the devil in the detail, page-4

Ocker,

I agree with you on this - Cheech (without is Chong) is certainly on the weed somewhere!!!

DBS:

DBS is capitalised at A$16.6B using the current FX rate of S$1.17.

DBS has current revenues of S$4.1B (A$3.5B) and current profit estimates of S$1B (A$850M). This has been flat for the last 3 years. In FY04, profit is estimated to rise towards S$1.3B (A$1.1B).

Net interest income is around S$2.3B (A$1.95B) and other income, around S$1.8B (A$1.5B).

The cost to income ratio is 43.2%, having improved from 48.9 in 2001, and 45.5 in 2002.

The Tier 1 capital ratio is 11.1% and the total capital ratio is 16.5%.


UOB:

As for UOB, United Overseas Bank is capitalised at S$20B (A$17.0B), slightly larger than DBS.

UOB has current revenues of S$3.2B (A$2.75B) which is about 20% smaller than for DBS (on a comaparative basis).

Current profit estimates for FY03 approximate S$1.15B (~A$1.0B) which is about 15% better than for DBS. This has been rising softly over the last 3 years. In FY04, profit is estimated to accelerate towards the S$1.4B (A$1.2B) mark which, if achieved, should be abl=out 10% better than for DBS on a comparative basis.

Net interest income is around S$2.2B (A$1.90B) and other income, around S$1.0B (A$850M), making UOB heavily reliant on interest income for its growth.

The cost to income ratio is 34%, making UOB a very efficient bank and one whose model of behaviour may well be of interest to the NAB.

The Tier 1 capital ratio is 11.7% (above that for DBS) and the total capital ratio is 14.8% (below that for DBS).



NAB:

In contrast to all this, the position for The National is as follows:
1)
Market capitalisation = A$48B (1.5x that of the combined UOB and DBS businesses);
2)
Revenue = A$12.4B (double that of the combined revenue base of DBS and UOB);
3)
Profit = A$3.5B+ (again double that of DBS and UOB combined) - some consensus estimates range above A$3.7B for FY03;
4)
Net interest income is A$7.3B (not quite double the combined values of UOB and DBS);
5)
non-interest income is A$5.1B (better than double the combined UOB and DBS values);
6)
the cost to income ratio is ~50% which fares worse than that for DBS and UOB and shows just how much room for prospective improvement (on an ongoing capital efficiency /productivity management basis), the NAB can drive its future profit growth;
7)
The Tier 1 capital ratio stands at 7.3% and the Tiers1 and 2 combined capital ratio stands at 8.9% (which, in percentage terms is well below that of UOB and of DBS, but in gross value terms, is well above); and
8)
the total capital ratio stands above 9%.


COMMENT:

Going forward, the issue for the NAB is more one of capital management (does it make an acquisition; does it go after one of the other financial institutions in the near region, or does it return excess capital to shareholders).
Rising interest rates will certainly aid the NAB's position (not worsen it), whilst its loan impairment portfolio remains better managed than for the other banks.

If I were to be concerned, I would be far more concerned with the asset base of both the CBA and of the ANZ and the relative exposures that each has to the turning points in the interest rate cycle going forward.