Dbs Group Hldgs Ltd S/Adr

Good morning, everyone, and welcome to DBS's third Q financial results briefing. This morning, we announced third quarter net profit of $1.7 billion, up 31% from a year ago. To take us through the highlights of the quarter, we have with us CEO Piyush Gupta and CFO Cheng Sokhui. Both of them will be talking through presentation materials that you can find on the DBS Investor Relations website. which you may want to refer to as they speak. After their presentations, we will open the time up for media Q&A. So without further ado, Sokhi, please.

Thanks, Agnes. Good morning, everyone, and thank you for joining us for our results briefing. Third quarter net profit was maintained at the previous quarter's level of $1.7 billion. Business momentum was sustained and asset quality continued to be resilient. Loans grew 2%. from the previous quarter which was moderated by a two basis point decline in net interest margin due to lower rates. This resulted in a one percentage increase in net interest income. Fee income rose 2% to the second highest level on record. Nine month net profit increased 46% to a new high of 5.41 billion with the first, second and third quarters the three highest on record. Business momentum was strong, with broad-based loan growth of 9% from a year ago with a fee income and treasury market income at record highs. The increased business volumes moderated the impact of a lower net interest margin and a decline in investment gains. Underlying expenses were 1% higher. The cost-to-income ratio was 44%. Asset quality continued to be resilient. Non-performing assets declined 1% from the previous quarter as new MPA formation was more than offset by repayments. Specific allowances for the quarter fell to six basis points of loans due to a write-back of a non-performing loan. Nine-month specific provisions halved to 14 basis points below pre-pandemic levels. General allowances of $138 million were written back in the third quarter as portfolio quality improved. This brought the general provisions right back for the nine months to $413 million. The general provisions overlay was maintained. General provision reserves continued to be prudent at $3.92 billion, $0.6 billion above the MES requirement. Capital was healthy with the CET1 ratio stable at 14.5%, well above the group's target operating range. Liquidity was amper, with the liquidity coverage ratio at 131%, and the net stable funding ratio at 127%. The board declared a third quarter dividend of $0.33 a share, bringing the dividend for the nine months to $0.84 a share. Slide three. Third quarter net profit was stable from the previous quarter at $1.70 billion. Total income was little changed at $3.56 billion as higher net interest income, fee income and trading income were offset by lower investment gains. Asset quality was resilient. and total allowances of $70 million were written back this quarter. There was a general provision write-back and specific provisions were lowered from a write-back for an NPL. Net interest income rose 1% of $15 million to $2.10 billion as 2% loan growth was offset by a two basis point decline in net interest margin due to lower interest rates. Fee income rose 2% or $20 million to $888 million as momentum was sustained across most fee activities. Increases in wealth management, transaction services and card fees were moderated by declines in investment banking and loan-related fees. Other income declined 10% or $63 million to $569 million as higher trading income was more than offset by lower investment gain. Expenses were 8% or $125 million higher at $1.67 billion. On an underlying basis, expenses were 6% higher due to base salary increments at mid-year and investments for future growth. Asset quality was resilient. Improved portfolio quality resulted in a general allowance right back of $138 million, while specific allowances halved to $68 million from repayment. Slide 4. Nine months net profit rose 46% to a record $5.41 billion as business volume growth and lower allowances more than offset the impact of lower interest rates. Total income declined 3% to $11 billion as record fee income was offset by decline in net interest income. Total allowances fell to $19 million as general allowance write-backs offset specific allowances. In comparison, $2.49 billion of allowances were set aside over the same period a year ago. Net interest income fell 9% or $656 million to $6.3 billion as broad-based loan growth of 9% was more than offset by a 22 basis points decline in net interest margin. Fee income rose 17% or $398 million to $2.71 billion with a growth led by wealth management, transaction services, cards and investment banking. Other non-interest income declined 3% or $67 million to $2 billion as record trading income was offset by low investment gain due to favorable market opportunities a year ago. Expenses rose 5% or $220 million to $4.80 billion. Underlying expenses were up 1%. General allowances of $413 million were written back in nine months due to improved portfolio quality. In comparison, $1.50 billion was set aside over the same period a year ago. Specific allowances halved to $432 million. Slide 5. Third quarter net interest income rose 1% from the previous quarter to $2.10 billion as loan growth was moderated by a decline in net interest margin. Net interest margin was two basis points lower at 1.43% due to lower short-term interest rate. Nine-month net interest income declined 9% from a year ago to $6.30 billion. Broad-based loan growth of 9% mitigated a 22-basis point fall in net interest margin to 1.45%. The fall in net interest margin was due to interest rates that remained low since central banks cut rates in March of 2020. Our deployment of surplus deposits is accretive to net interest income but has resulted in a six basis point headwind to net interest margin. Slide 6. Gross loans grew 2% or $6 billion in constant currency terms during the quarter to $411 billion. Slide 7. Compared to the previous quarter, non-trade corporate loans expanded at a faster pace, while housing loans and wealth management loans rose by similar amounts. The strong momentum was moderated by a reduction in trade loans. Non-trade corporate loans grew $5 billion, led by drawdowns in Singapore and Greater China. Housing loans rose $1 billion as bookings continued to be strong. Other consumer loans grew $2 billion from healthy wealth management activity. Trade loans declined $2 billion due to higher repayments. Over the nine months, loans grew 8%, or $28 billion, from broad-based growth. Slide 7. Deposits amounted to $489 billion, up 1%, or $4 billion in constant currency terms from the previous quarter. Over the nine months, deposits rose 4% or $18 billion. Current and savings accounts grew $28 billion, allowing $10 billion of fixed deposits to be released. CASA made up 75% of customer deposits. The loan-to-deposit ratio rose 1 percentage point from the previous quarter and 3 percentage points from end 2020 to 83%. The liquidity coverage ratio and net stable funding ratio were at 131% and 127% respectively. Slide 8, fee income. Third quarter gross fee income rose 4% from the previous quarter to $1.03 billion as momentum was sustained across most activities. Wealth management fees grew 8% to $461 million with higher activity across a range of investment products. Transaction service fees grew 7% to a new high of $239 million as cash management and trade finance fees increased. Card fees rose 9% to $180 million as consumer spending continued to recover towards pre-pandemic levels. These increases were moderated by declines in investment banking fees from the high base and in loan-related fees. Compared to a year ago, third quarter growth fee income increased 12%. The growth was led by a 16% increase in wealth management fees as AUM increased 13%. Transaction service fees grew 18% while card fees grew 13%. Gross fee income over the nine months rose 17% to a record $3.10 billion. The performance was broad-based with the growth led by wealth management, transaction services, cards and investment banking. Slide nine, expenses. Nine-month expenses were at $4.8 billion. Underlying expenses, which exclude the earth-wild Lakshmini Village Bank and the previous year's government grants, rose 1%. The cost-to-income ratio was 44%. Third quarter expenses were $1.67 billion. Underlying expenses rose 6% from the previous quarter due to base salary increments at mid-year and investments for future growth. Underlying expenses were 2% higher than a year ago. Slide 10. Non-performing assets. Asset quality remained resilient. Non-performing assets fell 1% from the previous quarter and 2% year-to-date to $6.57 billion as new MPA was more than offset by repayments and write-offs. The NPL rate was stable from the previous quarter at 1.5%. Slide 11, specific provision. Third quarter specific allowances halved from the previous quarter to $68 million or six basis points of loans due to a significant right back of allowances for an NPL reflecting our prudent stance on allowances. Nine month specific allowances amounted to $431 million or 14 basis points of loans. half of the previous year's level and below pre-pandemic level. Slide 12, general provision reserve. The balance sheet remains well fortified against risk with prudent general allowance reserves of 3.92 billion. The general provision overlay built up in prior periods was maintained. General provision reserves were 0.6 billion above the MES requirements and 1.1 billion above tier two eligibility. Together with specific allowance reserve, total allowance reserve amounted to $7.06 billion. Allowance coverage was at 107% or at 205% when collateral was considered. Slide 13. Capital ratio. Capital continued to be healthy. The common equity tier 1 ratio was stable from the previous quarter at 14.5% as profit accretion was offset by risk-weighted asset growth. The CET1 ratio was above the group's target operating range of between 12.5% and 13.5%. The leverage ratio of 6.8% was more than twice the regulatory requirement of 3%. Slide 14, dividends. The board declared a quarterly dividend of $0.33 per share for the third quarter, bringing the dividend for the nine months to $0.84 a share. Based on the previous trading day's closing share price and assuming the dividends are held at $0.33 per quarter, the annualized dividend yield is 4.1%. Slide 15, in summary. The first half's strong business momentum was sustained in the third quarter and the pipeline leading into next year is healthy. At the same time, forecast interest rate increases in the coming year will benefit earnings. Asset quality continues to be resilient and total allowances are expected to remain low. Our balance sheet is strong. CET1 at 14.5% is high and prudent general provision reserves of $3.92 billion are comfortably above the MES requirement. Liquidity remains ample and of a high quality. We are ready to put the pandemic behind us and remain well-placed to support customers and deliver shareholder returns. Thank you. Over to you, Piyush.

All right. Thanks. Thanks, Sakwee. And again, welcome everybody to our trading call. As usual, I'll go through two or three slides just to highlight some of the observations Sakwee made and maybe amplify on a couple of points. So slide one on business momentum. As Sakwee pointed out, we've had continuously very strong business momentum. Loan growth for the quarter is 2%, but that includes a $2 billion reduction in the trade book. That's a little bit driven by weakness in commodity prices, a little bit driven by action we took relative to the energy, oil business we do in some parts of the region. But 2% growth also reflected very strong underlying growth in the non-trade corporate business. In fact, the strongest for the year, much stronger than the first and second quarter loan growth. We've got 8% growth for the nine months. I think we'll see for sure another percentage point in the last quarter, maybe a little bit above that. So somewhere between 9% and 10% for the year, which is consistent with the original guidance for very high single-digit loan growth, I think we should get. One of the good things about the loan growth this year is being quite diversified. It is diversified by country and it is diversified by industry. In this quarter, we saw a little bit more on real estate of, you know, restructuring activity, acquisition activity. But overall for the year, TMT has been strong. Energy has been strong. The trading complex has been strong. The mortgage book has been strong. It's been quite diversified. And like I said, it's also diversified by country. So I'm feeling actually quite positive about that momentum as we go into the tail end of the year and into next year. The momentum we can also see in our fee income growth. Wealth management has continued to grow very, very well. It's up 16% for the third quarter year-on-year. It's up 8% quarter-on-quarter. AUMs are up 13%. That includes very good momentum in the retail wealth segment. I pointed it out in the past that we're quite pleased with how the digital retail wealth is proceeding. But whichever way you look at it, that growth is continuing to be quite strong and stellar. Transaction banking is up. Obviously, cash management does well because of all the digital cash management services we provided this year. But in this quarter, actually, trade finance was a standout, very strong numbers. So despite the marginal reduction in the trade book, the underlying activity both in supply chain financing and documentary trade was actually very strong. Our quarter-on-quarter growth for transaction banking is about 7%, so very good. Cards continues to do well as the economies are opening up. Our total spend is now up to pre-pandemic levels. The balances are about 10% short, and that I think reflects the fact that people are borrowing a little bit less, but I'm pretty optimistic that the balances are also headed the right way, so they will get up to pre-pandemic levels soon. Travel is still low. Travel used to be about 14-15% of our total spending. It's currently running at about 2%. If travel kicks in, that should give us another 10-15% lift in the spend and potentially another 20-odd billion bucks lift in the fee income pool. So as the opening up takes place in the next several months, I think there's some upside to that number. So net-net on the fee income, like on the loan, I'm actually quite optimistic that we have momentum. So markets, let's say over the record, the nine months, you know, we're 16% up for the nine months. That includes about 20% growth in the trading book and about 12% growth in the customer book. But 16% growth compared to global players is actually a top 10 percentile for the year. So extremely strong performance. Whether we can continue this next year is of course a little bit uncertain and maybe I'll circle back to the point when I talk about next year's outlook. And finally, the new platforms we set up in various growth markets. I'm actually again quite pleased that they're beginning to come in quite nicely. The integration of LVP is going smoothly. We've actually had about 15% deposit growth. The loan book is somewhat slower and that's deliberate, but we're now actually well positioned and we're in a position where we're going to start putting our foot on the pedal for the asset side as well. On the Shenzhen Commercial Bank, all the approvals have finally come in. And so that's going to be equity accounted from the fourth quarter onwards. So that's obviously a healthy uplift to our economics. The China Security Joint Venture, that kicked off nicely. In fact, we've been able to do two deals in our first quarter. And that's unusual because when I looked at most of the common pools, people take a year to start getting deal flow in. We did an equity trade, ECM trade, and we did EBS trade all in the first three months. So I'm actually quite pleased that's coming through quite nicely. So momentum across the board is actually quite positive. Next slide on business outlook. So how are we seeing next year? You know, there's obviously some uncertainty around supply chain bottlenecks. And as we're looking around our customer base, in pockets, you can see the impact of that. You know, manufacturing utilization is down in some places, but it's not material. And frankly, if you look at PMIs across the region, the PMIs are holding up quite nicely over 50. China, obviously, there is some impact in some parts of the economy. The growth rate for the third quarter was slow. I think you're going to continue to see some slowness But interestingly, what I just talked to you about the third quarter momentum, our pipeline as we go forward into next year reflects that the momentum should continue. So in a normal year, pre-pandemic, we were seeing 4-5% loan growth. This year will be 9-10%. Now next year, I don't see 9-10% repeating because we don't have the low base effect. but somewhere in between um you know the six seven percent loan growth i think is quite uh uh possible for next year as well um second on inflation you know My own view is that despite what the central bankers are saying, inflation could be a little bit more than transitory. And so I am not necessarily bought into the, you know, Yellen power camp. One of the reasons for that is that I do see wage inflation coming through. And we can see that across several of our markets. Frankly, you can even see that in the Western market. Now, I think that will increase, put some pressure on costs. We saw some of that this year. We were originally planning not to do salary hikes this year, but the market situation and the conditions compelled us to take salary actions in the middle of the year. And frankly, as I looked around, I realized we're not the only ones. So I do think there's some weight pressure coming through. But of course, there is a big positive to that. And the positive is that if there is any inflation impulse, you could see a much better, stronger interest rate outlook. The market is already pricing in two and a half hikes for next year. And as you know, many of the central banks have already started on tightening cycles. You know, maybe Bank of England as well, but certainly some of the banks in the region have already started tightening cycles. So if that happens, it's obviously very beneficial to us. If you recollect in the past, we've always guided, I mean, pre-pandemic, that our interest rate sensitivity in DBSs used to be about 14 million bucks per basis point. that is now increased to closer to 18 to 20 million bucks. And it increased obviously because the size of our CASA book has increased and our CASA ratio has increased from the high 60s to 75% CASA ratio. And therefore, if you do start seeing any intestate increases, that should be extremely helpful to us on a franchise basis. On the investment stuff, you know, you might have seen we there's some facilities a couple of days ago that we're dialing up our investments in digital and AI. And frankly, we're going to be looking at some of this across the board. And so let me give you some color on that. If you look at the last 18 months from the beginning of the pandemic to now, I think we managed our cost base extremely well. Our underlying expenses are 1% up from the 2019 level. And our headcount till the middle of the year was actually down. We're down a couple of hundred people over the last 18 months. But we used this opportunity, as you know, to create some very interesting platforms. Some of them I just talked to you about. The other thing we've done in this period is we've also built up a lot of ammunition through very conservative provisioning levels. And because we have these platforms and we do have this ammunition through our provisioning, we think it is appropriate to start investing, even though we might be a tad bit ahead of the rate cycle. If you're lucky, the rate cycle will come in. If it comes a little bit later, it might be a quarter or two ahead of it. But given where we are, given our outlook on the region, and given the platforms we've created, we think it is the smart thing to do to start putting in those investments for growth and for scaling up. at this point in time and therefore in the third quarter uh we actually added some 250 300 people and had come so where are we looking at investing uh in c4 areas in particular one as i said digital and ai a large part of that obviously singapore you know there's going to be a new set of virtual banks and competitors next year. But even outside of that, we're seeing good traction and payback on the investments we're making. Our incremental measurable revenues from our AI, the measurable revenues we're getting from our ecosystem strategies, they're coming through nicely this year. So we think it's worth putting some money in scaling that up. The other area we want to invest in is the digital exchange. After a calibrated start in the first half of the year, the last few months have really picked up. About two months ago, we took the exchange 24-7. And then, obviously, Vickers was given approval to start marketing this to institutional customers. And it's quite interesting that assets under custody in the last month alone have gone up from 200 million sink to well over 600 million sink, so over half a billion US. So we can see the traction coming through on that. Our total trading volumes in the last two months surpassed the entire trading volumes in the first eight months of the year. So we think that's an area that's worth... putting some more money and trying to scale up. I referred briefly earlier to retail wealth. I've been mentioning for the last couple of quarters that we're quite pleased with how that's coming through. And that's an area we think is worth continuing to invest in. Our AUMs and retail wealth have gone up nicely, a couple of billion dollars even in the last quarter. So we're going to put some more investment dollars against that. Outside of that, on India, I think we have the platform for growth. In fact, now that we put together our overall view on India, we think we can triple that franchise in the next five years. And that obviously requires some investment and putting some money behind it. We were spending some money in integrating Lakshmi Vilas. We're getting some saves from the rationalization of branches people. But we do need to start investing and putting some money to leverage the platform that we bought. So we will put some money behind that. And in China, our early results, I mentioned the security joint venture, but also on our consumer finance platform, the early results are very promising. We have doubled the consumer finance book in the last quarter. And so, that's another area that we think is worth making investments and putting some money behind. So, when you add all of that together, a little bit the wage inflation I spoke about, a little bit making calibrated and targeted investments in these platforms we put together. we think it's a sensible thing to do. Now, as a consequence of this, in a worst case basis, we might still have negative jaws next year. We obviously have negative jaws this year. Revenues are down, expenses are a tad bit up. Next year, we might still have negative jaws, but That assumes a couple of conservative assumptions. One is that the markets don't repeat. So this year we had fantastic markets. I'd say we're 16% up here or near. If we can repeat markets' performance, then you'd get positive jobs. If you assume markets' performance goes back to a closer to a more normalized period, then that would create some headwinds. The other thing in this negative jaws, we haven't assumed any rate uplift. So if we do get rate uplift, you know, one or two rate uplift, I already pointed out the sensitivity in our book. So that will obviously help our overall efficiency ratios if that were to come in. Even if these things don't happen and we do get some negative jaws, our overall profit before launches, we expect to be higher than this year. So I think we're still going to be headed in the right direction. One of the things that will help that is obviously outlook on credit. The credit outlook is very benign. And you can see this quarter we've obviously been helped a lot on every part of the credit thing. NPAs actually look like they've gone up a tad from last quarter, but that's just an idiosyncratic. We've had one case where it's actually a national airline. National Airlines got no problem, but on a technicality, you know, we had to move it to non-performing before the government support and restructuring came through. So, it's about one-third of the new NPLs. So, it's not an issue. Overall, NPLs are looking good. Our provisioning on our Pacific, this thing has been obviously very conservative. And so, we're beginning to see some write-backs on SPs. We saw a big one this year in this quarter in the oil and gas sector, but across the board, I think we have conservatively provided now on the bulk of our NPL books, so that should be okay. On our overall portfolio, we're seeing improvement. We're seeing improvement both in terms of upgrade, but also repayment of our exposures in some of the weaker names. And as a consequence, the $400 million reversal of general provisions that we've seen this year reflects an improving book. And I can foresee that continuing to be the case. We're not seeing any meltdown or reduction in the book anywhere. It's useful to think that our total loans under moratorium now are about half percent of our total loan book. The SME loans, the mortgage loans in Singapore are down to about 100 million bucks and there are basically no delinquencies well secured. The SME loans in Singapore are down to under 100 million bucks and we're not seeing any delinquencies on the residual fees. The ESG loans in Singapore, about 80% of them are now paying interest and principal both. And again, we're not seeing any pickup in delinquencies. And therefore, our overall book from, you know, coming out of the COVID standpoint, is actually performing much better than I had anticipated and seems to be quite robust at this stage. So I'm not anticipating big challenges from that front. We've done obviously all the test testing relative to China. The real estate, we gave advice earlier, we've got no exposure obviously to Evergrande, we have no exposure to any high yield, we've got no exposure to any real estate company in the three red lines. So we're not seeing any downside risk in that part of the portfolio. So overall, our portfolio outlook is looking good. We think we'll see some SPs, which will go back to pre-COVID levels, maybe a little bit better, given how conservative we've been. But also, as I pointed out earlier, we have a lot of ammunition in respect of the general provisions that we have built up. And so I do think we'll be in a position to make... thoughtful release of those general provisions into next year. We've actually come up with a framework for, you know, when and how we could release general provisions, and it's predicated on the opening up and travel and so on. But based on that, we're actually quite confident that our allowance level for next year will mirror the allowance level for this year. And this year, as you know, it's close to zero. We'll be, you know, maybe 100 million bucks if we're unlucky. So there is some tailwind on that front as well. All right, my last comment, next slide on innovation. I thought I'd slide in because I got a lot of questions after the Sand Commercial Bank announcements earlier in the quarter. And I just wanted to point out, if you look at the structure we have in the bank, it's actually very helpful to being able to realize value of various new businesses that we're getting into. So we already have a holding company structure. That's one of the things that SCB in Thailand is trying to do, where we've always had a holding company structure. And so the bank lies under the holding company. What we did last year is we put another company called DBS Finnovation under the bank. And all of the new activities that we're doing, whether it's a party or the blockchain-based payment business, whether it's a climate impact tech, whether it's a digital exchange, All of these are being held as individual entities under DBS Innovation. This obviously allows us to build partnerships, do joint ventures or even build our own bespoke activities and keep them at arm's length, one length removed from the bank. Like I said, today we have three businesses in this entity. In the future, the idea as I suggested the last quarter is is we could look at spinning out some other businesses from the bank also under Finnovation. And we're exploring some of these businesses that have digital characteristics and are more easy to unbundle. I would hasten to add, though, that it's not that easy to unbundle a lot of other businesses. So despite what people might think, the fact that we have a banking license and some of our businesses are integrated means everything can't get bundled up, but some things can. And so that's an opportunity for us to take and pull out. DBS Finnovation itself, we've chosen to put it under the bank just so that we have a more simplified governance of a unitary board structure. So the holding company and the bank are all managed by a common governance mechanism. If it was appropriate and suitable, we could easily move Finnovation out into the holding company or even some of the companies under Finnovation can be moved out quite easily. Whether we need to do it will oftentimes be a function of the regulatory environment. In most countries, Singapore is one case, but so is the US. regulators tend to look through so they regulate bank holding companies like they regulate banks and therefore the idea of leveraging regulatory arbitrage by moving things under a holding company is not entirely obvious they will depend on how regulators did whether it be interesting to see what bank of thailand chooses to do but in most countries in the world regulators tend to look at regulating bank holding companies like their banks However, it does give us the option of being able to take our companies entirely from within this thing and so that's the flexibility we have. Again, this is stuff that we're actually exploring right now and over the course of the next year. This and many of the other technologies, strengths and capabilities we built, we do think there's some opportunity to monetize these, to be able to create value transparency and we will look at doing that at the right time. So why don't I stop there and happy to take questions.

Okay, Jessica, we can proceed to the media Q&A now.

Thank you. We will now begin the question and answer session. Participants with questions to pose, please press 01 or telephone keypad and you'll be placed in the queue. To cancel the queue, please press 02. First, we have Rebecca from S&P Global. Your question, please.

Hi, thank you so much for the presentation today. I've got two questions, one about loan growth and then the other about fee income. So first on loan growth is, you know, with COVID waves coming and going, and you mentioned as well with the supply chain constraints, how do you think this will impact your loan growth for the quarters to come? You did mention that your provision... It does mean that you're slightly optimistic but also still conservative because you haven't written it down that much further. And then the second question is, could you talk more about your strategy on increasing fee income? You mentioned it will likely be mid to high single digits. And what specifically are you going to do to increase that? Thank you.

I didn't follow one part of the question on provision, but the general broad theme on loan growth first. If you look at our loan growth, first of all, let me point out that our loan growth this year was quite diversified between the corporate bank and the consumer wealth business. On the consumer website, the mortgage book in Singapore actually surprised us. It's been very strong. In the beginning of the year, I thought we'd get about a couple of billion dollars of growth. We'll wind up at three and a half, four billion dollars of growth. And that continues robust. New bookings are still very, very strong in the market. So there's been a positive. Also growth in the wealth management business, the margin financing business has also been very strong. And like I said, AUMs are up nicely, our net new money is up nicely. We got at least $7 or $8 billion of net new money this year that continues to be good, but that also has propelled some financing on the back of that. So the consumer wealth portfolio is doing well. We expect that to continue to keep its pace next year. On the corporate side of the book, like I said, we've been growing $3-4 billion the first couple of quarters. We've grown closer to $5 billion in this quarter. And that is very broad-based. It's across industries. TMT has been a standout this year. Property, you know, the acquisition finance, restructuring deals have been very strong. The Singapore, you know, Temasek is doing a lot of restructuring in Singapore that gives us some very healthy opportunities. And the data center space has been very good for us. It's actually been quite diversified. And we expect that to continue, because you look at our pipelines across the region, they are good. In particular, we think we will see some more good loan growth come out of places like India next year, which we think should be quite helpful. So, quite diversified. Now, like I said, I don't think we'll get 9-10% next year, but I do think it will be higher than our normal 5% that we get in a typical year. The second question was on fees, and as we pointed out, our fees both have been very diversified. So, wealth management fee is very strong, but transaction banking fee has been very strong, and I think both have been helped by the digitization that we do. Wealth management by the retail digitization, as well as the top end. Transaction banking through all of the cash management, API-built activity we've done. Trade finance with the supply chain financing, again, API-driven. that we've been able to do, including algorithmic lending. So transaction banking continues to be extremely strong. I pointed out that I think cards and payments will pick up. As the economies are opening up, we're already seeing that. Today, back at pre-COVID levels, we think there's some upside in that space as well. What is a little bit more up and down is always the investment banking and loans. Overall, investment banking this year will be up some 50% over last year. So it's been very strong for us, both debt capital markets and ECM. And with the security joint venture in China, we're now beginning to get into even more deep flow. So I'm quite optimistic about our position in the investment banking space. Third quarter was a little slow because the market was slow. I think on the back of the worries around China, both ECM and DCM were a little bit slow in the third quarter. But conceptually, over a full year basis, we think there's some upside in that space too.

Sure. Thank you. Thank you. Next, we have Gula from The Edge. Your question, please.

Hello. Hi. Yes. Thanks for the presentation. An interesting set of results. Just wondered, can I... Gula, can you speak up? Can you hear me now? I've got about four questions. Can you hear me?

Yes, yes.

Yeah, thanks. Thanks for the results. They were very interesting set of results. Could you give an idea of how your subsidiaries did, such as like DBS Hong Kong, because I didn't see much of that in the... in the presentation. And then the second question is, could you speak to the growth of your ESG loans and in terms of cost and the yield and all that, are they the same as normal loans or are they higher? Then on the digitalization part, I think in the last quarter you mentioned you may want to IPO at some point DBS remit. I just wondered whether you have any more thoughts on that. And would this be affected by the rollout of, you know, PayNow and the prompt PayLane? I think there's one with PayNow and the Indian equivalent as well. And then just in general, your views of a decentralized finance and how this will affect traditional banking services, because I do know that you've done a lot of initiatives such as your DDEX and Patrio. And yes, so in general, how will this digital economy change the earnings profile of a traditional bank? Well, you're not really a traditional bank anymore, but traditional banking as we know it today. Did you hear all that?

Yes, Gula, I did hear all of that. So the last question is very expansive, so I'll keep my comments brief. But let me go see the items. On the subsidies, actually, from a geography standpoint, all of our countries are having a record year, this year. And that includes China, Taiwan, Hong Kong, India, India, it's been actually very broad-based. It has been very good. And I'll leave it to Sakui to give the specific listing on Hong Kong. I don't remember off my head, but Sakui, I'll pass it on to her in a minute. On the ESG space, we continue to be very active. In the third quarter, we did, I think, 23 loan transactions totaling about $4.5 billion. And so that brings the nine-month number up to about 62 transactions, totaling 13.7. Of course, the drawdowns of these don't all come immediately. They come over time. But we are well on the way towards meeting our targets and our own internal commitments around ESG. In fact, we have another 30 mandates that we're working on. That's another couple of billion dollars. And so this compares with last year. Last year, the total was about 50-odd transactions worth 9 billion. So this year, we'll be about 40-50% up on last year in terms of the range of ESG transactions that we're doing. on digitalization, you know, my last slide that I pointed out, the construct of innovation and the fact that we can actually move some businesses from the bank into innovation, that is the point. And last quarter, I suggested that a payment business like Remit is something that we could look at doing. It is still something that we're working on and exploring. I think the opportunities are, we have to take some businesses of that nature. That doesn't mean we will do it or, you know, we're not sort of We haven't lined up our ducks entirely at this point in time. It's something that we're still exploring. The country-to-country connectivity, the Thailand connectivity or even do it with Malaysia or this thing with India is actually quite positive for us because for us, as long as we participate in the origination as a customer, this just adds more rails in the back. In fact, as we're launching out and working more with Partior, we expect to plug Partior also as another set of rails. So we will continue to originate with Remit, that's the DBS base, and then use these various rails at the back to be able to get efficiency and real-time settlement. Now, as I pointed out before, in addition to the DBS set of customers, we're also increasingly bringing it to white label and go to third-party customers. We're currently working with at least three other counterparty banks in other countries, so we are taking the payment capability and white tabling it into their customer base. So, I think the payment space is a genuine opportunity for us. How we deal with it is something that we will get a greater clarity in the next year or so. uh and finally on d5 you know this is a big question because if you fast forward 10 years and ask me uh in the future world of d5 do you even need banks i don't know uh because the whole construct of a decentralized system means you don't need intermediaries and therefore you could very easily make a bigger case that in the future world nobody needs any banks anymore you don't need any stock exchanges and you don't everybody deals with each other Now, whether you get to that ultimate, this thing is not clear. If you look at China, the P2P lending space in China was a case in point. So they got to 4,000 P2P companies where people were trying to intermediate directly between individual savers and corporate and individual borrowers. And then two years ago, the Chinese had to shut down almost 4,000 of those companies because there weren't enough safety rails and OB markers around, you know, how to protect people. I think over the next 5-10 years, those rules will have to be built out. How do you protect individuals? How do we protect people? So do you really get to a world where everybody is dealing with everybody else and you don't need intermediaries? Like I said, if you have a dystopian view, you could say you don't need banks anymore. If you have a utopian view, then you would say that this really creates the opportunity for scale and much bigger participation with different customer segments and different geographies, the nature of the intermediaries will change, but the intermediaries will still potentially play a role. But how exactly it will pan out is not entirely easy to forecast. Our view on this has been that since the heart of the DeFi world is blockchain and a distributed ledger capability, what we need to do is make sure that we are plugged into the technology that we know how to use the technology, and where possible, we start launching sets of products and suites that we can leverage on. And that's why the digital exchange, that's why the party org, that's why things like climate impact tech, all of these are leveraging effectively blockchain and distributed ledgers so that we can play a meaningful intermediary role in the new world. And exactly what the role will be, we will be nimble and adapt to how the situation evolves. Sophie, Hong Kong?

Yeah, so just a bit more colour on Hong Kong. Hong Kong has actually done very well. If you look at third quarter, because we showed you the sort of data already for first half, you look at third quarter, the operating profit level before allowances is up 22%. And if you look at the MPAM level for third quarter year-on-year, It's more than doubled last year's level. So I think Hong Kong actually delivered a very strong set of results for the third quarter. If you look at China and Taiwan combined, because we showed that view, the rest of greater China, both the income and operating profits before allowances also grew at very healthy levels. And India, of course, is doing extremely well. At the top line level, India for third quarter, operating profit before allowances is, sorry, at the income level is up 32% for year on year for third quarter, as well as 38% for nine months. So very strong numbers. The only country that is affected significantly A bit more is actually Indonesia, where we saw some declines in the income, both year-on-year third quarter as well as for the nine months, and that's reflecting that we actually sort of slowed down our unsecured lending in Indonesia during the COVID period.

Thank you, thanks. Thank you very much. Thanks, Piyush, for the view on G5.

Welcome.

Thank you. Next, we have Chaya Poi from Bloomberg News. Your question, please.

Hi, Piyush. Hi, Sukhui. Piyush, you talked about your readiness to invest early in the cycle, including in China and Indian units. What's the total amount you plan to invest for 2022? And whether that will be on top of the $300 million that you have earmarked? or digital banking capacity. Second question, could you talk a little bit more with regards to your options on DBS spinnovation and the underlying assets that you said could be moved out or spin off? Is IDO or a stake sale to another firm among the things that you are looking at? And third question is on the DBS crypto trading platform. How is it doing and what's the outlook when compared to other non-bank players like Coinbase, Gemini and Binance? Thank you.

All right. Chania, on the first, which is the investments in places like China, India, I don't have a number for you. The 300 million, actually, if you read the details, was not all new money. It reflected a growth of some 15% here and there. So we are going to put more money, but some of that is money we've already been spending. So the delta is only a part of that. We will put some more people and headcount behind the Lakshmi Vinash platform as well as the consumer finance and the security platform in China. But I haven't dimensioned the money. In terms of actual capital, we might have to, we might put in more capital into India, you know, another 100, 150 million bucks of capital to grow the Indian platform. Like I said, we're very ambitious for that growth. Your second question in terms of our options and alternatives for innovation, like I said, it's too premature for us to give you specific guidance on what we could do. But effectively, if you take a look at the three entities we have there, In each of those entities, you know, Partier, Climatex, we actually brought in third-party money. We drove the creation of the entity, but we brought in third-party money. And so that's obviously a thing we could do. Once we spin out an entity, we could bring in third-party strategic or private investors into the entity at different value considerations. If we have the right thing in the right time, of course, you could also IPO one of those entities. But it's all very premature, right? So just to explain that we have the capacity to do something like that. Finally, on DDAX, I pointed out in my thing that the last couple of months after we took DDAX 24-7 have been very encouraging. As you know, we've deliberately kept our exchange only on a member basis. for wealth customers, accredited investors and institutions We are up to about 500 customers. But to me, even at that limited way, focusing on the wealth activity, the fact that we now have over half a billion dollars of assets under custody so quickly, it just tells you how much demand there is for that activity and the business. Our intent over the next year is to continue broad-basing the customer base and to look at moving out of that narrow private banking space into a broader retail offering. So it is something that we just need to wait and watch for.

Thank you, Piyush. Just to clarify that the amount, with regards to the first question, when you mentioned putting in 100 to 150 million in Lakshmi Villa, that's US or Singapore dollars?

China is not in Lashmi Villas. It's in our India franchise. You can understand it's not all integrated. So we are using the Lashmi Villas distributed obviously to power our growth. But yeah, that's about investing dollars.

Thank you.

Thank you. Next, we have Dylan from Nikkei. Your question, please.

Hi there. Thanks for the presentation. I'd just like to get you to elaborate a little bit more about China, Greater China. Do you have a little bit more details on the growth of your loan book in Greater China over the last quarter? Also, clearly there have been some alarm bells raised over the slowdown of growth in China and as well as the risk of financial contagion from Evergrande. So could you talk a bit as well about how that may or may not have affected your calculations and your stakes in China and your ventures?

Yeah, I think the best way to think about it is to first start with the observation that we are so tiny in China that we can really cherry pick. Our total book and our exposure in China are minuscule relative to the broader macro economy. And as a consequence, there are enough opportunities for a growth for a pair like us. And so when China slows down from 6% to 5% or whatever it is, that is not really very material to us because we're not in the consumer space at scale. We're not SME. The broad macroeconomic thing doesn't impact us that much. Our portfolio is very clean and very solid. We do a lot of stuff with the largest state-owned enterprises, many of which are continuing to grow quite nicely, both in the country and outside the country. And so because we can cherry-pick and we're very focused on the kinds of business that we do and the counterparties we have, we can continue to grow. And so the growth is actually, for the last year and this year, has continued to be quite broad-based and diversified. Some of this is obviously we do trade finance. Overall, when we went down for the quarter for the year, our trade finance book was strong because of commodity prices, and we obviously are quite active in that space. We've also been quite active in the restructuring and M&A space, helping many of our Chinese clients outside the country as well. Thank you.

Thank you. Next, we have Takashi from Nikkei. Your question, please.

Thank you for taking another question from Nikkei. I would like to know more about innovation. How many employees are working at innovation? And how many of them are tech talents? And how much capital does innovation have to invest? And to what extent will innovation contribute to the future profits of DBS? And lastly, You have been trying to get all the employees of DBS to have an entrepreneurial spirit. So if everyone in DBS has an entrepreneurial spirit, why do you have to create that innovation?

Yeah, so first of all, I think innovation does not have independent capital and employees of any significance and consequence. As you correctly said, the bulk of our resources stay in the bank. The actual scale and employees of any of these, if I remember, the party or total employee base is eventually expected to get to 70, 80 people. The climate impact is likely to get to 30 to 40 people. So these are not large numbers of employees. And at this point in time, they're not heavily capital consuming because the burn rates are actually very low. The reason we're trying to create these as independent things out of innovation is really, one, to be able to bring in partners or to be able to tap incremental sources of capital, and second, to be able to get price discovery, value discovery. I mentioned before that many of these activities and things that we do, as long as they're integrated within the bank, they tend to get hidden. Whereas the same activity, if you can spin it out and provide transparency the comparables in the market are very, very different. That's the context in which I talked about Remit last year, last quarter. If you look at our payments platform, Remit, our total profitability, EBITDA, our volumes and our throughput compare very, very favorably to comparables in the market, like TransferWise or, you know, any of these people. Whereas inside the bank, it gets lost. So you can spin something like that out, then you get much better benchmarking and transparency for the value that you have. That's one reason to try and think about doing this differently.

Business Times also wanted us to ask a question on their behalf, so this is from Kelly. So I'm going to read out two questions from her. The first question, where do you see domestic borrowing rates moving next year, given that the Fed is expected to start tapering bond purchases this month? And the second question is, can you share an update on the bank's interest in Citigroup Asia's assets?

So on the first domestic rates, I think rates will go up. In fact, after hitting an all-time low in September, you started seeing a creep up in rates in October across the region. And it's one of the reasons I think we have some upside. LIBOR crept up in October, HYBOR crept up, but also SOAR, CYBOR, the thing of SOAR, all the Singapore rates went up. In fact, perhaps even more in October. So I do think you are seeing the dip and you will see a pickup in rates. One uncertainty about the domestic rate next year is the switch from SOR to SORA. In the past, Singapore's SOR used to be entirely a function of the foreign exchange policy and the swap points between the US dollar and Singapore dollar. As more and more embrace the SORA is done, it will be less dependent on that and more driven by Singapore market liquidity conditions as well. But let's say I do expect to see a pickup in rates. Now, the underlying question is how many rate increases do we see from the Fed? I'm sure I don't know. I'll be testing to see what the dot points point to next. Certainly, the market is pricing in two and a half rate increases next year. Based on what Powell is saying, I don't think you'll see two to three. You might see one to two rate increases, though. If that happens, I think some of it is filtered through in Singapore. Some of it in these economies might even front run some of that. Your second question was the Citibank assets. I think it's inappropriate to talk about that. The transactions are running at this point in time.

Okay, thank you, Piyush. I think that's all the time we have for today. So thank you, everyone, for coming, and we'll see you next quarter. We'll start the analyst briefing in a few minutes. Yeah, thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.