Dbs Group Hldgs Ltd Ord

And welcome to DBS's fourth quarter and full year financial results briefing. We announced this morning a very strong set of numbers, both for the fourth quarter as well as for the full year. So to tell us more, we have with us our CEO, Piyush Gupta, and our CFO, Cheng Sokhui. Without further ado, Sokhui, please.

Thanks, Agnes. Good morning, everyone. Welcome. to our results presentation. So let me start by explaining two changes to the results disclosure format introduced this quarter. First, for the various income items in a group profit and loss statement, i.e. net interest income, fee income and other non-interest income, we have separated out treasury markets from the rest of the bank, which we label commercial book. The profit and loss items for treasury markets were already previously available in the business unit section of the performance summary, so the information is not new. What the format change does is to improve the transparency of the performance trends of our customer franchise, principally institutional banking and consumer banking and wealth. In particular, rising interest rates. are unfavourable for Treasury markets revenue booked as net interest income. This is due to higher funding costs for its non-interest bearing and mark-to-market assets where the returns are shown under the non-interest income line as well as Thank you very much. The revised format is in line with global banks, which have already adopted such disclosure formats for some time. The net interest income drag from higher interest rates incurred by Treasury markets is generally offset by gains in other non-interest income. Hence, there's little economic loss from the drag. It is for this reason that our guidance for Treasury markets has always been on a total income basis. The current guidance is for Treasury and markets total income to average $275 million per quarter or $1.1 billion a year, consistent with previous guidance. The second change is how associate and joint venture income is recorded. Previously, it had been classified under other non-interest income because the amounts were immaterial. Given that Shenzhen Rural Commercial Bank, in which we have a 13% stake, is becoming more material, we are now reflecting associate and joint venture income as a separate line item just above profit before tax in the profit and loss statement. The change in format has a minor impact on the reported cost-to-income ratio amounting to a rise of 0.3 percentage points in the fourth quarter. Performance highlights. We achieved a record performance for full year 2022. Total income rose 16% to $16.5 billion, net profit by 20% to $8.19 billion, and ROE by more than 2 percentage points to 15%. The results were driven by a 21% increase in commercial book total income to $15.3 billion. Its net interest income grew 40% due to a 48 basis point increase in net interest margin to 2.11%, as well as loan growth of 4%. A decline in wealth management and investment banking fee income moderated the results. Treasury markets' total income normalized to $1.17 billion from the record high of $1.5 billion in the previous year and was in line with the guided run rate. The previous year's record results were due to exceptionally favorable market conditions. Expenses rose 10% led by higher staff costs. The cost-to-income ratio improved 3 percentage points to 43%. We also achieved record quarterly results for the fourth quarter, which surpassed the previous high in the third quarter. Total income increased 2% to $4.59 billion, net profit by 5% to $2.34 billion, and ROE by 1 percentage point to 17%. Like for the full year, the results were driven by the commercial book, whose net interest income grew 14% from the third quarter as a result of a 31 basis point increase in net interest margin to 2.61%. On an underlying basis, expenses rose 3% from the third quarter and the cost-to-income ratio was unchanged at 41%. Asset quality was healthy. Non-performing assets fell 8% from the third quarter due to repayments, write-offs and currency effects. The NPL ratio fell 0.1 percentage point to 1.1%. Specific allowances were 6 basis points for the fourth quarter and 8 basis points for the full year. Capital and liquidity were also healthy. The CET1 ratio rose to 14.6% while liquidity ratios were well above regulatory requirements. The Board proposed for the approval at the forthcoming Annual General Meeting a dividend of $0.42 per share for the fourth quarter. It also proposed a special dividend of $0.50 per share. The combined payout of $0.92 per share reflects our robust earnings profile and strong capital position. The fourth quarter dividend and the special dividend will bring the payout for the financial full year to $2 per share. Full year total income rose 16% to $16.5 billion. The increase was due to a 21% in commercial book total income. Net interest income grew 40% to $3.06 billion from a higher NIM and loan growth. Fee income fell 12% or $433 million as declines in wealth management and investment banking fees more than offset increases in cards and loan-related activities. Other non-interest income was little changed. Treasury markets income declined 22% or $335 million to $1.17 billion, normalising from exceptional levels a year ago. Expenses rose 10% or $621 million, led by higher staff costs. There was a general allowance write-back of $98 million, $349 million less than the write-back of $447 million a year ago. Specific allowances fell 33% or $164 million. As a result, total allowances were $237 million for the year. Compared to the previous quarter, fourth quarter total income rose 2% to $4.59 billion. Commercial book total income grew 4% to $4.39 billion. Net interest income rose 14% or $416 million as NIM increased 31 basis points to 2.61%. Fee income fell 14% or $110 million from lower wealth management fees due partly to seasonal factors. Other non-interest income declined 31% or $142 million, mainly from Treasury customer sales. Treasury markets' income fell 24% or $65 million due to seasonal factors. Expenses rose 8% or $138 million. They included a non-recurring accelerated depreciation of fixed assets, a one-time special award to all staff, and some expenses for the integration of Citi Taiwan. Excluding these items, expenses rose 3% and the cost-to-income ratio was 41%. There was a general allowance write-back of $116 million due to transfers to non-performing assets, upgrades and repayment and repayments. This compared to a charge of $153 million in the previous quarter to buffer against headwinds in the external environment. This resulted in a positive earnings impact of $269 million quarter-on-quarter. Specific allowances were $49 million higher compared to the previous quarter at six basis points of loans compared to two basis points in the previous quarter. Compared to the previous year, commercial book net interest income rose 40% to $10.7 billion. Compared to the previous quarter, commercial book net interest income rose 14% to $3.41 billion, driven by a 31 basis point improvement in NIM to 2.61%. The NIM increase follows an increase of 45 basis points in the third quarter compared 20 basis points in the second quarter and 4 basis points in the first quarter. As a result, the quarterly commercial book NIM rose 100 basis points during the year. Treasury markets' net interest income declined $561 million compared to the previous year. As explained earlier, the offset is generally seen in gains in the non-interest income line. For the year as a whole, TNM delivered total income of $1.17 billion and we are maintaining our guidance for total Treasury and markets income to average $1.1 billion in the coming year. Combining the commercial book and Treasury markets, the group's overall net interest income grew 30% for the full year and 9% from the previous quarter to $10.9 billion and $3.3 billion respectively. We expect both group and commercial book net interest income, group NIM and commercial book NIM to continue rising in the coming quarters from high interest rates as well as the lack with pricing of fixed rate assets. Loans declined by $2 billion in constant currency terms during the quarter. Non-trade corporate loans fell $3 billion. Some corporates shifted their borrowing to markets with cheaper financing options, such as mainland China, or used their cash on hand to repay loans they had opportunistically lost. when interest rates were low. Underlying loan demand was healthy, as is our pipeline. Trade loans rose $1 billion. Consumer loans were lower as housing loan growth of $1 billion was offset by a decline of $2 billion in wealth management loans. For the full year, loans rose 4% of $14 billion with broad-based growth in non-trade corporate loans, trade loans and housing loans, partially offset by lower wealth management loans. Deposits rose 2% in constant currency terms during the quarter to $527 billion, bringing full-year growth to 7%. Fixed deposits grew 80% or $93 billion during the year. The majority of the growth was in foreign currencies led by U.S. dollars, enabling us to swap less of surplus SingDollar Casa deposits as they continued to earn attractive returns. CASA deposits fell 16% or $60 billion during the year, mostly in the second half, in line with market trends. We continue to have the largest share of CASA deposits in Singapore, with our market share rising 0.7 percentage points during the year, slightly more than 53%. Gross fee income fell 10% from the previous quarter to $835 million. Wealth management fees fell 19% to $262 million due mainly to seasonal factors. Loan-related fees declined 35%. Transaction service and investment banking fees were slightly lower. Card fees continued to increase, rising 10% to $245 million as travel continued recovering to pre-pandemic levels. For the full year, gross fees fell 9% to $3.70 billion, with declines in wealth management and investment banking fees more than offsetting growth in cuts and loan-related fees. Expenses. Fourth-quarter expenses, as mentioned earlier, included an accelerated depreciation of fixed assets, a special award to staff, and expenses for city-Taiwan integration. These non-recurring items totaled about $86 million. Excluding these non-recurring items, expenses rose 3% from the previous quarter, and the cost-to-income ratio was 41%, unchanged from the previous quarter. For the full year, expenses were 10% higher, led by staff costs. The cost-to-income ratio was 43%. Consumer Banking Full-year consumer banking and wealth management income rose 25% from a year ago to $6.65 billion. Income from loans and deposits increased 77% to $4 billion, driven by an improved NIM. This was partially offset by an 18% decline in wealth management investment product income to $1.82 billion. Card income was 5% lower at $717 million as the lower net interest margin on outstanding balances more than offsets higher card fees. Sing dollar savings deposits fell in line with the market. Over the past 12 months, our domestic market share for savings deposits rose 0.7 percentage points to just over 53%, while our share of housing loans rose 0.3 percentage points to just under 29%. Full-year wealth management segment income rose 20% to $3.27 billion. Weaker non-interest income from lower investment product sales was more than offset by significantly higher net interest income from higher deposit NIM. Asset under management rose 2% or $6 billion in reported terms during the year to $297 billion amid challenging market conditions. In constant currency terms, the increase was $9 billion for the year, including $8 billion in the fourth quarter. The increase in AUM was helped by record net new money flows of $24 billion during the year, of which inflows in the fourth quarter amounted to $9 billion. Full-year institutional banking income rose 28% from a year ago to $7.69 billion. The growth was broad-based, led by cash management and partially offset by lower investment banking income. Cash management income more than doubled to $2.5 billion, driven by higher interest rates and a 6% growth in deposits. Treasury and markets. Fourth quarter, Treasury markets income fell from the previous quarter to $204 million due partly to seasonal effects. Treasury product customer income, which is recorded in IBG and CBG, was also lower at $372 million. For the full year, Treasury markets' total income declined 22% to $1.17 billion, in line with our guided run rate. Lower income from trading interest rates and equity derivatives was partially offset by stronger performance in credit and foreign exchange. Gains from the investment portfolio were also lower. Full year combined, IBG and CBG Treasury customer income fell 3% to $1.65 billion as sales to wealth management customers were affected by weaker market sentiment. The decline was partially offset by higher IBG sales as heightened market volatility resulted in more hedging activity. Hong Kong's full-year net profit rose 19% in constant currency terms to $1.45 billion. Total income increased 16% to $2.92 billion from higher net interest income and trading income. Net interest income rose 30% to $1.84 billion. Net interest margin increased 22 basis points to 1.47% from higher interest rates with all of the income occurring in the second half. Loans fell 5% in constant currency terms in line with industry trends. Fee income fell 15% to $672 million from lower wealth management and investment banking fees due to the weak market sentiment. Other non-interest income rose 28% to $407 million from higher trading income. Expenses rose 6% to $1.14 billion from higher staff costs. The cost-to-income ratio was 39%. Total allowances increased to $56 million from $7 million a year ago, as there had been a larger general allowance write-back a year ago. Specific allowances declined. Asset quality continued to be resilient in the fourth quarter. Non-performing assets fell 8% from the previous quarter to $5.13 billion. New non-performing asset formation was more than offset by repayments and write-offs as well as currency effects. The NPL ratio improved from 1.2% in the previous quarter to 1.1%. Specific allowances remain low in the fourth quarter at 72 million or six basis points of loans. For the full year, specific allowances fell 33% to 332 million or eight basis points of loans. Total allowance reserves stood at $6.24 billion, with $2.51 billion in specific allowance reserves and $3.74 billion in general allowance reserves. There was a general allowance write-back of $116 million in the fourth quarter due to transfers to non-performing assets, upgrades and repayments. Allowance coverage was at 122% and at 215% after considering collateral. The CET1 ratio rose 0.8 percentage points from the previous quarter to 14.6%. The increase was due to strong profit accretion, a decline in risk-weighted assets, as well as currency effects. The leverage ratio was 6.4%, which was twice the regulatory minimum of 3%. The Board proposed a final dividend of $0.42 per share, an increase of $0.06 from the previous payout. The Board also proposed a special dividend of $0.50 per share. The total payout of $0.92 per share reflects our robust earnings profile and strong capital position. With the payout, shareholders will receive a total of $2 per share for the financial full year. Barring unforeseen circumstances, the annualised ordinary dividend going forward will rise to $1.68 per share. In summary, we delivered fourth quarter and full year results that reached new highs. The record return on equity of 17% for the fourth quarter and 15% for the full year reflect the benefit of higher interest rates as well as significant structural gains from our decade-long transformation. The commercial book total income growth of 21% for the full year and 43% for the fourth quarter attests to the strength of our franchise. Our pipelines are healthy and asset quality robust. Confidence is returning to markets as interest rate increases, ease and China reopens. To recap, the Board proposed for approval at the forthcoming AGM a dividend of $0.42 per share for the fourth quarter and a special dividend of $0.50 per share. The combined payout of $0.92 per share brings the total payout for the financial full year to $2 per share. Thank you for your attention. I will now pass you to Piyush.

All right. Thanks, Sokwi. Thank you. So, as usual, I'll talk a little bit about the fourth quarter and then some comments on how we're looking at this year. Saki elaborated, so I won't dwell too much on the fact that we did have a record quarter. I mean, income, profits, ROE. Everything is up. She pointed out that the commercial bank NIM is up 100 basis point from fourth quarter 21 to fourth quarter 22, and that's pretty solid. And that results in a – that also includes – I mean, part of that is a 62 basis point increase in group NIM, also quarter on quarter. So I think the NIM has been good. Overall profits are very solid. I think the thing to reflect on is the ROE. You know, at 17% ROE, we are about four percentage points higher than the last time when NIMS were at these levels, when rates were at these levels, which was about 2005, end of 2005. That difference of four percentage points reflects structural change in the nature of the bank. It reflects both the change in our income mix as well as some of the outcomes of the transformation agenda that we've laid out over the last decade or so. With the fourth quarter itself, It was a noisy quarter. And so as I talk to the next two, three points, I'm going to point out the noise in the quarter and what you need to try and look through. It was noisy for obvious reasons. I mean, rates had jacked up and the market was still reacting in a fairly knee-jerk reaction to a new, completely new set of market environment. So first was on the loan momentum. I had actually guided at the end of the third quarter that the loans might come off in the fourth quarter. We'd already started seeing it. And loans did come off. And the reason for that is quite simple, that if you have to pay based on a 4.5% interest rate, then you find ways to pay down your loans or find cheaper sources of borrowing. And we saw that happen in two ways. People, companies who've got opportunistic loans, opportunistic in the sense they had cash on the one side, but they'd taken loans just to make sure they had a buffer going through this environment. They used the cash to pay down the loan. There's no point keeping a loan when loan rates are high. The other thing that happened in some cases, especially our Chinese customers, they found it cheaper to borrow onshore instead of borrowing offshore because the onshore rates are cheaper. And so we gave up some loan growth because of both of these phenomena. When I say look through the noise, the good news is that the underlying non-trade loan growth momentum continues to be quite strong. We saw loan growth across multiple industries. TMT was soft because the cycle is coming off, but property was strong, energy was strong, logistics was strong. The China plus one capex cycle is coming through. The deal flow is strong, M&A. So underlying loan growth is actually quite robust, notwithstanding the fact that the quarter itself showed a little bit of a decline. You can also see that our market shares in Singapore for everything were up. For consumer loans, corporate loans, everything on our market shares were up. On fee income again, we've got to look through the noise. Cards, was it a quarterly record? But I think there is still more tailwind. Travel as a percentage of car spend is now up to about 11% for the quarter. It used to be 15% pre-COVID. So we're still not back. And as China opens up, I expect the travel component of the car spend to continue to increase. So we'll get some tailwind from there. Wealth management fees were lower. And that's, again, back to as rates go up, not only do loans come down, people aren't taking margin financing at these rates, but the markets themselves were badly hit. And as a consequence of that, animal spirits were low. Nevertheless, as I said, look through it. Our net new money was the highest we ever had. We got $24 billion for the year, $9 billion plus in the fourth quarter alone. And a lot of this money is now there for dry powders, waiting on the sidelines, waiting to be invested. I'll talk about it in the outlook, but we're already beginning to see green shoots on the back of that. Slide. Expenses, this is the third place. This is not to do with market. This is to do with us internally, but there is some noise in the expense numbers. We took the opportunity to do accelerated impairment of about $50 million, $60 million in our technology spend. As you know, we've been spending on technology over the years, and it's several billion dollars of investment, so $50 million is not a big number. But we took the opportunity to take some of the technologies we put into place that don't seem to be that effective, and we basically written them off. We also did a one-time payment to staff as a year-end recognition for the environment and what we've done. So basically some one-timers in that number are net-net. Asset quality is very resilient. It continues to be very strong. As you can see, our NPS continue to come down. They're down to 1.1 percent. The interesting thing was, you know, in third quarter, we buffered up. We took management overlays to buffer up our GP to take it back to the beginning of the year level. As things happened, the portfolio continues to improve. So in the fourth quarter, we saw more repayments. We saw more upgrades. And as a consequence, we saw a reversal from GP. And, you know, some of these are model-driven. So you just got to let the numbers flow. But the asset quality is looking very, very good. And next, finally, as we promised earlier, the board took stock of our dividends, and we're pleased that we've been able to increase our total payout for the quarter to $0.92, including the $0.50 special. So the full year dividend payout is $2 per share, which is obviously quite attractive. Thank you. So some quick comments on the outlook. So my view is I think you see a couple of more rate hikes. I think the Fed will get to 5.25. I could stop at 5, but somewhere 5, 5.25. And I don't see them cutting rates this year. I think inflation will come off. Our own projection is inflation will come down by the year end to the plus-minus 3% level. But even at 3% handle, I don't think the Fed will be precipitated about cutting rates. So the rest of our outlook is really based on that assumption, that you get rates at the level, but rates don't get – you get inflation at the level, but rates don't get cut. So what does it mean for our business? We're maintaining our guidance for mid-single-digit loan growth and double-digit fee income growth. I think China's opening up will help the environment a little bit. As we go into first quarter, we're seeing that momentum. It is still there. Business volumes are good, and loan growth is quite robust. The area we'll see some headwinds is the mortgage book in Singapore. Last year, that book grew between 2.5 and 3, 2.8, if I remember, billion dollars. This year, I expect that to be only half because market bookings have slowed down a lot in the last quarter with the new policy changes in September. But nevertheless, I think mid-single-digit loan growth is very much on the cards. On NIM, though, we think earlier I guided that we could see NIM peaking at about 225. I think we'll be off by five, seven basis points from that earlier guidance. And there's some headwinds and some tailwinds. The headwinds are really one, the T-bills issued by the government at very attractive rates. They went up to 4.5%. They're still at about 4%. That's a factor we've not taken into account when we were doing our modeling earlier. Obviously, a lot of money has flowed out of the system into the T-bills. Now, our own assessment is that the T-Biz by May, new money will not go in. It starts recycling. But for the first quarter, three, four months, you will continue to see some impact of that. Second, SING dollars strengthen much faster than people expected. And a strong SING dollar obviously means the pass-through rates from Fed policy dates and SING dollar tend to be lower. And finally, as Sokhi pointed out, one of the reasons we've represented the treasury book and the commercial book is to point out the treasury book funding costs actually have an impact on the NIM line. It doesn't mean anything for income because you fund at a higher cost, but you make it up below the line on other income. Nevertheless, on the optics of NIM, it has a bigger drag than we'd originally forecasted. What are the tailwinds? The tailwinds really is that we have about $180 billion of book which is still repricing of asset book and loan book. Of that, about half will reprice in the next two years, the 23 and 24, two years, and the other half carries on for the next three years. You know, it's going to play five overall duration will carry on to five years. So obviously that helps that, you know, we will continue to see upside from the repricing of assets. Our own assessment is that while peak NIM will probably, therefore, be a tad below 220, our average NIM for the year will be north of 210. And so that's not bad. I think that the tailwind means that we will have a greater stability in our NIM as you look forward. On cost, we've kept the guidance unchanged at between 9% and 10%. I actually think there is some upside to that. I think cost could come in slightly better than that 9% level. Nevertheless, also, we have some levers. If it turns out that we are wrong or there's some unusual uncertainty in the income side, we always have the capacity to tighten the belt. So our cost-income ratio should be securely below 40 percent for the year. Finally, SPs. In the last quarter, I guided for SPs. I said we should assume normalized SPs, which we now think is 15 to 20 basis points. And the reason I said that is because rates are going up. So nobody knows what the impact of that might be on parts of the portfolio, particularly the SME portfolio. By the end of the year, it's quite clear that things are not looking that bad. SME book is actually looking quite robust. The consumer book is looking robust. We're not seeing any material signs of weakness in any of our portfolios anywhere. And so we're bringing the guidance down to 10 to 15 basis points. And, frankly, even that, there might be some upside to the 10 to 15 basis points number. As you know, this year it was only eight basis points. So the reason we're saying 10 to 15 is not because we have any insight. It's just because at these high interest rates, you should expect to see some more uncertainty. The other positive we have, though, is that we have still that over $2 billion of management overlay buffer we haven't touched. And so if we do see some idiosyncratic risk in the course of the year, we will be able to address it from the GP. We won't have to take it down to the bottom line. So why don't I stop there and take some questions.

We have a live stream going on, so when you ask your question, please do speak into the mic in front of you, or we have some roving mics just so the people online can hear your question too. Chania, we'll pass you a mic.

Hi, just to check with Sokhui on one number. When you mentioned annualized 2023 dividend, you said 1.62%? It's 1.68%. 1.68%. Okay, thank you. Four questions for Piyush. How achievable is the $10 billion net profit for this year? How achievable are you to get to $10 billion in net profit this year, and what would be drivers? Any share buyback plans based on your strong capital base? Number three, question, exposure to Adani. How much do you have? Are you concerned? And what actions are you taking on that exposure? Thank you.

On the $10 billion, frankly, there's a lot of uncertainty in the environment. If you look at our projections on NIM, on COS, on SP, I have to say, I mean, we were short at it. Whether we get a $10 billion handle at the bottom line depends on some of the moving parts. Some also depends, by the way, on how strong the SING dollar gets, because the translation impact of our income from our overseas activities into Singapore is also material. The stronger the SING dollar is, the less those overseas revenue streams convert into SING dollar as well. So it's hard to say whether we hit that number, but I think we have a shot at it in the course of this year. On buybacks, Yes, I think even after the dividend lift that we've announced, we're extremely well capitalized. And therefore, in the course of the year, you know, we're not done. It's just the first step of our dividend policy. We will continue to examine our dividend policy and capital return policy through the course of the year. And depending on a lot of other circumstances, we could figure different ways to look at giving a capital bank. Share buybacks is obviously one such option.

Just to clarify, because there's an analyst expecting share buyback program at $5 billion over two years, is that a reasonable estimate?

We have not even thought about it, so I'm not sure I've come up with that number. And the third on Adani, our exposures to Adani are actually of two kinds. Our large exposure is about $1 billion, which we've done to finance the M&A of the cement companies that they did recently. The cement companies are completely debt-free, and they're solid cash-generating companies, so we're not concerned about the exposure. The underlying is ring-fenced. It is cement. The cement industry in India has got huge potential given the growth in the market, and so that exposure is quite tightly managed. We're not overly concerned. We have another set of exposures, which are smaller, much smaller, maybe about $300 billion, and that's to a range of different companies. They're operating companies. They're ring-fence cash flows or specific projects. And, again, those companies are working well. The companies are working well. The cash flows are secured. We have no exposure to any of the shares of Adani. We have no exposure to any promoter financing for Adani. And so we're not affected by all of this change in the share price and promoter share price, et cetera. And so, no, right now we have no concerns on eye exposure. We don't expect to do anything with it.

Is there another question? Agula?

Thanks for the presentation. Can I ask Sokwe again on the impact of Basel IV and where the two percentage points come from and what you plan to do with capital when it comes back and when is this likely and why some of the global banks are starting to implement it this year aren't they? But why are we so late?

So the MES has put out on its website that Singapore banks are expected to implement Basel IV sometime between 1st Jan 2024 and 1st Jan 2025. make the announcement sometime in July this year. So there'll be certainty with the sort of clarification of final rules. And we expect that the transitional car will be lifted by some two percentage points. And in the first instance, it'll be helpful to us in that additional Tier 1 instruments and Tier 2 instruments, which will be redeemed in the next three years, amounting to some $5 billion, will need not be refinanced. So that would have beneficial impact both to our bottom line and to Tier 1 capital. So that's one benefit we can see. And over the five-year transition period, we expect that our final car ratio should be neutral to sort of slightly above today's levels.

But the CET1 is positively impacted. Sorry? The CET1 is positively impacted. That's right. That's right.

So the way the Basel IV rules work is that there'll be a five-year transitional period. And in the first instance, there'll be a benefit of two percentage points. But over time, as the sort of capital flaws kick in after five years, then we are back to sort of roughly the CT1 that you're seeing today. Other things remaining unchanged.

Can I just ask a question on your digital asset strategy and whether that has changed over the past year because some digital assets have come off a lot? And also your regional book, India, how is that doing? Because at one point you were quite positive about it. I mean, does that outlook remain?

Well, first, actually, both our digital asset in terms of tokens, Our total traded tokens are up about 70 or 80 percent for the year. Bitcoin is up about 80 percent. Ethereum is up about 60 percent in terms of number of coins. Obviously, in terms of value traded, it's flat to last year, and that's because the values came off so sharply. But we are consistent with our strategy. In fact, frankly, we think that being an exchange from a regulated entity is actually a benefit in this environment when a lot of other exchanges are coming under question and scrutiny. So we're going to be staying the course. We think, in fact, our current assumption is that our total revenues from this business, they're small, but they will be up 60%, 70% this year. So we're quite constructive. As you know, it's a members-only exchange. We're offering it to accredited investors and professional investors for the time being, which includes, you know, a potential target market of tens of thousands of people, not millions of people. Eventually, as the regulators get their minds around the retail offering, and different regulators are looking at it differently, we will consider what is the right thing to do, you know, keeping in mind suitability, appropriateness, recognizing the crypto crash that happened in the last year. So we need to be thoughtful about that. But net-net, we are consistent with our strategy. We think there is a lot of opportunity in the space going forward. On India also, we are still as bullish here. India is doing well. Over the course of the quarter, we were able to finally integrate the technology of Lakshmi Vilas Bank into DBS, and we now have a completely one single technology platform for everything in the country. And now that we have that, therefore, we can start scaling up and ramping up our activities quite considerably. So starting this year, we expect to see meaningful growth in the business, given the platform is now complete and ready.

And then could you give us an update on Digibank, on the digital bank? And there was, okay, that's about all I can, I forgot the other question.

Well, on Digibank, I told you before that, you know, our standard on Digibank strategy we changed because earlier we were just trying to be pure digital mobile only. And we realized that it's very hard to make money with this strategy. You get a lot of, you know, young people who are only trying to game the banks, and you can't really monetize that customer base. So we've changed our strategy to a physical strategy, so physical plus digital, and which is why we acquired Lakshmi Vilas Bank. Now that we have that footprint and the brand presence, we continue to overlay our digital capabilities on top of that. And that's giving us now much better results, both in the consumer space, the wealth space, the SME space, across multiple asset classes. So this combined strategy works much better.

Sorry, just one clarification for you. When you talk about Adani exposure, that's in USD or SGD? The billion?

Do you have the numbers somewhere? Okay. I think it's SGD. SGD.

So both 1 billion to the first one and the 300 million.

That's SGD.

Anshuman, did you have a question?

I want to check with you. Hello. Do you expect refinancing costs for Indian groups to rise as a result of this turmoil at the Adani group?

I don't think so, actually. I think, you know, if you look at India, pricing has always been exceptionally low. In fact, the Indian large corporates borrow at way below India country risk. And I don't see this material impacting the overall market. So the general view that this is going to tarnish all of the India story, I don't see that happening.

And out of the S dollar, $1 billion of financing, is DBS holding on to this debt or is it also sold on to this?

No, it is a bridge financing. So we're holding on to the debt. It's on our books right now.

Okay. So when you're saying you're not concerned, this is because it's being secured, the cash is ring fenced and all, right? I mean, you don't have any concerns about the exposure because it's to these companies or...?

Because the underlying operating companies are very solid. The cash flow generating companies, the well-managed companies, it's a good that runs its operations extremely well. And if you look at the cement, for example, between ACC, Ambuja, and this thing, it's high-quality companies, and EBITDA in these companies can pay off this entire M&A financing debt in four or five years. If you just had to hang on to it, the cash flows cover the debt.

So would DBS group be okay to take part in any other refinancing activities of Adani or would you sort of hold off at this point?

I think that depends. You know, it's hard to comment on a credit posture overall. But I have to tell you, the underlying company is very good. I've personally gone and spent time and looked at the company. The management is good. The companies are good. The cash flows are solid. As long as you can ring fence cash flows and you're close to the cash, so you're not taking exposure on, you know, promoter shares and so on, there's no reason for not looking at opportunities.

And in general, I mean, what lessons do you think Indian groups, I mean, again, we have seen these short seller attacks on many companies. It happened in Olam. It happened in many companies. Are there any specific lessons that you see that companies need to take from these attacks at Adani Group? I mean, obviously, you know, interconnected companies, promoter financing and all. Is there anything at all that other companies can take a note of?

It's not peculiar to India. This is a global phenomenon. It happens in every part of the world. The short sellers take a view on the underlying valuation of companies and decide companies are overvalued. And so the real question is, what drives overvaluation in stock? You can make the same case for all of the tech sector in the U.S. It fell by 60%, 70%. Many of these companies fell by 40%, 50%. So you could ask the same question of Meta or you could ask the same question of any other tech company. Why did the stock price go up so much and why did the stock price fall so much?

I mean, just one different thing in this is that, again, we saw it in the Olam case also many years ago. But this short sellers are alleging, you know, fraud in this case. Right. Which is not the same with tech valuations and all. Obviously, there's a valuation story. So any any any comments on that?

I don't. If you read this analysis from Damodran, have you seen it? Yes. I think it's completely right. There is no evidence of any fraud. So I don't see where the fraud is, other than maybe propping up stock price. But in the underlying company, the companies are real, the sales are real, the cash flow is real. So there is no fraud in the sense that, you know, it's a whole sting, nothing exists.

Okay, so just in summary, you don't expect anything in terms of, obviously you talked about your exposure, but also in terms of the key sentiment for Indian groups refinancing and all, this won't be... We're not seeing it so far. Thank you.

Any other questions? Takashi?

Many people are now discussing about the potential of chat GPT. So how will AI such as chat GPT change banking industry? So DBS has used AI such as chat bots. But are there any plans to use AI for loan processing, loan scoring?

Actually, we use AI for all of those things. We have over 250 AI models running in the bank today for everything, for those processing, for marketing, for compliance, for audit, for human resources. So we're a very active user of AI. We have almost 1,000 people who help drive our AI in the business. On generative AI and natural language processing, we've tried it a couple of times. We were one of the first guinea pigs for Watson in 2013-14. Then we tried it two years ago. And generative AI NLP hadn't reached the level that you could rely on it. So that's why we came up with these chatbots with guided conversations, which is AI assists human beings. What's happened in the last couple of months with generative AI is obviously taken it to a different level. And so what we're doing now is running several experiments on what potential further use cases there are for using NLP and generative AI. And I think it's quite powerful, whether it's summarizing, you know, meetings, minutes, writing reports, writing evaluations. You can use chat GPT for a lot of things. And we are currently exploring. We have two or three experiments running on how best we could put it to use in our banking operations.

Prisca?

Hi. Thanks for the presentation, and congrats on the good results. Piyush, you mentioned that you see headwinds in the mortgage book here. How much do you expect the impact to be, and what is the effect on the overall loan book? And also, in which property segments or consumer segments do you expect the impact to be most prominent?

Actually, you know, Francisco, what we've seen before, every time the government takes policy actions, and, you know, in September they took some policy actions around – The imputed rate you have to apply for ABSD has gone up from 3.5% to 4%. And then you've got to hang on to your HDB house for another three months to 15 months and so on. And so the bookings have fallen by about half. If you look at fourth quarter bookings, they're down to about half of what third quarter was. In our experience, it will take two to three quarters for the impact of this to flow through the system. The third quarter or so of the year, I'd expect the market to have absorbed this and things to come back to a previous pre-tightening momentum. That's my general base case. But it does mean that the first half of the year, since the bookings have been low, what translates into loans in the first and second quarter will be somewhat lower. It's broad-based. It's in the private side as well as in the HDB side. So you're seeing the slowdown on both sides of the business. And you're seeing, like I said, last year our total loan book was up by about 2.8 billion. So this year, because of this, I expect the loan book to grow between 1.5 and 2.

Just one follow-up question. How much of the hit wins, do you expect any of the hit wins to come from higher interest rates as well besides the policy changes?

Well, that too. So it's a mix of both. So some of it is interest rate increase, some of it is the policy changes. Both of them have led to a slowdown in bookings. And if you look at the mortgage rates, they lag the market price. So the market rates have gone up, but because we have a bunch of different portfolios, we have a SORA-backed portfolio, which is backward-looking. We have a FHR portfolio, which focuses on the fixed deposit rates of the bank. This also rises slowly. So the rates in the mortgage portfolio have not all worked in to customers. The through-the-door rates, though, are pretty much at market.

Is there a final question?

So I can ask you, you mentioned in terms of just the outlook for the results and all. I mean, again, what are the major changes you see in this year for growth outlook? I mean, you mentioned interest rates. You don't see any rate cuts. But what are the drivers for growth? I mean, are we talking about any – I mean, is China going to be the big driver for growth for you all? Or, I mean, any broad trends versus last year?

China will be – I think the U.S. – first of all, both Europe and U.S. will slow. The good news is that it is possible that they might escape a recession. Last quarter, I'm pretty sure that they're going to recession. Our current house view for the U.S. is north of half a percent, 0.5 to 1 percent. So you might actually see it's not as bad as we expected. UK will probably go into a recession, though there's zero last quarter. I think Europe will also be around zero, but might not be massively negative. On the other hand, China is opening up was quicker and swifter than anybody expected. And so I think you will see some tailwind from there. Our current projection for China is maybe five, five and a half percent growth rates. And that will obviously benefit all of Asia. It will benefit from tourism, but it will also benefit from exports into China.

How's your outlook for the wealth management business? And then will it continue to grow? And what's the reason?

I'm actually very optimistic. Like I said, our net new money growth, if you look at AUMs, we're probably one of the only houses that I could find which showed an AUM increase last year. Our total AUMs were up by $8 or $9 billion last year. And that's because, like everybody, the market value of our assets went down, but the net new money of $24 billion made it up. And so we have a lot of dry powder. We opened almost 50% of all new family offices that opened in Singapore over the last few quarters. So we have a lot of dry powder in there. And as the markets are turning around, you can see people beginning to get more optimistic. So even though fourth quarter was low, if you look at December itself and Jan, early this thing, you can see the turnaround happening. The North Asia markets have done well. Hong Kong is rebounding. China is rebounding. And so people are getting a little bit more optimistic about putting money to work. So overall, I think we'll have a good year.

Gula, maybe last question, please.

Sorry, last question. So are there any concerns about the cost of funds, specifically in the wholesale market, or are you not planning to tap? Because cost of funds has gone up so much. I mean, you had fixed deposits. You said that a lot of CASA has been transferred to FDs, but this is all in your 2.1. We factored it all in.

When we give you NIM guidance, it is actually all factored in. When we drop guidance from 225 to the 220 range, it reflects the higher cost of funds for all of these reasons.

And in this market condition, we tend to want to issue in covered bonds format, which is actually cheaper than senior debt financing.

Because one of your competitors, your peers issued ATI, additional tier one, isn't it? Very high price.

That's what we said. If that Basel IV transition rules kick in sometime, we will pay back all our tier one and tier two because we'll be just so well capitalized on core equity that we won't need to. Right now we have about $5 billion of tier one, tier two, and especially tier two. It goes into our income line. We pay for it. So we'll be able to pay all of that back.

Okay, on that note, thank you everyone for your questions and thank you for coming. We'll see you in the next quarter.

All right, thanks very much.