Dbs Group Hldgs Ltd S/Adr

Okay, good morning, everyone. And thank you for joining BBS's third quarter earnings call. This morning, we announced 3Q net profit rose 32% from a year ago to a record $2.24 billion. And return on equity was a new high of 16.3%. Today, we have with us our CFO, Cheng Sok Wee, and our CEO, Piyush Gupta, who will take us through the numbers. You can also follow along with them without further ado, sorry.

Thanks, Agnes. Good morning, everyone. We start with a slight tool. On the highlights, we achieved a record performance in the third quarter. Net profit rose 23% from the previous quarter to $2.24 billion and return on equity reached 16.3%, both at new highs. Total income rose 20% to a record $4.54 billion as net interest margin recovered to pre-pandemic highs and business momentum was sustained. Net interest margin climbed 32 basis points to 1.90%, accelerating from the increases in the previous two quarters amid faster rate hikes. Loan momentum was healthy as non-trade corporate and housing loans grew faster than in the first two quarters. Fee income was maintained as increases in card and loan-related fees compensated for lower wealth management fees. On the back of the strong top-line performance, the cost-to-income ratio improved 4 percentage points to 40%. For the nine months, net profit rose 8% to $5.85 billion, also a new high. Total income rose 10% to $12.1 billion as a higher net interest margin and loan growth more than offset lower fee income. Expenses grew 7%, resulting in profit before allowances rising 12% to $6.96 billion. Asset quality continued to be resilient. Non-performing assets fell 5% from the previous quarter and the NPL ratio improved to 1.2%. Specific allowances were minimal for the quarter and 8 basis points for the 9 months. General allowances of $153 million were set aside. Capital and liquidity remain strong and well above regulatory requirements. The Board declared a third quarter dividend of $0.36 per share, bringing the dividend for the nine months to $1.08 per share. Slide 3. Compared with the previous quarter, total income rose 20% to a record $4.54 billion. Net interest income was 23% or $566 million higher as a result of a 32 basis point expansion in net interest margin and healthy loan momentum. Fee income was stable, while other non-interest income rose 32% or $183 million from higher Treasury markets' non-interest income, Treasury customer income and investment gains. Expenses were 10% or $167 million higher. The positive jaw resulted in a 27% increase in profits before allowances to $2.72 billion. Specific allowance charged for the quarter was $25 million or two basis points of loans compared with eight basis points in the previous quarter. Total allowances were higher as $153 million of general allowances were set aside during the quarter compared to a $23 million write-back in the previous quarter. Additional general allowances were set aside as a prudent measure. General allowance overlays of $350 million were added, even as baseline general allowances were reduced by $200 million due to portfolio improvements. Slide four. Nine-month total income rose 10% from a year ago to a record $12.1 billion driven by higher net interest income. Net interest income increased 22% or $1.36 billion to $7.66 billion from a 20 basis point expansion in net interest margin and loan growth of 6%. Fee income fell 10% or $279 million to $2.43 billion as global wealth management and investment banking fees more than offset growth in other activities. Other non-interest income was little changed at $1.99 billion. Expenses rose 7% or $329 million to $5.13 billion led by higher staff costs. General allowances of $18 million were taken compared with a $413 million write-back a year ago from portfolio improvements. Specific allowances fell to 8 basis points of loans from 14 basis points a year ago. Slide 5. Net interest income of $3.02 billion was 23% higher than the previous quarter. The Group's net interest margin, represented by the black line, rose 32 basis points during the third quarter to 1.90%. The increase was faster than the three basis points in the first quarter and the 12 basis points in the second quarter, as the impact of rate increases was more fully felt. The commercial book NIM, which excludes Treasury markets, represented by the red line, increased by 45 basis points during the quarter to 2.30%. This reflects the higher funding costs for the Treasury Markets book as seen in the change in NII for Treasury and Markets on the chart. Taking into account both net interest income and non-net interest income, Treasury Markets income was unchanged during the quarter, with higher funding costs offset by gains in other income. For the nine months, net interest income increased 22% to $7.66 billion as net interest margin rose 20 basis points and loans grew 6% from a year ago. Commercial book NIM rose 30 basis points. Going forward, the group's net interest income and net interest margin will benefit from the 75 basis point Fed rate hikes announced in late September, the 75 basis points announced today, and further increases in Fed funds rate. On the asset side, net interest income and net interest margin will benefit from repricing of about $180 billion of fixed rate instruments and fixed deposit rate home loans in future periods. Slide 6. Underlying loan momentum was healthy in the third quarter as non-trade corporate and housing loans grew faster than in the first two quarters. Excluding trade loans, loans increased $7 billion or 2% in constant currency terms from the previous quarter. Non-trade corporate loans rose $8 billion or 3% over the quarter from broad-based growth across the region and sectors. Housing loans increased $1 billion or 2% from higher loan disbursements and lower round-offs. These gains were moderated by a $5 billion or 10% decline in trade loans as maturing exposures were not replaced due to unattractive pricing. Loan growth for the first nine months was $16 billion or 4%. The growth was predominantly in non-trade corporate loans. Slide 7. Deposits were stable from the previous quarter at $533 billion. Over the nine months, deposits rose 24 billion, or 5%, in constant currency terms, Fixed Deposits grew $62 billion, while Casa declined $38 billion. Most of the decline in Casa was seen in the third quarter, of which SingDollar Casa declined was $11 billion. Nevertheless, SingDollar's savings deposit market share rose 0.4 percentage points in the third quarter as the industry's SingDollar savings balance declined at a faster rate. The growth in fixed deposits was predominantly in foreign currencies and was used to fund foreign currency loan growth. This enabled us to swap less from surplus SingDollar CASA deposits, which continue to earn attractive returns. The pace of decline in CASA has been in line with our expectations. Notwithstanding the decline in the third quarter, our CASA balances remain more than $100 billion higher than before the pandemic. The liquidity coverage ratio and net stable funding ratio were at 133% and 114% respectively. Slide 8. Third quarter gross fee income was stable from the previous quarter at $923 million. Wealth management fees fell 4% from the previous quarter to $323 million as market conditions remained weak, dampening sales of investment products. Investment banking fees declined 17% to $25 million as deal flows were also impacted by adverse market conditions. These declines were moderated by higher card fees which rose 10% to $223 million as travel spending continued to recover towards pre-pandemic levels. Loan-related fees rose 7% to $122 million. Transaction service fees were stable at $230 million. Gross fee income over the nine months was 8% lower than a year ago at $2.86 billion. The decline was due to lower wealth management and investment banking fees, partially offset by growth in other fee activities. Slide 9. Third quarter expenses rose 10% from the previous quarter to $1.83 billion, led by higher staff costs. With total income rising faster than expenses, the cost-to-income ratio improved from 44% to 40%. Nine-month expenses rose 7% from a year ago to $5.13 billion, led by higher staff costs. The nine-month cost-to-income ratio was 42%, an improvement of 2 percentage points from a year ago. Slide 10 on non-performing loans. Asset quality remained resilient. New non-performing asset formation in the third quarter remained low, and there were significant upgrades and repayments during the quarter. Write-offs were at a similar level to the previous quarter. As a result, non-performing assets fell 5% from the previous quarter to $5.60 billion, while the NPL ratio improved from 1.3% to 1.2%. Slide 11. The resilient asset quality resulted in third quarter specific allowances declining to $25 million or two basis points of loans. Nine-month specific allowances for credit exposures declined 40% from a year ago to $260 million or eight basis points of loans compared to 14 basis points a year ago. Slide 12. Total allowance reserves stood at $6.71 billion, with $2.81 billion in specific allowance reserves and $3.90 billion in general allowance reserves. Total general allowances increased $153 million during the quarter. Additional general allowance overlays of $350 million were taken as a prudent measure, even as baseline general allowances were reduced by $200 million due to portfolio improvements. The $6.71 billion of allowance reserves resulted in an allowance coverage of 120% and of 216% after considering collateral. Slide 13. The Group's Common Equity Tier 1 ratio declined 0.4 percentage points from the previous quarter to 13.8%. Profit accretion was partially offset by dividend distributions. Risk-weighted assets increased, led by strong growth in non-trade corporate loans. There was also a modest impact on CET1 from mark-to-market losses on fair value through OCI securities as a result of higher interest rates. CET1 of 13.8% remained above our target operating range of between 12.5% to 13.5%, while the leverage ratio of 6.1% was twice the regulatory minimum of 3%. Slide 14. The Board declared a dividend of $0.36 per share for the third quarter, bringing the dividend for the nine months to $1.08 per share. Based on yesterday's closing share price and assuming that dividends are held at $0.36 per quarter, the annualized dividend yield is 4.1%. Slide 15, the final slide. We achieved record third quarter and nine-month performance despite challenging financial market conditions, a testament to the strength of our franchise. Business momentum was sustained, asset quality was resilient, and the inherent value of our deposit franchise became more apparent with high interest rates. These positives enabled us to more than offset pressures on markets-related income. The record third quarter ROE of 16.3% underscores the significant structural improvements we have made over the past few years, including from digital transformation. Our transformed franchise, balance sheet strength and leverage to rising interest rates will enable us to continue delivering healthy shareholder returns in the coming quarters amidst external hit-links. Thank you.

All right, thank you and thanks everybody for dialing in as usual. I have a couple of slides to reemphasize some of the comments that we made and perhaps amplify on a couple of things. So the first slide too, I think it's called. Just to look back in the quarter, I think the two or three things that stand out. One is underlying business momentum has continued to be quite strong. Corporate loans grew by about $8 billion for the quarter, and that was broadly dispersed. It was in different markets in India, in Taiwan, in Australia, UK, Singapore itself. and across multiple industries. Property was one of them, but TMT, ERI, Energy, so fairly diversified broad based growth. In Singapore, interesting, our mortgage book grew as well. We've grown barely 300-400 million bucks in the first half of the year. We grew well over a billion dollars in the third quarter. Our bookings have held up despite a little bit of slowdown in the market. But what was more distinct is our refinancing in as well as our lower refinancing outs that helped our overall balances. I think part of that reflects the fact that we had competitive pricing in parts of the quarter, but nevertheless, overall loan growth was strong. The only area that didn't grow was trade, and a lot of that was deliberate. As rates have been going up, it's been hard to hold the credit spread in the trade book, and the low margin trade book doesn't make sense to us. So to a large extent, we've been letting the low margin loans run off. liquidity remains healthy uh zaki pointed out that there continues to be a conversion from uh casa to uh fixed deposit a lot part of the conversion is in the dollar book in the singh dollar book uh our casa ratio is still 93 percent uh because that is high to 94 percent is very sticky in the us dollar book there is more conversion but it's consistent with our thinking and our model the expectation for how much we should expect to move to our fixed deposits and the repricing Even after that, as we said, our CASA levels are over $100 billion higher than they were just a couple of years ago. And ICR, NSFR, etc. In fact, around the region, liquidity seems quite comfortable. On free income, quarter to quarter was flattish, but the good news is the wealth management seems to be stabilizing despite no improvement in the market conditions. Capital markets also continues to stay challenged. ECM really had no activity, though in the last few weeks you've begun to see some bond activity coming out of china nevertheless that part of the business market slave fee continues to be slow on the other hand um you know fees on cards in particular is improving and the markets continue to open up and travel activity is increasing so that's been helpful on wealth management obviously the one big silver lining was uh net new money we continue to benefit from a lot of inflows into the region in the first nine months Total inflows have been about 15 billion, double what they used to be. And a lot of that money is waiting on the sidelines to be invested. That momentum continues as we speak. So I do think there's some upside over there. And finally, last comment on the asset quality. Asset quality has been really pristine. We've seen no new NPA formation. NPA rates are down to 1.2%. We're seeing no stress in the books, really. And in fact, we continue to see upgrades and repayments. There are some questions I saw on, you know, why would you add gender provision of 350 million bucks if that's the case? And the answer to that is, frankly, there is a lot of uncertainty around next year. I don't think any of us have seen a 5% interest rate environment in a long, long time. and if rates head to plus minus five percent uh what impact that has on slowdown in asia uh and therefore potential credit is quite unclear so what happened is through the three quarters of this year our general provisions had reduced by 350 million just because of improvements in our book and we took the opportunity to add the 350 back so we've gone back to a gp level that we had at the end of last year It's not for any specific knowledge. It's just for being very prudent given the uncertainty around the interstate and the economic outlook for next year. Next slide. So, you know, we think about next year, you know, at the end of the second quarter briefing, I said our base case was that inflation starts going down and the Fed levels off at three and a half percent. But I had highlighted in my comments that there was a tail case and the tail event was inflation was more sticky and the Fed didn't level off at three and a half. Well, as you can see, that tail event was playing out. Inflation has been stickier. You know, CPI levels are still high. I do expect inflation rates to start leveling off partly from base effect in the coming quarter, but for the time being, the high. What's more important is the Fed body language and the Fed statements are quite clear. I mean, they're not leveling, not really not leveling off at 3.5%. I think they will definitely wind up at 4.5% this year and probably our current base case at 475, but they could even see through that. And therefore, you know, do you wind up with a slowdown only in the US or a recession is anybody's guess. But my current thinking is that you could wind up seeing a recession in the US if rates hit north of 5%. And therefore, you will see a sharper slowdown in Asia if that is the case. And that uncertainty of, you know, how would rates go up to and how much slowdown you see is what some of our, you know, outlook and our guidance is being predicated on that. There is a lot of uncertainty with these high interest rates. We haven't seen this environment in a long period of time. China also is an uncertainty right now. Our original everybody's base case was that after the Congress, you might start seeing an opening up and if you discount that WhatsApp floating around in reality, it doesn't seem to be the case that China will open up, you know, very rapidly. It could take them a few quarters or longer to open up. So there is some upside if they do open up quicker. But in our thinking right now, we're assuming that they wind up taking two, three more quarters before the economy starts opening up as well. Nevertheless, our low pipeline for the time being looks quite healthy. As we're looking at the prospects, you know, we think we can get mid single digit for next year. But I want to hasten to add that, you know, sometimes these pipelines disappear. So if you really see a sharp slowdown in Asia in the early part of next year, we'd have to go back and reconsider the pipeline and we would be thoughtful about that. In fact, I think we see a moderation in our loans even in the fourth quarter. And that's for a different, more idiosyncratic reason. That is that today with the dollar rates where they are and the renminbi rates where they are, it's much cheaper to borrow onshore in China than to borrow offshore in the international markets. And so several of our Chinese clients are switching over from international to local markets. And obviously, we're not that competitive in the local market. you might see a softening or a moderation of the momentum in China. But that's a, you know, idiosyncratic thing, one off because of that situation on wealth and cards. we're assuming we can get double digit growth and this partly because of a base effect this year has been down overall we're down 20 and so uh even if there is some degree of optimism in the market uh and uh uh um you know you don't see the continued negative news coming out of china then you should see some positive effects coming out of that so i think a double digit growth in a fee income should be possible On NIM, our modeling currently suggests that if the Fed fund rates get to 475, NIM, which is circa 2% today, we should be able to get to about 2.25% NIM. Now, there are a lot of moving parts in this. One, this is, as Saki pointed out, the full bank NIM. The underlying commercial bank, commercial book NIM is much higher. uh but like uh several other international banks uh the funding cost of the treasury book uh means that there is a drag on them and so this uh is actually a blended number which includes a much stronger growth in the commercial book but some drag on the on the name uh on the treasury book This also reflects the fact that the cost of funding and deposits at the margin is going up more rapidly as you go forward. I've indicated before that our modeling up to 3.5% suggested that we could do 18-20 million bucks of basis points in income. But as you go forward and get to 4-5% rates, that sensitivity does not necessarily hold. And so the payout rates increase, and that's why the 225 incorporates that. The last thing it incorporates, again, Sakrit pointed out, we do have $180 billion of assets in our fixed rate and our FHR portfolio. About a quarter of these will reprice by the end of next year. Another quarter reprice actually in 2024. So you do see some tailwind from the repricing of the fixed rate book. But when you add and blend all of that together, we think this is where we probably wind up. Our cost-income ratio continues to be good. Obviously, it's helped by the income line. Our cost growth for this last quarter was close to 10%. Our own sense is that you will see costs in the high single digits, a 9-10% growth rate next year, but the cost-income ratio should still be headed down. And finally, ROE, we think ROE, we will be comfortable about 15. We do think cost of credit might go up next year. This year, like we pointed out, it's been unusual. We were eight basis points of specific provisions in the first nine months. And like I pointed out, we're not seeing any stress and we're not seeing any pain. But 40 years of banking tells me that at 5% interest rate, you should expect to see some pain and some new cost of credit. So in our assumptions, we're assuming cost of credit goes back to a normal cost of credit, the plus minus 20 basis points on SPs that we normally assume. But even if you throw that in with the rest of the assumptions that we have, we think we will be very comfortably well above 15%. So I think we're shaped up for a solid next year as well. So why don't I stop there and we take questions.

Okay, thank you, Piyush. We'll now go to the media Q&A. So if you have a question, please click the raise hand button. You can see that under reactions. And when I call on you, then please accept the option to unmute yourself and then go ahead and please state your name and the publication you represent before you ask your question. So we'll just give a few moments for people to raise their hands in case you have a question. We have a question from Chris Wright.

Thanks, Piyush. Thanks, Sokri. Thank you very much for the presentation and taking the question. I have two, if I may. The various city consumer purchases or sales, I should say, are gradually going through. UOB completed a couple of them this week. Not yet your Taiwan purchase. Could you just bring us up to date on how that's going along and whether the increased geopolitical noise around Taiwan and China has given you any concern at this time? Second question. The FinTech Festival is underway, and we saw through the week the announcement about the pilot trade under Project Guardian involving DBS. Without getting into the weeds of that specific transaction, I'd be interested in your high-level view about where DeFi might take us and what it means for banks like DBS. Thank you.

So Chris, on the first question, that process is going smoothly and well. As you know, unlike UOB who is actually doing the transaction and then doing the operations close in the future, having the city continue the process for them for some period of time, we are doing our transaction differently. We are going to do the operations close and the legal close all at one time, which is targeted for August next year. uh deltas in the meantime we're working very closely with city to make sure that our systems are up to snuff and we know how to transfer the people the system the technology and like i said right now i think uh we are firmly on track uh of the geopolitical considerations frankly i i alluded to this before when we did the deal we spent a lot of time thinking through the consequences of geopolitics with respect to china taiwan etc And our overarching view has always been that as an Asia centric commercial bank, our strategy includes a healthy view on North Asia. You cannot be an Asia centric bank without meaningful North Asia presence. And really, if geopolitics comes to a stage where you have the next world war, Taiwan is the least of our issues and problems. The issues will be much bigger and include Singapore and Asia and the rest of China. So the incremental exposure we take to Taiwan is really not material when you think through that kind of scenario. And absent that kind of scenario, the underlying book that we're purchasing, it's a cards book, it's a wealth book. I think that will continue to do quite well. Anecdotally, if you look at Ukraine today, despite the war, the consumer businesses and domestic businesses in Ukraine are doing just fine. And so I don't think that will get overly impacted. Your second question on DeFi. Look, I've said before, I do think that the power of the technology is game changing because it eliminates the need for a hub and spoke arrangement and it creates the architecture where you can do point to point dealings, whether it's person to person or entity to entity. The point-to-point dealings for authentication, identity, value transfer, confirmations can make a fundamental difference to what I call the back office of the world. So I do think those opportunities are very, very real. Everybody conflates, you know, the notion of DeFi necessarily to crypto and so on. Official money. I think there's a long way before private money will replace official money. I mean, the evangelists would argue it could happen very quickly. I think it's going to be a long time. But the rest of the stuff, perhaps fiat money, perhaps official digital currency, perhaps the projects we're doing with Guardian, which is, you know, delivery versus payment, cross asset class instance settlement. I do think all of those have their legs because they bring efficiency to the overall system.

Okay, we have the next question from Gula. Will you unmute yourself?

Yeah, I'm trying to. I think you... Okay, thanks. Yes, thanks. Congratulations. Can you hear me? Yes, we can. Okay, great. Congratulations. Very good results. Can you just ask on the score of the NIM and the net interest income, how much more upside are you likely to have next year if we end up at 5% on the Fed funds rate and... there's some impact on credit costs. And I didn't catch how much you expected your credit costs to be. So that's one question. This is our outlook for next year. And then could you repeat the $180 billion of assets, is this your securities book, your high... quality liquid assets? And if so, was there an impact? What was the impact on your set one? Because I think UB said they had an impact on their set one. They gave a figure as well. I'm just wondering what that was on yours. And okay, then, okay, this is the outlook, the pipeline for both loans and investment banking, a pipeline for next year. I wonder if you could give us a flavor of that. And also, there's been a lot of interest in India. There's a recent Morgan Stanley report. So I'm just wondering, how is your Luxmobilis Bank acquisition tracking in terms of income margins, credit costs, et cetera? And are you getting any of that institutional business? We've had GFC and DSR setting up property funds, et cetera. Are you getting any of that? institutional interest and the last question was also i think was asking about decentralized finance i'm not quite sure how it works but how would it impact your institutional business i mean will you lose anything in fees when you get something in efficiency that that sort of thing if you could did you get all those questions i got to see if i can i tried to scramble down there were 10 of them but you speak very fast you know it's very difficult to get to write everything you use you say so

Well, the first one, we actually, if you go back to my second slide, the answer is there. We said that, you know, if Fed funds rates get to 4.75, and then we'll be at about plus minus, no, slide three, next slide, please. 2.25%, right? And so if you said five, I said 4.75, but it's in that order of magnitude. So we do have that. You asked about credit costs and the reality is, you know, we have no real line of sight to cost of credit for next year because this year has been fantastic. And, you know, this last quarter provisions only two basis points. uh and therefore there's on the one extreme you can make the case that you're not seeing any stress in the portfolio you're not seeing any provisions portfolio continues to improve so cost of credit could really continue to be very benign even next year on the other hand because rates are going up to this you know four and a half five percent level uh you know you haven't seen that kind of interested environment for a long time and it's just logic tells you that you should start expecting to see higher cost of credit and therefore uh what i said in my talk is that um in our thinking we're saying cost of credit will probably go back to a through cycle level of about you know maybe 20 basis points of sps or something uh but again we really don't have a line of sight to what the real number could be In our planning assumptions, we are assuming that we go back to a normalized cost of credit of around 20 basis points. The 180 billion book is about half and half. Half of it is our loan book and the other half of it is our securities book. The loan book comes from fixed rate and eventual lending. A chunk of that is in the mortgage book. Two-thirds of our mortgage don't reprice right away. One-third is related to fixed deposit linked mortgages and then another one-third is really fixed rate. So that reprices over time. And then the rest is other fixed rate loans that we have in the corporate book. The other half of that roughly is our securities book and it's our duration portfolio plus our interest rate swap portfolio plus our HQLE. Maybe we can give some more color on that as well.

Yeah, so the fixed rate instruments that we talk about is really in the sort of corporate treasury book. So they are mainly held to collect. So don't have the fair value to OCI that we talk about. Most of the fair value through OCI securities instruments which are mark to market are from the treasury and markets book and that had a 0.3 percentage point impact on car in this quarter as you would see all the banks reporting they would see the FVOCI impact so for us of the 0.4 percentage point decline 0.3 percentage point came from the FVOCI book The other 0.1 percentage point due to sort of the growth in RWA from normal loan growth.

Then you had a set of questions around outlook. Again, I talked about that for investment banking, etc. So right now, the markets are still not open, though we started seeing some fixed income and bond issuances come out of China in the last few weeks. um so not entirely easy to say when the markets open up the good news is we have very strong and very healthy pipeline for the capital market business both on ecm and dcm so if uh over the next several months we start getting windows of opportunity and some degree of market confidence comes back then we do have the opportunity to bring a number of deals to the market On India in particular, the whole Lakshmi Vilas is doing very well. India continues to be a fastest growing franchise over the last year or two. And outlook for next year is also very promising. The country, like the Morgan Stanley report, we believe in that too. The country is on the cusp of tremendous momentum. We think our timing in India has actually been quite good for the investments we've made. At this point in time, though, the margins, income, et cetera, for the luxurious thing are still negative because we're still integrating the business. So it's consistent with our model and our plans. In fact, in some cases outperforming the underlying portfolio quality of the book has been better than we thought. And we actually got recoveries on that as well. But overall, that book is doing well and the country franchise is doing quite well. You had some questions on the institutional business, which I did not follow. So I'll skip that. Maybe you can ask me that again or somebody else knows. Your last set of questions were on DeFi and what the impact of DeFi might be. And it really depends on A, what time frame and what view you take. If you really take the view that in the future, everybody, all 9 billion people on planet Earth start dealing directly with each other. And you could easily make a case that you don't need banks. Banks disappear. Central banks disappear. Stock exchanges disappear. And countries also disappear. So you could take that case in which case none of us have any jobs or roles because everybody deals directly with each other. I don't think you're going to wind up there anytime soon. We've seen that historically P2P arrangements come with their own sets of risks. And I also don't believe that nation states and authorities are in a position where they're happy to sort of uh cannibalize themselves and the entire institution so i do think what you'll wind up is a more intermediate form of d5 and intermediate form of d5 i think you'll still find a role for various kinds of intermediaries and players um i make the the you know analogy sometimes to commercial banking and investment banking. 40, 50 years ago, when people started going directly to the capital markets, you'd argue that you didn't need commercial banks. But what happened is that a new role evolved. And so commercial banks started getting investment banking arms to help the issuers reach out to the investors. I do think that those kinds of roles are likely to happen in the DeFi metaverse as well. People who create context, people who create access, people who help, you know, shepherd the system. So I do think there's some opportunities around that. I also think there are opportunities to drive down costs, as you correctly mentioned. When I say back office of the world can change, I do think there's some potential for cost efficiencies in the future. You can improve the customer experience and that's somewhat helpful. Our party or does that, it changes the T plus two settlement paradigm to T plus zero, for example, or the experiments that we're talking about right now in Singapore, I think some of them can be helpful.

Okay, next question from Chania.

Hi, Diush. Congrats. Chania, a bit soft. Hi, congrats on the good number to Piyush and team. I have one question on wealth management, which you say will help drive fee income to double digit growth next year. Will that be coming from stronger inflows or are you expecting more transactions that generate fees? Also, could you share your view on inflows into Singapore next year where it will be coming from? Are you seeing strong inflows? And if you expect China lockdown to continue for two, three more quarters, will that drive more inflows to Singapore? Thank you.

China is very hard to predict what happens to inflows and, you know, when China, whether China lockdown draws flows or not. Actually our inflows have been more broad based than just China. We've been seeing inflows from broadly North Asia, but also other parts of the world. The big pickup has been North Asia though, but it's not specifically only China. So when we talk about the wealth fees, you know, we've got 15 billion. Actually, you know, if you look at year to date, we're closer to 18, 20 billion of inflows. A lot of that money is actually sitting on the side. It's in deposits or cash form. So if the markets become a little kinder, I expect a lot of that money to be put to work. So that will be one thing when you're correct. But on top of that, overall wealth fees were down 20 odd percent this year. And we've said before that, you know, the wealth business in Asia, a large part of it is linked to animal spirits. Recurring income in that business is only about 20%. 80% of that income comes from trading in animal spirits. And therefore, along the path that that picks up, then you should expect to see a recovery.

The next question from Prisca from Streets Times.

Hi, thanks for the presentation. I have a question for you on outlook. Where do you see the tipping point in which the US economy might go into a recession and Asia might slow down? Is this at the 4.75% mark or could this be earlier? My second question is on CASA. Are you worried about the CASA book going down? And yet, are there any other reasons for the move to fix the COVID My third question is on... Sorry, I didn't follow the second question.

Can you say that again?

Oh, my second question is on CASA. Given that the CASA pool has gone down, are you worried about this? And are there any reasons why, reasons behind the decline besides the move to fixed deposits? Yeah. And thirdly, our interest rates for FDs and savings, they have been going up quite a bit. Do you think this is sustainable given that... the outlook for next year is a bit uncertain and loan demand might fall off a bit.

Yeah, on the first question of when does the economy go into recession, I think, you know, Powell is trying to guess that too. So, you know, at 4.75, I was in Washington for the World Bank Conference. Most people think you would see a recession at the 5% handle. and that the fed is quite uh you know willing to drive that recession um so at plus minus that rate you would see if you don't there's also a view that the fed will continue to hike rates till they can force a recession because they want to bring inflation down uh but yeah i think there's a decent probability that with five percent handle of 4.75 uh you could see a recession in the u.s third quarter actually bounced back a little bit but you can see consumption is already coming off uh and that uh you know should create some uh a slowdown in gdp growth um your uh second question was uh of course see the you know if you look at them um over the last couple of years uh two three years with zero interest rates uh have gone to extraordinary high levels uh historic high levels uh and that reflects the fact that the alternative views of money uh was not very profitable. So by moving from you might leave the money in Casa and keep the liquidity if you can't earn very much more by moving to FD or any other investment. So the Casa ratios were historic highs. When rates go up, it's well known people will move money out of Casa into FD because now if you can get 3% on FD, it suddenly becomes attractive. So you move out from Casa to FD. So that's not an unexpected occurrence. when we do our modeling for our business, both from a liquidity standpoint and from general balance sheet management standpoint, we already take that into account, that CASA rates will come down, people will move from CASA to FD, the cost of funds will go up. And so far, you know, till the end of the third quarter, our modeling has been very consistent with what has actually happened. So the CASA conversion, CASA deposit outflow is very consistent with what we predicted in the past. So it's not a matter of great concern. As you pointed out, we still have a lot of liquidity in the system. So we're okay with that.

I think maybe I take the question. I think your question was around the fixed deposit rates and how sustainable are the higher rates. And I think the question is, what's your alternative deployment? And I think banks will continue to sort of pay up for deposits if they can make a turn on the deposits because interbank rates and alternative deployments do provide a margin above fixed deposit rates. So I think it can be sustained if external rates continue to go up.

We have another question from Anshuman of Reuters.

Hi Piyush. Many thanks for hosting the call as always. It's good to see the strong numbers. I remember last time in August you said inflation was a big underlying uncertainty and it was hard to translate what it means just for the macro economy. Has anything changed in your outlook from the previous quarter at all? And also in terms of geopolitical uncertainty certainty which you raised last time. Are there any changes at all? Thanks.

First of all, I mean, what I pointed out, my base case and then the last quarter was three and a half percent raise because I thought that you would start seeing moderation in inflation with rates getting up there. In reality, I think partly due to the Russia Ukraine conflict, you didn't see that. I also partly because I think some of the inflation is in the wages. And so CPI rates have continued to be high, which is why you're not talking about 5% instead of 3.5% rate. So that's obviously a material shift. At 3.5%, as my base, the thing was the US would slow down a lot, might escape a recession, and Asia would have a mild slowdown. At 5%, that's a very different outlook. So I do think the US does get into a recession, and I do think Asia does have a slowdown. So it's a material shift. an outlook just because the rates regime is much much higher than we'd anticipated three months ago. In terms of geopolitics, I don't think, I think the US CHIP Act was a little bit stronger than people had expected. The Pelosi visit created some more tension, but overall the fact that you're continuing to see tensions between the West and the East, I think that's been on the cards. I think what was more of a surprise to me was China domestic politics and the outcome of the, you know, the party congress results because that puts into, opens up another question about when does China open up and directionally where does it go in the medium term?

Are there any final questions? This is the last call. Okay, looks like that's all the questions we have for today. So thank you, everyone. Yeah, we'll dial off now. And we'll come back 11.30 for the analyst call. Thank you, everyone. Bye.