Dbs Group Hldgs Ltd S/Adr

Okay, good morning and welcome to DBS's second quarter 2023 financial results briefing. This morning, we announced yet another record quarter with net profit up 48% to $2.69 billion. Return on equity reached 19.2%. To give us more details, we have our CEO, Piyush Gupta, as well as our CFO, Chung Sok Hwee. Without further ado, Sok Hwee, please.

Thanks, Agnes. Hello, good morning everyone. We achieved another record performance in the second quarter and first half, with total income, net profit and ROE at new quarterly and half-year highs. For the second quarter, net profit increased 48% from a year ago to $2.69 billion, while ROE rose to 19.2%. total income grew 35% to exceed $5 billion for the first time. Commercial book net interest margin increased 96 basis points, including 12 basis points during the quarter. Fee income rose 7%, the first year-on-year increase in six quarters, led by wealth management and cards. Treasury customer and other income rose 21%. The stronger commercial book performance was partially offset by a 34% decline in Treasury markets' trading income due to higher funding costs. The cost-to-income ratio improved 6 percentage points to 38% and changed from the previous quarter. For the first half, net profit rose 45% to $5.26 billion, with ROE at 18.9%. Total income grew 34% to $10 billion, as increases in commercial bulk net interest margin, cut fees, as well as Treasury customer and other income were moderated by lower Treasury markets' income. Expenses of $3.81 billion were 15% higher than a year ago and stable from the previous half. Asset quality continued to be resilient. The NPL ratio was unchanged from the previous quarter at 1.1%, as new non-performing asset formation remained low and was offset by repayments and write-offs. Second quarter specific allowances were at 10 basis points of loans, bringing the first half to 8 basis points. Allowance coverage was high at 127% and at 224% after considering collateral. Liquidity was amper, with both the LCR and NSFR comfortably above regulatory requirements. Capital remained healthy, with CET1 at 14.1%. The Board declared a dividend of $0.48 for the second quarter, an increase of $0.06 from the previous payout. This brings the first-half dividend to $0.90 per share. Slide 3. Compared to a year ago, second quarter commercial book total income increased 40% to $4.87 billion. The growth was broad-based. Net interest income rose 54%, or $1.26 billion to $3.58 billion. Net interest margin increased 96 basis points to 2.81% from higher interest rates. Loan and deposit volumes were generally little changed in constant currency terms, both from a year ago and over the first half. Net fee income grew 7%, or $55 million to $823 million. Double-digit increases in wealth management, cards and loan-related fees were moderated by a decline in transaction service fees due to lower trade finance activities. Treasury customer sales and other income increased 21% or $82 million to $464 million. The increase in commercial book total income was partially offset by a 34% or $93 million decline in Treasury markets trading income to $177 million due to higher funding costs. Expenses were 16% or $273 million higher at $1.93 billion. With total income growing 35%, there was a positive draw of 19 percentage points, which resulted in a 6 percentage point improvement in the cost-to-income ratio to 38%. Specific allowances amounted to $114 million or 10 basis points of loans, which was $45 million higher than the $69 million or 8 basis points a year ago. There was a general allowance write-back of $42 million compared to a write-back of $23 million a year ago. Integration costs of $60 million for CityTaiwan were accrued during the quarter as a one-time item. Including the charge, net profit was $2.63 billion. Slide 4. Compared to the previous quarter, second quarter net profit was 5% higher as total income rose 2%. Commercial total income grew 4%. The increase was due to a 6% or $197 million increase in net interest income as net interest margin rose 12 basis points. Loans fell 1% in constant currency terms from a decline in trade loans, while deposits fell 3% as CASA outflows were not replaced by fixed deposits. Non-interest income was stable. Net fee income fell 3% or $28 million as higher wealth management fees and card fees were offset by decline in other activities. Treasury customer sales and other income was 7% or $32 million higher. Expenses were in line with the previous quarter. Specific allowances of $114 million or 10 basis points were $52 million higher than the $62 million or 6 basis points in the previous quarter. The general allowance right back of $42 million during the quarter compared to a charge of $99 million in the previous quarter. Slide 5. For the first half, commercial book total income rose 42% to $9.54 billion from broad-based growth. Net interest income grew 61% or $2.64 billion to $6.97 billion, as net interest margin improved 100 basis points to 2.75%. Net fee income was 1% or $15 million higher at $1.67 billion, with a 4% year-on-year decline in the first quarter, offset by a 7% increase in the second quarter. Wealth management fees were stable as a decline in the first quarter was offset by an increase in the second quarter. Card fees and loan-related fees were higher, which were offset by lower transaction service fees due to trade finance. Treasury customer and other income rose 22% or $160 million to $896 million. Treasury customer sales income reached a record. Expenses rose 15% or $511 million to $3.81 billion. A significant part of the increase was due to headcount growth in second half 2022. Compared to the previous half year, expenses were stable. Specific allowances of $176 million or 8 basis points of loans were $60 million lower than the $236 million or 11 basis points a year ago. General allowances of $57 million were taken compared to a write-back of $135 million a year ago. Slide 6. Commercial book net interest margin expanded 12 basis points to 2.81% during the second quarter as asset repricing continued to outpace rising deposit costs. As a result, commercial book net interest income rose 6% from the previous quarter to $3.58 billion. Compared to a year ago, commercial book net interest income rose 54% as net interest margin increased 96 basis points. Treasury markets' negative net interest income widened to $148 million from negative $113 million in the previous quarter as funding costs further rose. Combining the commercial book and treasury markets, the group's net interest income grew 5% to $3.43 billion, and net interest margin rose 4 basis points to 2.16%. Compared to a year ago, net interest income was 40% higher, while net interest margin rose 58 basis points. For the first half, commercial book net interest income increased 61% to $6.95 billion from a 100 basis point improvement in net interest margin to 2.75%. The group's total net interest income was 44% higher at $6.70 billion as net interest margin rose 62 basis points to 2.14%. Slide 7. Gross loans declined 1% of $5 billion in constant currency terms during the quarter to $422 billion. Most of the decline was due to a $4 billion contraction in trade loans, as maturing exposures were not replaced due to a general market slowdown and unattractive pricing. Non-trade corporate loans fell slightly by $1 billion as a steep rise in HIBOR and depreciation of the RMB accelerated repayments in Hong Kong, offsetting gains in other regions. Housing loans and wealth management loans were little changed. Over the first six months, loans were stable as non-trade corporate loans growth of $3 billion was offset by the contraction in trade loans. Slide 8. Deposits fell 3% or $14 billion in constant currency terms during the quarter to $520 billion. CASA deposits declined as customers switched to higher-yielding instruments. The pace of CASA decline has slowed considerably, from a peak of $32 billion in Q3 2022 to $10 billion in the last quarter. Fixed deposits were stable given the bank's strong liquidity position. LCR was at 146% and NSFR at 116%, well above regulatory requirements. Slide 9, fee income. Second quarter gross fee income of $999 million was higher from a year ago, the first year-on-year increase in six quarters. Wealth management fees rose 12% to $377 million from higher bank assurance and investment product sales. Card fees increased by 17% to $237 million from higher spending, including for travel. Loan-related fees were 17% higher at $133 million. Offsetting these increases was a 5% decline in transaction service fees to $221 million due to lower trade finance activities. Investment banking was stable at $31 million. For the first half, gross fee income was also higher than a year ago from cards and loan-related fees. Slide 10. First half expenses rose 15% from a year ago to $3.81 billion, contributing to the increase with the base effects of headcount growth in second half 2022. As such, first half expenses were stable compared to $3.79 billion in the previous half. For both the first half and second quarter, cost-to-income ratio improved six percentage points from a year ago to 38%. Slide 11. CBG performance. CBG's first half profit before allowances doubled from a year ago to a new high of $2.22 billion, as total income grew 48% to $4.27 billion. Loan and deposit income increased 91% to $2.86 billion, driven mainly by a higher net interest margin. Investment product income rose 8% to $1.05 billion from higher sales of investment and bank assurance products. Card income was 16% lower at $313 million, as higher card fees were more than offset by a lower net interest margin on outstanding balances. Assets under management increased 9% from a year ago to $320 billion, with investments and deposits contributing equally to the increase. We had $6 billion of net new money flows in the second quarter, bringing the amount to $12 billion for the first six months. SingDollar savings deposits fell in line with the market. Our market share has been stable over the past 12 months and is currently at 54%. Our share for Singapore housing loans has also been stable at 29%. Total CBG deposits were stable at $278 billion as the savings deposits decline was offset by fixed deposit growth. Slide 12, IBG. Institutional banking's first half total income rose 38% from a year ago to a new high of $4.69 billion. The growth was driven by cash management, which tripled to $2.13 billion due to higher interest rates. Cash management deposits fell 6% to $187 billion as higher-cost deposits were managed out. The increase in cash management income was partially offset by an 11% decline in trade income to $345 million. Trade loans contracted amidst a general market slowdown and as maturing exposures were not replaced due to unattractive pricing. Trade finance fees also fell with reduced activity. Other product categories were generally little changed. Slide 13. Treasury and markets. For the first half, Treasury customer income rose 11% to a record $935 million, boosted by higher sales to CBG customers as market sentiment improved, while IBG sales remained robust at year-ago levels. Treasury markets trading income was 36% lower at $446 million, reflecting a high year-ago base in the first quarter and the impact of higher funding costs. The decline was led by lower income from interest rate activities as spreads compressed. Slide 14, Hong Kong. Hong Kong's first half net profit rose 39% in constant currency terms to $808 million as total income increased 25% to $1.57 billion. Net interest income grew 43% to $1.04 billion as a 61 basis point improvement in net interest margin to 1.79%, more than offset the impact of lower loan and deposit volumes. The NIM expansion was driven by a high ball, increasing over 100 basis points during the second quarter. However, loans declined 13% from a year ago, impacted by a slowdown in trade, high interest rates and a widened rates differential with China. Deposits fell 14% in tandem with loans. Non-interest income was little changed. Net fee income was stable at $350 million as higher income from wealth management product sales was offset by lower contributions from loan-related and trade finance activities. Other non-interest income fell 3% to $189 million due to lower Treasury customer sales and trading gains. Expenses rose 9% to $573 million led by higher staff costs. The cost-to-income ratio improved from 42% to 36%. Total allowances rose $2 million from a year ago to $45 million as higher specific allowances were partially offset by a larger general allowance right back. Slide 15. Asset quality. Asset quality continued to be resilient. The NPL ratio was unchanged from the previous quarter at 1.1%, while non-performing assets were stable at $4.99 billion. New NPA formation remained low and was offset by repayments and write-offs during the quarter. Over the first six months, non-performing assets were 3% lower. Slide 16, specific provisions. Second quarter specific provisions remain low at 116 million or 10 basis points of loans. First half specific allowances amounted to 178 million or 8 basis points of loans, 24% lower than the 235 million or 11 basis points a year ago. Slide 17. allowance coverage. There was a general allowance right back of $42 million in the second quarter due to transfers to non-performing assets and credit upgrades. This brought general allowance charges to $57 million for the first half. Total allowance reserves stood at $6.33 billion, with $2.53 billion in specific allowance reserves and $3.80 billion in general allowance reserves. Allowance coverage was at 127% and at 224% after considering collateral. Slide 18. Car ratio. The CET1 ratio was at 14.1% per recent guidance. The leverage ratio of 6.5% was more than twice the regulatory minimum of 3%. Slide 19. At our investor day in May 2023, we said that baseline annual dividend step-up would be sustained at $0.24 per year, barring unforeseen circumstances. We also guided that there was further upside of $3 billion or $1.20 over and above the $0.24 per year increase, and this could be in further ordinary dividend step-up, special dividend or buyback. The pace of distribution would be dependent on business conditions and macroeconomic outlook. Consistent with this guidance, and given the strong earnings prospects for the rest of the year, the Board declared a dividend of $0.48 per share for the second quarter. The dividend is $0.06 higher than the previous payout. This brings the first half dividend to $0.90 per share. Based on a quarterly dividend of $0.48 per share, the annualised dividend would be $1.92 per share. And based on yesterday's closing share price, the dividend yield would be 5.7%. Slide 21, in summary. In summary, we achieved another record performance in the second quarter and the first half. Total income, net profit and ROE were at new quarterly and half-yearly highs. The commercial book benefited from higher interest rates and broad-based growth in non-interest income, which was moderated by higher funding costs for Treasury markets trading activities. While there is some uncertainty, our prospects for the rest of the year are anchored on a franchise with a proven ability to capture business opportunities. At the same time, our long-standing prudence in building general allowance reserves and maintaining strong capital ratios will position us well to withstand headwinds. Thank you for your attention.

Okay, thanks, Sakhi. So as usual, I'll take a few minutes and first recap the quarter and then maybe a couple of comments on where we see things going. As Sakhi pointed out, our ROE topped 19%, and that's obviously a record. It's also, actually, if you look at the global benchmarks, there are very few banks in the world which are able to get ROEs at that level. This speaks not just to profit and profitability, but also our capital management, which has been efficient. Income hit 5 billion for the quarter, the top line, which is also a record. So it was a good quarter all in all. The thing that's more important is it is broad-based. So, obviously, interest rate hikes help. But you've got to reflect that underlying the interest rate hikes is the balance sheet has been actually quite robust. So, our strategy is to grow the liability book over the last several years, including in the zero interest rate environment. are really paying off, and that really speaks to our cash management, speaks to our wealth management, speaks to our digital retail. All of those are anchored on being able to harness low-cost liabilities and deposits, and that's actually coming good at this time. NIM rose, and NIM, as Sokhi pointed out, got up to 216, which is a little bit of a surprise, because last quarter we guided for the fact that NIM has probably topped out. Now, the surprise really came from a couple of things, and I'm going to get into that in the next slide. Then fee income up 7 percent year-on-year. Underlying that, cards were strong at 17 percent. It continues to do well. Wealth management was strong. First quarter wealth management was down 11 percent. Second quarter wealth management was up 12 percent. And actually, as we got into the tail end of the quarter, as you saw the last week or two, the animal spirits are back and the markets are doing well. So, again, I can touch on that briefly as we go forward. Costs were contained. Year-on-year costs look high, but that's because of the growth we did in the second half of last year. Some of it was to do with the Taiwan integration. We added almost 1,000 people to manage the Taiwan integration. So some of that gets reflected. If you look at half-and-half, we're really not growing expenses. We're pretty flattish. Asset quality has been very good. NPA, new NPA formation is probably the lowest it's been. If you look at the numbers, it was just very low. We're not seeing any NPA stress, and therefore SPs are very low, specific provisions, way below our guidance. And then finally, our dividend, again, Sokhi pointed it out right now. You know, in the May investor release, investor day, we'd said that 24 cents increase, we're pretty confident that we'll be able to sustain that. But we'd also guided that we actually have more capital. And therefore, the surplus that we have, and it's almost $1.20 per share more, we need to return it to shareholders over the next couple of years, and we'll find the appropriate way to do it. And therefore, given the outlook and given the prospects for the year, the board actually voted to already start doing that. And so we were able to increase that payout for the quarter. Slide. So what are things looking like? First of all, the macroeconomic and business outlook is actually a little bit slower. Second quarter was slower, and partly because China rebound. China rebound was stronger in the first quarter and became more teeped in the second quarter. Now, whether the new policy actions they're talking about and what comes of that give some more momentum in the second half of the year is anybody's guess. I don't have a strong view either. But certainly the slowdown in the second quarter meant that our guidance on things like loan growth were tapering down a little bit. Second quarter, we didn't get any loan growth. In fact, we are negative. So for the first half, we're zero. We were up 1% in the first quarter. We're down 1% in the second quarter. Pipelines through the second half of the year are looking reasonable. So I do think that for the full year, we'll still get a low single-digit loan growth, but it won't be the earlier guidance. I thought earlier we'd get 3% to 5% loan growth. It's going to be very unlikely, given that we're zero at halfway through the year. Part of the loan growth problem, though, is not just to do with the macro slowdown. It is to do with the fact that a lot of the loans have shifted from our booking centers, principally in Hong Kong, back to the mainland. And the reason for that is that, A, there's a big differential between borrowing in renminbi and borrowing in dollars. The Chinese onshore rates are substantially lower than the U.S. dollar rates. And the second reason is that, obviously, the renminbi has been depreciating. So in this, between first and second quarter, renminbi depreciated from 6.8 to 7.3. So if you're a borrower, you always want to borrow in a weaker currency, in a depreciating currency. And that's caused a shift of people borrowing on the mainland as opposed to borrowing in Hong Kong. So it's a mix of both. There is some general slowdown, but there's also a shift. We saw this shift, this thing show up mostly in trade. So our trade book shrank by about $4 billion for the quarter. And our best guess is about two of that is just reflecting the general slowdown. And about two of that is the shift to onshore borrowing in China because it's cheaper to do that for people. On the NIMS, though, just the reverse of that, because rates in the offshore markets are doing well, our NIMS are doing better. And so there are really three things that are really driving NIMS, why NIMS are slightly better than we had actually anticipated and forecast. One, obviously, is when we spoke the last time, we sort of figured that rates were topping out. And since then, the Fed has actually had hikes. So we're not taking those into account. The second perhaps more material thing is HIBOR has moved up. So normally Hibor tracks the US rates very closely. But through the late end of last year, early this year, there was a lot of liquidity. And so Hibor was learning almost 200 basis points lower than the US rates. And so as we projected unnamed, we'd assume that Hibor is not going to correct back up. Actually, Hibor corrected back up. So Hibor is now almost back to US dollar rate levels. So that, on the one hand, improved our NIM for the group. On the other hand, that was also what drove the loans out of Hong Kong back to China. So it has a double-edged thing. We also, as we indicated last time, have a large chunk of our commercial book which reprices over time. So even now, about 20% to 23% of our book It has not repriced. It will reprice through the second half of this year, 2024, and then beyond that. So we still have some support from the repricing of that asset book. And finally, as Sakshi pointed out, the deposit repricing pressure is being relatively contained. The CASA outflow was 32 billion for a couple of quarters, then it came down to 16 billion. This quarter is only 10 billion. So because the CASA outflow is being contained and we're not getting loan growth, we're not having to bid for high-cost fixed deposits in the market. And so that's allowing us to continue to manage the NIM. So there is some upside bias to NIM. Our exit NIM for June and July is closer to 220, even though the NIM for the quarter is only 216. Free income, we'd also taping the guidance a little bit because I'd said, you know, high single digits the last time. That was in the assumption when first quarter we got no growth. So it was negative one or something. So the assumption was if we can get double-digit growth for three quarters in a row, then you'll still wind up with high single digits. In actual fact, second quarter, we didn't get double digits. We got 7 percent growth, which is good, but it wasn't double-digit growth. So given where we are now in the middle of the year, I still think we'll probably get double-digit growth in the tail end of the year, but you can't, the math won't add up to high single digits. So I think you'll probably get slightly lower growth on fee income when you average the growth rates for the year. One of the good things, though, is wealth management, like I said, is coming back quite nicely. It was minus 11 percent first quarter, plus 12 percent second quarter, and that still doesn't reflect the fact that the last three, four weeks the market has really picked up. Net new money continued to grow. So we grew 6 billion in each quarter, first quarter and second quarter. And that's actually quite robust. So money flows are still coming in. The money flows that we've got in recent times are half in deposits and half in investments. But that means that we do have the opportunity to convert the half in deposits into more investments and investment income as we go further. So I think the prospects for wealth management in particular are good. Prospects for cards are also good. We're growing well. Consumption spending is good. But even now, travel as a percentage of card spend is only up to about 13%. In the pre-COVID days, travel as a percentage of card spend used to be 15% plus. So we still think there's an opportunity to get some more juice as the travel market continues to improve in cards. The area that we actually think we have some headwinds is treasury and markets. And, you know, we record our treasury and markets as a composite, not just the trading fee that people make – that we make there, but also the interest income on the assets that we hold. And therefore, the bulk of our funding of our treasury markets – assets happens in the market. And as the funding cost goes up, as rates go up, therefore there's a negative drag on the TNM assets that we hold. As a consequence, this quarter, we had almost 140, 150 million bucks of negative drag on the funding cost. And so, as we go forward, till rates start correcting, I think we're more likely to do like 230 million bucks a quarter as opposed to the 275, which I previously guided. Now, the flip to that, of course, is if rates start stabilizing and coming off, then there's obviously a lot more value in that franchise, which will come back sometime in the future. Expense growth, we will be around 10% for the full year. The cost-income ratio will be below 40%. And like Sokhi mentioned, year on year, I mean, quarter, half year and half year, we're flattish. So this really reflects the growth we had in the second half of last year. SPs, I think we'll do better. We said 10 to 15 basis points. I think we'll be at the low end of that 10 to 15. We're only eight basis points in the first half of the year. And so far, portfolio is looking very resilient. We are not seeing any signs of stress anywhere in the portfolio. And we have no obvious problems that we can see that would cause SPs to rise materially. So we think we'll be at the low end of that range. So, yeah, net-net, when you put it, you know, we think we'll have a record year, of course. The first half will all be, you know, well over $5 billion. And if our outlook continues to be consistent with what I'm saying, I think there's every likelihood that this will be a record year. So I'll stop there and take questions.

Okay, are there any questions? Before you ask your question, I also want to request that you do speak to the mics in front of you, or we have some roving mics just so that those who are tuning in virtually can also hear the question. Prisca.

Hi, thanks for the presentation and congrats on the good work.

I'm not sure whether the mic is on, actually. Is it?

Hello. Thanks for the presentation and congrats on the good results. Two questions. The first, wondering what's your new guidance for NIM given the continued rates uplift? And the second question on digital banks, what's your outlook for CASA given the recent moves by the banks to raise the deposit cap?

So NIM, I've said upside bias to this. They already said that June exit NIM was 220, July is still in that range. But obviously, it's a function of loan pricing and deposit pricing as well. So I think there is at least a couple of basis points upside from the second quarter, from where we are. I can't fine-tune it much better than that at this stage. On the digital bank deposit rate, I've said this before. I think the digital bank's total market share gain in any market, whether it's the UK or Hong Kong or anything, tends to be small and takes an extraordinarily long time for it to impact the system as a whole. And so, yeah, I mean, to the extent that people raise rates, they will continue to see some inflow of money. But in the big scheme of things, those numbers are quite small, so it's not going to materially change shares. So then the question is, how fast do you want to compete for the marginal deposits? And as we already said in the second quarter, we felt we didn't need to compete for the high-cost fixed deposits. Loan's not growing. LDR's only 80%. LCR is really strong, 127%. So if we choose not to compete for the marginal fixed deposit, it won't have a material impact.

Chanya?

Hi. Just to clarify one thing, the net new money of 12 billion, is it in Sing dollars or in USD?

No, no, we count our AUMs in Sing dollars.

In Sing dollars. And second question, well,

This is called the Mitch McConnell movement.

Wow. Is DBS the unnamed bank that has kept Ecclestone's 650 million? MAS mentioned an unnamed bank in Singapore. Is that DBS? And if so, what measures have you taken?

Well, first of all, it's not DBS.

Any other questions? Anshuman? It should be on.

Not on? Hello. Hi. Hi, Piyush. If you can just clarify the fee income, because it went down on the quarter, but the slide said it's the first rise in six quarters.

Year-on-year. Year-on-year rise. So, but generally, how do you... Look at the slide. So, it's 999, and last, second quarter last year was 917.

Right. But generally, is this just, I mean, even from the first quarter, it's slightly down. How are you seeing the, how are you overall seeing the... I'm thinking it's going to be quite robust.

So if you look at the, this I point out, cards grew 17%. Cards is robust and I think as travel picks up, cards will continue to do well. Wealth grew 12% in this number. And I think wealth, especially in the last two weeks, I'm quite bullish. The market's opening up and we've got a lot of new money that we can put to work. So I think wealth will be positive. Investment banking was flat. So capital markets, that's still a little uncertain. We have a lot of healthy deal pipeline. And that is not because we didn't do it. The market wasn't there. In fact, our league table positions for the first half are very strong. We're number one in ASEAN for ECM. We're number eight in Asia and Japan. And we have a strong pipeline. So that depends on if the market opens up for capital markets. We might do well on ECM, DCM as well. So the one thing which was slow was transaction banking. And that is really trade over the half. Trade was down. So that trade, we think we'll get trade growth in the second half of the year, in which case it will come with some fee income as well.

Get new money, right? You talked about 12 billion in the first half. How does that compare with the earlier number?

About the same.

About the same. And what about the source of the money, right?

It's also broad-based. It continues to be broad-based. So we're getting North Asia, Southeast Asia, Middle East. It's been quite consistent.

And with the UBS taking over Credit Suisse, you had mentioned that some of the flows you had also gained from that. What's the trend?

Like when you talk to clients, when you talk to prospective clients also, what are they saying about, you know, do you think it's actually, you know, we continue to see it as broad-based money and it's a strange dynamic. So first of all, UBS taking over Credit Suisse has stabilized the entity and therefore it's less uncertain and fragile for some people. On the other hand, there are a lot of people who were using two providers, and now they're down to one provider. And so a lot of people don't like concentrating with one provider. They like to have a couple of banks that they deal with. So it's like both sides, right? So people are less spooked, but on the other hand, people want to look for alternate providers as well.

Dexter?

Hi, morning. Dexter from Bloomberg News. I wanted to ask three questions. The first one is, there was a report about a while ago about how UK banks are basically only passing a quarter of rate hikes to consumers. I'm just curious, from your point of view, do you see that in Singapore banks or your own banks as well? Well, my second question is, you mentioned just now your outlook on China. I'm just curious, in terms of how that might affect Singapore's economy more broadly, what do you see slowdown in China impacting the outlook for a year? And my last thing is, I think Tomasic said last month that they are trying to engage more with their portfolio companies. especially with a bunch of restructurings going on in a bunch of portfolio companies in Singapore. I know that they have quite a big stake in DBS as well. Have you had any conversations with them on... On what? I missed it. On restructurings and things like that. Restructuring. And change in policies, change in strategy and things like that. Because we've seen that a lot with Temasek portfolio companies. They have quite a sizable stake. Thanks.

So I'm going to take your third question first. We've had no discussions with Temasek on the need to restructure DBS for performance. I think Temasek is quite happy with DBS's performance. If you look at what they've been doing, and I shouldn't be speaking for them, But if you look at what they've been doing the last couple of years is looking at entities in their portfolio which have not been delivering the returns that they want, and they've been trying to see if they can actually restructure and drive for better returns in some sectors which have been more challenged. Fortunately, we stand out as a high-performing part of their portfolio. On your first question on deposit payout, actually, if you look at the – Overall deposit payouts for Singapore banks, we are reasonable. So in the sense that we'd match the U.S. banks in terms of payouts. I track it because a couple of the U.S. banks' deposit payouts are much lower than ours. A couple are about our level. And so we're roughly at the same level of deposit payouts as them. I think it's worth reflecting that even now, despite these high interest rates, our NIMS are not at records. So we have in the past have had north of 220 basis points in NIMS. And therefore, it's not that, you know, we've hit a record level on NIMS. And what we're doing at the same time is we are calibrating the loan rate. So if you look at the lending rate on mortgages, for example, as a market actually, not just us, the market is charging for two-year fixed rate somewhere between 3.3% and 3.5%. And that's only marginally over the cost of fixed deposits. So it's not just the deposit side of the equation, it's also the lending side of the equation. We're actually underpricing for the mortgage loan rates just to make it easier for the market and for our customers. Your second question, which is related to China and the China prospect. So, you know, all of Asia – and Singapore is not excluded from that – slows down when China slows down. And that's because the intra-Asia trade and activity is still a material part of our business. So you do see an impact from China slowdown overall in economic activity. Again, there are swings and roundabouts. There are two positives which come from that. One is the geopolitics of China plus one are continuing to help the region, including Singapore. So there is an inbound flow of investment across the region. We're able to capitalize on that. And the second is on investment, so wealth management and other activities. So not just the individuals, but also Chinese companies are opening up more treasury centers and operations in Singapore as well. So it's not just the Western companies doing China plus one, even the Chinese companies are doing China plus one. And so we benefit from that as well.

If I can follow up, do you have a sense of how much that Chinese investment makes up in terms of wealth flows and stuff like that for your bank at least?

There was a question before, I think we asked, so where does that $6 billion a quarter come from? And I said it's a broad base, but about half of that comes from North Asia.

Ultra? Ultra?

Hi, Piyush. I would like to ask the question about just now you mentioned that DBS is highly likely going to hit a record year this year. What are the factors just now that you mentioned that the output that is going to support this and do you see this momentum carrying into next year? Thank you.

Well, you know, the biggest part of that is interest rates. You know, DBS continues to be very highly correlated to interest rate cycles. And even though we manage our duration and I interest big books sensibly, so we're not a total, you know, correlated beta, but we do benefit from interest rate hikes. So that happens to be the number one thing. But I do want to reflect on two other parts which are important. One is interest rates. This is a PQ variable. So interest rates are the price. But then you've got to have a Q, a quantity to apply the interest rates to. And so I think over the last seven, eight years, our focus on digitizing, on cash management, on both the corporate and consumer side, and on wealth, that's really paying off. We were one of the first to actually create this whole API-based embedded financing thing. We plugged in our APIs into a thousand companies. Sushant is there. She and her team did this in 2018-19. We plugged it way before COVID. And so our volume of payments activity, our volumes of transactional activity has gone through the roof. And that allows us to have this large, low-cost deposit base which benefits from a high interest rate environment. And similarly on wealth management. You know, our wealth management AUMs, you know, remember we were – I still think a decade ago we weren't in the top 30. Today we're number three in Asia in terms of AUMs. Right? And number three in Asia means that when we get 320 billion in AUMs, a substantial chunk of that stays in deposits as well. So that benefits a lot from interest rate hikes as well. So the nature of a franchise, which is what we built out in the liability book, it really benefits in a high interest rate environment. So that's one big driver of the growth. But outside of that, we've also built, you know, very solid other non-interest lines of business. And you can see that the fee income which we get from things like wealth again, from credit cards, from payments, from trade is very broad based. And then finally, treasury sales. Again, a decade ago, if you look at the bank, we were 75% prop and 20, 25% customer. Today, more than half of activity is customer driven. And therefore, even though the, I said the trading, this thing in high interest rate environment suffers, there's volatility. But you look at our treasury sales activity, it continues to power long. It's very consistent and strong growing. So there are many engines of growth.

Anshuman?

Just two questions. One is, MS has been taking a number of measures in the last couple of months to sort of streamline the flow of family offices to make it sort of make some more guidelines or introduce this, right? What do you think is the impact on this on the family office and what are the prospects? And secondly, in terms of overall as a bank for risk factors, when you were here in Q1, you talked about the margins might have peaked, but now it doesn't look like. But in terms of the risk factors, what have been the new risk factors for this quarter and what do you see you need to, what would change for you to sort of cope with those risk factors? Thanks.

So on the family offices, frankly, not that much impact. In fact, frankly, one of the, having a good regulated family office architecture is helpful for Singapore. We want to make sure that the money that comes in is solid money, clean money, put to work, and not flighty money. And the last thing we want is to build up a reputation as a haven for hot money. So I'm actually quite happy with all of the measures which the central bank is putting in place. If you look at our pipeline of customers who are wanting to relocate monies into Singapore family offices, et cetera, I don't think it's hot money. And frankly, the money which, you know, is coming from places like Russia, we've been very careful around that. So I don't think you'll see material negative impact of that. Your second question on where the risk factors, and honestly, I'm not seeing any dramatic risk factors at this point in time, which is new. And the China property market is a challenge. We've known that for two, three years. We've been working, and we've been ahead of the curve with that. I was concerned about how high rates could go. We've stretched our portfolio all the way up to 7% rates. I don't think we'll get, from everything I can see, you might get a rate hike or two, but five and a half, 5.75, that looks like very stoppage. So I don't think you'll see too much, beyond that. You normally have expected at these levels that you could see dollar liquidity challenges. And you've seen that in the past in taper tantrum, et cetera. So we stressed for that repeatedly. But you're not seeing that. The market is very liquid and very flush. And I think that reflects the huge money printing by the Fed. It's just sloshing around all over the world, if you will. Geopolitics remains an uncertainty. So how do you continue to work? Geopolitics you never know. Something can come out of nowhere. So we keep a close eye on that so we don't get caught in the middle of that challenge. But it's that in the cyclical sense, short-term sense, nothing major. You asked me the big picture questions still there, the sustainability question, the social issue question. All of those are still there, but they're not cyclical short-term impact.

MS. Thanks. MS. Dexter?

Can I ask one more question? In terms of the wealth inflows in Singapore, have you been satisfied with the amount of money that they are investing? Because we have done quite a few reports in the past, like, basically, even though there's a lot of money parked in banks like yours, like, basically, the investors aren't actually putting a lot of money in big investments. They're just parking the money. Has that been the situation for you guys as well?

It's true, but there's nothing to do with the niche. I think people are misreading. You've got to understand that everybody, including my existing customers, they invest in upcycles. So the notion that, oh, money came in and it was lying in a bank deposit, therefore it's a bad thing, that's illogical. You won't put your money to work in a down market. That's exactly like everybody else. They don't put their money to work in a down market. But they move their money here. But when I say that there's upside in this, we do know that the money that comes here, a substantial portion of it, like half the money is in deposits, not invested. Typically, you'd expect 80% of the money to be invested. So there is upside. As the markets start turning around, that money will go into investments.

Maybe a final question, if there is one. Okay, if there's none, then thank you everyone for coming. I'll see you next quarter.

Thank you. All right, thanks. Thanks, everybody.