DBS Group Holdings Ltd

Okay, we will now resume the second part of our briefing. So on Q2, we reported today that we had another solid quarter with second quarter net profit of $2.8 billion, up 4% from a year ago. And return on equity was 18.2%. And this took our first half net profit to a record. So we have Sok Fee and Piyush with us. And without further ado, Sok Fee, please. Thank you. Sure.

Good evening, everyone. We delivered another strong performance in the second quarter with net profit rising 4% from a year ago to $2.80 billion and ROE at 18.2%. This brought first-half total income and net profit to new highs. For the second quarter, total income increased 9% from a year ago to $5.48 billion, with the commercial book increasing 9% to $5.30 billion. The growth was broad-based. Net interest income was higher as the balance sheet grew and net interest margin expanded two basis points to 2.83%. Net interest income reached a new high and treasury customer sales remained strong. Markets trading income also grew 6%. Expenses were 12% higher, with City Taiwan accounting for 5 percentage points. The cost-to-income ratio was 40%. For the first half, net profit was up 9% to $5.76 billion. Total income increased 11% to $11.0 billion as fee income and treasury customer sales reached new highs and commercial book net interest margin expanded by 5 basis points. Expenses rose 11% with CityTaiwan accounting for 5 percentage points. they were little changed compared to the previous half. The cost-to-income ratio was 39%. Asset quality remained sound. The NPL ratio was unchanged from the previous quarter at 1.1%. Specific allowances remained low at 8 basis points of loans for the second quarter, bringing the first half to 9 basis points. Allowance coverage was at 129% and 227% after considering collateral. Capital was healthy with CET1 ratio at 14.8%. Liquidity remained amper with LCR and NSFR well above regulatory requirements. The board declared a dividend of $0.54 per share for the second quarter. Next slide. Compared to a year ago, net profit was 4% higher as total income grew 9%. Commercial book income increased 9% to $5.30 billion. The growth was broad-based. Net interest income rose 5% or $188 million to $3.77 billion as net interest margin improved two basis points and loans grew. Fee income rose 27% or $225 million to $1.05 billion with double-digit growth in wealth management, cards and loan-related fees. Treasury customer sales and other income remained strong, increasing 3% to $478 million. Markets trading income also rose by 6% to $187 million. Expenses were 12% or $241 million higher at $2.17 billion, with CityTaiwan accounting for 5 percentage points of the increase. Profit before allowances increased 6% to $3.31 billion. Specific allowances remain low at $97 million or eight basis points of loans. General allowances of $51 million were taken compared to a write-back a year ago. Next slide. Compared to the previous quarter's record, net profit was 5% lower as total income was little changed and expenses rose 4%. Commercial book total income was stable. Net interest income increased 3% or $122 million as net interest margin expanded 6 basis points led by fixed-rate asset repricing. Fee income rose slightly to a new high. These gains were offset by a 23% or $143 million decline in commercial book other non-interest income. Excluding non-recurring gains, commercial book other non-interest income was 15% lower than the previous quarter. Markets trading income fell 24% or $59 million. Expenses rose 4% or $93 million, led by higher staff costs. Profit before allowances were 5% lower. Total allowances were 10% or $13 million higher from a low base. Next slide. For the first half, net profit increased 9% as total income rose 11%. Both were at new highs. Commercial book total income grew 11%. Net interest income grew 6% or $451 million to $7.42 billion. as net interest margin expanded five basis points from higher interest rates. Fee income rose 25% or $417 million to a record $2.09 billion, led by growth in wealth management fees, card fees and loan-related fees. Treasury customer sales and other income increased 23% or $203 million to $1.10 billion. Excluding non-recurring gains, it was up 12%. Markets trading income was little changed at $433 million. Expenses grew 11% of $438 million to $4.25 billion. City Taiwan accounted for 5 percentage points of the increase. The cost-to-income ratio was 39%. Profit before allowances was 10% higher at $6.79 billion. Specific allowances remain low at $210 million or nine basis points of loans, similar to the eight basis points a year ago. General allowances of $73 million were taken. Next slide. Compared to the previous quarter, commercial book net interest income increased 3% to $3.77 billion. Net interest margin improved 6 basis points to 2.83%, led by fixed-rate asset repricing. Compared to a year ago, commercial book net interest income rose 5% as net interest margin improved 2 basis points and loans and deposits were higher. Markets trading net interest income continued to be negative this quarter due to products with inherent accounting asymmetry where income is taken in a non-interest income line and funding cost is taken in the net interest income line. These activities are accretive to income but dilutive to net interest margin at the GFM level. Combining the commercial book and the markets trading, the group's net interest income grew 3% from the previous quarter to $3.59 billion, while net interest margin was unchanged at 2.14%. Compared to a year ago, group net interest income was 5% higher, as growth in loans and deposits was partially offset by a two-basis point contraction in net interest margin. For the first half, commercial book net interest income increased 6% to $7.42 billion from a five basis point expansion in net interest margin to 2.80%. The group's total net interest income was 6% higher, driven by loan and deposit growth and stable net interest margin of 2.14%. Next slide. Gross loans were stable in constant currency terms during the quarter at $431 billion, as increases in trade and wealth management loans were offset by a decline in non-trade corporate loans. While there was good demand for non-trade corporate loans, this was offset by idiosyncratic repayments, including some due to asset sales by clients. Over the first half, loans grew 1% or $5 billion. The growth was led by trade and non-trade corporate loans, both of which grew by $3 billion. During the quarter, deposits were stable in constant currency terms as CASA and fixed deposit flows stabilised. CASA declined $2 billion. one-third of the first quarter's pays and one-fifth a year ago. Amidst the slower loan growth, we continue to profitably deploy surplus deposits to high-quality liquid assets. These assets consume limited capital and boost liquidity ratios. LCR of 148% and NSFR of 116% were well above regulatory requirements. Next slide. Second quarter gross fee income rose 27% from a year ago to $1.26 billion. Excluding CityTaiwan, which is consolidated in third quarter 2023, gross fee income grew 17%, unchanged from both the previous two quarters. This quarter's growth was led by wealth management fees, which rose 37% to $518 million. Excluding Citi, they increased 25%, driven by a shift from deposits to investments and bank assurance, and by expanded assets under management. Assets under management grew 24% year-on-year to a new high of $396 billion, with Citi contributing 10 percentage points to the increase. We had $3 billion of net new money inflows in the second quarter, bringing the total to $9 billion for the first half. Gross inflows remained strong during the quarter, but outflows were higher due to client diversification into real assets and more competitive deposit rates offered by other banks. Card fees increased 32% to $313 million from higher spending and inclusion of Citi. Excluding Citi, card fees rose 9%. Loan-related fees also saw significant growth, rising 40% to $186 million due to an increased number of deals. Transaction service fees were 3% higher at $228 million, while investment banking fees fell 39% to $19 million. For the first half, gross fee income rose 26% to a record of $2.54 billion. Next slide. First half commercial book non-interest income, which is boxed up in red, rose 24% from a year ago to $3.19 billion. The growth was driven by fee income and treasury customer sales, which both reached new highs. There were also non-recurring gains on FX hedges for our overseas operations, accounting for around $100 million, or 4 percentage points of the increase. For the second quarter, commercial book non-interest income was 19% higher than a year ago at $1.53 billion. Fee income was at a record while treasury customer sales were over 20% higher. Compared to the previous quarter and excluding non-recurring gains, commercial book non-interest income was 5% lower. Combining commercial book and markets trading, total non-interest income was $3.94 billion for the first half. 20% higher than a year ago. For the second quarter, it was $1.89 billion, 17% higher than a year ago. Next. First half, expenses rose 11% from a year ago to $4.25 billion, with City Taiwan accounting for 5 percentage points of the increase. Compared to the previous half, expenses were little changed. The cost-to-income ratio was at 39%. Second quarter expenses were 12% higher than a year ago at $2.17 billion, with City Taiwan accounting for 5 percentage points of the increase. Compared to the previous quarter, expenses rose 4%, led by higher staff costs. The cost-to-income ratio was at 40%. Next slide. Asset quality remained resilient. Non-performing assets fell 3% from the previous quarter to $5.08 billion as new non-performing asset formation was more than offset by repayments and write-offs. A few new MPAs in the first quarter were settled in the second quarter. As such, first-half new MPAs were less than the sum of the first and second quarters. The NPL ratio was unchanged at 1.1%. Next slide. Second quarter specific allowances remain low at $97 million or eight basis points of loans. First half specific allowances amounted to $212 million or nine basis points of loans similar to the eight basis points a year ago. Next slide. General allowances of $51 million were taken in the second quarter and $73 million for the first half. Total allowance reserves stood at $6.55 billion, with $2.57 billion in specific allowance reserves and $3.98 billion in general allowance reserves. Allowance coverage stood at 129% and at 227% after considering collateral. Next, the CET1 ratio rose 0.1 percentage points from the previous quarter to 14.8%. The leverage ratio of 6.5% was more than twice the regulatory minimum of 3%. Next, the board declared a quarterly dividend of 54 cents per share for the second quarter. This brings the first half dividend to 1.08 cents per share, 32% higher than a year ago. The payout ratio for the first half was 53%. Based on yesterday's closing share price, and assuming that dividends are held at $0.54 per quarter, the annualised dividend yield is 6.6%. In summary, we delivered another strong set of results for the second quarter, bringing first-half earnings to a new high with ROE at 18.8%. While recent market volatility and ongoing geopolitical tensions have resulted in heightened uncertainty, we have built resilience against the risks of an economic slowdown and lower interest rates. Our high general allowance reserves, our reduced interest rate sensitivity, our strong capital position and ample liquidity will position us to continue supporting customers and delivering shareholder returns. Thank you for your attention. I'll now pass to you over to Kish.

Thanks, Sokhi. So let me again have two slides. I'll just give you some insights on the quarter and then some thoughts about the outlook as you go forward. So first, as Sokhi pointed out, our NIM stayed unchanged at 2.14, which is very strong, which is very good. And that's really driven by the commercial book where the fixed asset repricing came in quite handy. As you know, we indicated earlier about $40 billion of fixed asset repricing to flow through this year, of which 27 was in the first half of the year. So we repriced that. And in the repricing, you get a pickup of about 180 basis points. So that's quite helpful for the commercial book name. But on top of that, we also took the opportunity to add a lot more duration, add a lot more fixed rate assets. And so actually we put on $40 billion of fixed rate assets instead of just 27. We added another $12, $13 billion more. Our total fixed asset book is now $190 billion. And all of that helped drive the commercial book NIM and the NII. Now, this is obviously offset a little bit because treasury markets, the funding cost is still a drag. But more specifically, we continue to take money in treasury markets as relatively affordable money and deploy it in low-risk markets. These are accretive to income, but they dilute the NIM. They're not the same NIM as everything else, but they're really low-risk assets. And so they actually help our income improve. We balanced those two out, the commercial book improvement and the markets trading drag. We still got a flat NIM, and I think that is one big agenda, one big item for this quarter. The second was loans. Our loan growth is actually looking like it's stable. We didn't get loan growth. But in reality, if you look at the underlying, we continue to get a lot of new loans booked. And you can make that out from our loan fees. Our loan fees at $180 million were the same as the first quarter. And these are at least $30 million, $40 million more than a typical quarter. So we continue to see a strong, healthy pipeline of loans. But we lost some loan volume for what Sakwe described as idiosyncratic reasons. A couple of our clients did some large portfolio sales of assets, and then they paid us down. And so that resulted in not being able to show any loan growth on the balance sheet. But the pipeline was quite good. The fee income was really the standout. Our total fee income, wealth management was up, as again Saki pointed out. It looks like it's 37-odd percent, but that includes city. If we exclude city, it's 25 percent. The first quarter, excluding city, was 21-odd percent. So if you average for the half year, it's like 20 to 23 percent fee income growth in wealth management, which is extraordinary. Cards is very strong. If I back out city, it's still 9-odd percent growth in the cards. And loans, I already said, $180 million in loan fees. So the fee income line has been very strong. Wealth momentum continues. We continue to see inflows of new money. We continue to see clients shift from deposits to investment. We went up by another percentage point to 55 percent investments out of AGMs for the quarter. And card spending is continuing to be relatively robust. So relatively comfortable with the momentum we have on this line. Cost-income ratio continues to be fairly steady. And the last call-out is asset quality has been quite healthy. We're not seeing signs of stress and strain generally in the system. The real estate portfolio in China, Hong Kong, continues to be a little bit troubled. But as I mentioned before, we're mostly secure. We don't have large, you know, vulnerable positions. So there is some migration impact that shows up in our general provisions. But by and large, the asset quality is continued to be good. Our specific provisions are low. We had some nine basis points in specific provisions for the quarter. There is, even on the consumer side, the cards delinquencies that indicated the first quarter delinquencies were picking up, actually they've leveled off. And so our actions on collections and card management have paid off. We're not seeing further deterioration in the second quarter. Unsecured lending is still creeping up in a couple of markets, in Hong Kong in particular, in India, but it's not material. So overall, asset quality continues to be quite good at this point in time. If you look at the outlooks of where we are, you know, the market volatility, the tension, you know, obviously in the last couple of days, there have been a lot of heightened uncertainties. It's kind of hard to say how many cuts there will be, what's going to happen. But I did want to point out that we have built resiliency against potential economic slowdown and lower interest rates. What do I mean by that? First, for economic slowdown, as you know, we've got general provisions of almost $4 billion. Our models come up with a number which is much lower, $1.7, $1.8 billion. So we have over $2 billion of general provisions, which are what we call overlays. Those have been in place now for some time, in fact, past COVID, and we haven't touched those. So we do have a reasonable amount of dry powder to help us absorb any unexpected risk from a recession or sharp slowdown. Second, on interest rates, to go back to what I said, you know, we build duration in the book. We've added over the last couple of years almost $65 billion of fixed-rate assets. We have about $190 billion now of fixed-rate assets. And that makes a big difference to the interstate sensitivity of our book. So if you look at the next point, it tells you that on the way up, we had guided at one stage that the interest rate sensitivity we had was $18 to $20 million per basis point, which means that if Fed fund rate went up by 100 basis points, you should expect to see $1.82 billion impact on our top line. And if you look back, that's what you saw. As rates climbed up, our bottom line has gone up from $6 billion to well over $10 billion, a lot of it driven by rates. But what we've also done over the last year or two is prepared ourselves for a new environment. One, because obviously a lot of our CASA balances have gone into fixed deposits, and therefore they are less sensitive on the way down. But mostly because we've added duration. We've got a duration of three, three and a half years in the book, and that's actually been quite helpful. So at this point in time on the way down, our interest rate sensitivity is only about $4 million. which means that if the Fed cuts rates by 100 basis points, we should expect to lose about 400 million in income top line on a full year basis. That shows that our book is a lot more resilient as we go forward, both to credit challenges as well as to income challenges. uh the commercial book non-interest income as i mentioned earlier momentum is good the wealth business is very good cards is good lending is good only investment banking has been slow fixed income was okay ecm continued to be really really challenged um The outlook as you go forward is a little less clear. By and large, if the markets sell off massively, then you will see some impact on wealth management because people tend to be risk-off when markets sell off. But the good news is that after the sell-off day, before the markets rebounded yesterday and so far, we are not seeing any let-up in momentum. In fact, even going into the third quarter over July, numbers are very strong. So our outlook currently based on all this, we expect total income growth to be high single digit for this year. That still factors in a couple of rate cuts. So we haven't changed that. But even if the rate cuts are more, the reality, like I said, is $4 million per basis point. And if the rate cuts happen late in the year, we see more rate cuts in November, that's like a month or two months of impact. It's not going to materially change that. This income guidance is now stronger than we had. Earlier, we started with low, then we said probably mid-single digits. Now, based on the strong run we've had, we think we can get to high single-digit income growth for the year. Cost-income ratio is still a target to do around 40%. The other thing where we think we do better than previous guidance is our allowances. We had earlier guided 17 to 20 basis points just based on through cycle average. At this point in time, we've done about nine basis points in the first half of the year. We're not seeing any major stress. I'm still guiding 10 to 15 basis points because you really don't know what might happen in the next three, four months. But if I had to bet, I'd say we're probably coming somewhere halfway through that range. But 10 to 15 basis points is probably a good guidance. So when you add all of that together, you will get net profit growth in the mid to high single digits for this year. Remember we did 10.2 or 10.3 last year. And so you can work the numbers and see that we will have a pretty solid year this year as well. So why don't I stop and we can take some questions.