DBS Group Holdings Ltd

Good morning and welcome everyone to DBS's first quarter financial results briefing. This morning we announced record profit before tax of $3.44 billion in first quarter 2025, as total income reached a new high. Net profit was $2.9 billion, with ROE at 17.3%. As per our norm, our CEO Tan Tushan and CFO Chung Sok Hwee will start by sharing more about the quarter. Both will be speaking to presentation slides that you will be able to see on screen. The slides can also be found on our investor relations website. Thereafter, we will take questions from the media. So without further ado, Sok Hwee, please.

Thanks, Agna. Good morning, everyone. Highlights. We delivered a strong first quarter performance with total income rising 6% year on year to a record 5.91 billion from broad-based business growth. The strong operating performance allowed us to set aside 205 million of general allowances to further strengthen GP reserves in light of the recent escalation in macroeconomic and geopolitical uncertainty. Profit before tax was a record $3.44 billion after the GP build. Net profit was 2% lower at $2.90 billion due to the impact of the 15% global minimum tax with return on equity at 17.3%. Commercial book total income grew 4% to $5.54 billion. Net interest income rose 2% as balance sheet growth more than offset a 9 basis point decline in net interest margin. Net fee income and treasury customer sales were at record levels, driven by continued momentum in wealth management. Markets trading income was the highest in 12 quarters, benefiting from market volatility and lower funding costs. Compared to the previous quarter, net profit rose 10% as income grew 7% from broad-based business momentum in the commercial book as well as in markets trading. Expenses declined 8%, partly due to non-recurring items in the previous quarter. asset quality remained resilient. The NPL ratio was stable at 1.1% and specific allowances were at 10 basis points of loans. The general allowances set aside increased our GP to 4.2 billion. Allowance coverage rose to 137% and 230% after considering collateral. capital remained strong. The CET1 ratio was 17.4% on a transitional basis and 15.2% on a fully phased-in basis. The Board declared a total dividend of 75 cents per share for the first quarter, comprising a 60 cent ordinary dividend and a 15 cent capital return dividend. Slide 3. As you can see on this chart, first quarter 2025 had a number of new highs. Total income, profit before allowances, and profit before tax. Subsequent slides will show that fee income is also a record. And within fee income, wealth management fee income and loan-related fee income are also at record levels. As well, treasury customer sales are also at record. year-on-year performance. Compared to a year ago, pre-tax profit was 1% higher, while net profit declined 2% due to higher tax expense from the global minimum tax. Commercial book net interest income grew 2%, or $72 million to $3.72 billion, as balance sheet growth more than offset a nine-basis point decline in net interest margin to 2.68%. Fee income grew 22%, or $232 million to $1.28 billion as wealth management and loan-related fees reached new highs. Commercial books are the non-interest income declined 12% or $73 million to $548 million due to non-recurring gains in Q1 2024. Within this, Treasury customer sales grew 11% to a record. Markets trading income rose 48%, or $117 million to $363 million, the highest in 12 quarters, partly reflecting lower funding costs. Expenses rose 6%, or $135 million to $2.21 billion from higher non-staff expenses. The cost-income ratio was stable at 37%. Specific allowances were $120 million or 10 basis points of loans, similar to a year ago. General allowances were higher with $205 million prudently taken this quarter to strengthen GP reserves. Slide 4, quarter-on-quarter performance. Compared to the previous quarter, net profit was 10% higher. Commercial book net interest income fell 3% quarter-on-quarter or 1% on a day-adjusted basis as a 9 basis point decline in net interest margin from lower interest rates was mitigated by balance sheet growth. Fee income grew 32% of $307 million led by wealth management and loan-related fees. Commercial book at the non-interest income of $548 million was stable compared to the previous quarter, which included property disposal gains. Treasury customer sales rose 32%. Markets trading more than doubled as interest rate, FX and equity derivative activities benefited from market volatility and as funding costs fell. Expenses were 8% or $181 million lower partly due to seasonality effects in the previous quarter. Specific allowances halved while general allowances were taken compared to a write-back in the previous quarter. Slide 5, net interest income. Compared to the previous quarter, group net interest income rose 1% on a day-adjusted basis to $3.68 billion from strong loan and deposit volumes. Group net interest margin fell three basis points to 2.12% due to a nine basis point decline in commercial book NIM reflecting lower interest rates. This was partially offset by an improvement in markets trading NIM partly due to lower funding costs. Commercial book net interest income fell 1% on a day-adjusted basis to 3.72 billion as the impact of lower rates was mitigated by balance sheet growth. Compared to a year ago, group net interest income rose 5% as balance sheet growth more than offset a two basis point decline in net interest margin. Slide six, loans. Gross loans grew 2% or $7 billion in constant currency terms during the quarter to $442 billion. Non-trade corporate loans increased 3% or $8 billion from broad-based growth across the region and a range of industries. Trade loans fell 1% or $1 billion while consumer loans were little changed. Slide 7, Deposits. Deposits rose 3% or $18 billion on a constant currency basis this quarter to $576 billion, led by strong Sing Dollar and foreign currency KASA inflows. This compares with a deposit growth of $20 billion for the full year 2024. Sing dollar CASA growth accelerated to $9 billion, up from $5 billion in the previous quarter, while foreign currency CASA rose by $4 billion. The CASA ratio improved to 53%. Liquidity remained healthy, with the liquidity coverage ratio at 145% and the net stable funding ratio at 115%, both well above regulatory requirements. Slide eight, fee income. Compared to a year ago, first quarter gross fee income rose 18% to a record 1.50 billion led by new highs in wealth management and loan related fees. Wealth management fees grew 35% to 724 million driven by strong market sentiment and an increase in assets under management. loan-related fees rose 23% to $227 million on increased deal activity. Compared to the previous quarter, gross fee income rose 22%, led by double-digit growth in wealth management and loan-related fees. Slide nine, wealth management segment income. The strong momentum in wealth management from last year carried over into the first quarter. Wealth segment income rose to a record 1.49 billion, driven by a 32% increase in non-interest income from a year ago. Fees were at a record, driven by higher sales of investment products and bank assurance, while Treasury customer sales to wealth clients also reached a new high. Assets under management reached a new high of $432 billion, with the proportion investments maintained at 56%. Slide 10, commercial book non-interest income. This chart shows the breakdown of the group's non-interest income into three components, fee income, markets trading income and the third component commercial book are the non-interest income. The third component largely comprises treasury customer sales for both the wealth segment and the institutional segment. Treasury customer sales are similar in nature to fee income as they are driven by customer demand. In the first quarter of 2025, the entire $548 million comprised Treasury customers' sales who are in comparative periods of Q1 2024 and Q4 2024. There were other items of around $100 million each relating to FX gains and property disposal gains respectively. Excluding such non-recurring gains, Treasury customer sales were up 11% year-on-year and 32% quarter-on-quarter, as you can see from this slide. Slide 11, Expenses. Compared to a year ago, expenses rose 6% to $2.21 billion due to higher staff costs from salary increments, increased bonus accruals, and the larger headcount. The cost-to-income ratio was stable at 37%. Expenses fell 8% from the previous quarter, mainly in non-staff expenses, due partly to seasonality effects. Slide 12, non-performing assets. Asset quality remained resilient. Non-performing assets fell 3% from the previous quarter to $4.86 billion, driven by lower new MPA formation and higher upgrades. The NPL ratio was stable at 1.1%. Slide 13, specific allowances. Specific allowances amounted to 111 million or 10 basis points of loan, similar to a year ago. The entire specific allowance charge was from consumer banking, which had been stable over the last few quarters. Specific allowance from institutional banking was largely flat, as additional specific provisions were offset by write-backs, which included an upgrade of a large case during the quarter. Specific allowances were about half that of the previous quarter, which had lower than usual write-backs. Slide 14, general allowances. This quarter, we added 205 million to general allowance reserves as a prudent measure, given the recent escalation in macroeconomic and geopolitical uncertainty. The increase in general allowances is not driven by deterioration in the actual credit performance in our portfolio. As you can see, specific provision to loans was at 10 basis points this quarter. In our methodology, and as at end March, total general allowance reserves were 4.16 billion or 100 basis points of loans. General allowance reserves take into account base scenarios, which are then overlaid with stress scenarios. GP overlays for stress scenarios stood at $2.6 billion as of 31 March 2025. Allowance coverage rose to 137%, an increase of 8 percentage points compared to December 2024. After considering collateral, allowance coverage rose to 230%. Slide 15, capital. The reported CET1 ratio rose 0.4 percentage points from the previous quarter to 17.4%, mainly due to the implementation of revised market risk rules with effect from 1st January, 2025. These rules are known as fundamental review of the trading book, which are part of the final Basel III reforms to enhance risk sensitivity of the capital framework for market risk. Per our Pillar 3 disclosure, DBS market risk, risk-weighted assets declined by 5.6 billion due to the rule change contributing to the 0.4 percentage point improvement in CET1. The pro forma ratio on a fully phased-in basis increased 0.1 percentage points to 15.2%. The leverage ratio was 6.5%, more than twice the regulatory minimum of 3%. Slide 16, dividend. The board declared a total dividend of 75 cents per share for the first quarter, comprising an ordinary dividend of 60 cents and a capital return dividend of 15 cents. The capital return dividend is part of the three-year plan that we announced last quarter to return excess capital to shareholders. Based on yesterday's closing share price, and assuming total dividends are held at $0.75 per quarter, the annualized dividend yield is 7.0%. In addition, we also commenced share buyback under the $3 billion share buyback program during the quarter. So far, we have bought back about $260 million of shares, representing around 9% of the program. Slide 17. In summary, we had a strong start to the year. Total income and pre-tax profit were at new highs, driven by broad-based business growth. Our return on equity of 17.3% remained above our medium-term target, despite the impact of the global minimum tax. The recent escalation in trade tensions have heightened macroeconomic risk and market volatility. In response, we have strengthened our GP reserves. We'll stay nimble to capture opportunities while prudently managing risks. And our strong capital and liquidity position provides us with a solid foundation to continue supporting our customers. Thank you for your attention. I'll now pass you over to Sushant. Thanks, Sokwi.

So let me take my slides and give my CEO comments on our first quarter. As Sokwi said, we had a strong start. I will say it was a solid quarter. We were firing on all cylinders. We saw record wealth management fees, record loan fees, record treasury sales, record operating profit, record NPBT. And so both our structural growth engines and the cyclical growth engines were working well. in the first quarter. With that and ROE at 17.3%, we are well within our guidance of 15 to 17% in spite of the tax and the GP build-up, which I thought was just us being prudent. The GP build-up, we thought, given that we closed our books after Liberation Day, we should exercise some prudence and given the good first quarter, we thought it was a wise thing to do. As far as the business side grew, you will see from our loan and deposit volumes that both grew very nicely. The first quarter loan volume was largely driven by the IBG large corporate non-trade loans. It was a solid, good quality, large corporate deal-driven loan book. And that's the kind of loans we want to grow. It's franchise driving, it's good ROE, and it deepens relationships long term. And so... deposits growth as well was very strong. And that momentum continues. It looks like it's continuing anyway for now. And that's also driven both by consumers bringing back their cash from Treasury, SingDollar, T-bills, etc. But also driven by the work that we've done to be cognizant of and cognizant of pricing elasticity and consumer flows, and also SME flows. So I think, again, the structural work we've done there seems to be paying off. We had record fees, and that was led by both wealth management and also by IBG hedging activity. We've seen very volatile markets in the last few months. First quarter was also volatile. April was also volatile. But in this volatility, the opportunities will come from customers potentially having to hedge both their interest rate and their FX volatility, but also by our traders also doing well because of the volatility, the long vol, as you know. So wealth management fees, as you can see, up 35%. The first quarter, obviously, the markets were strong. Net new money also was running at the pace that we were expecting it to. It was about 3 billion in the first quarter because there was a lumpy outflow of about 2 odd billion. But some of that will come back in April. In fact, April, we are seeing still strong net new money growth for the wealth business. Market trading, as I said, because of the high volatility, is the highest in the year. I'm comfortable with the asset quality. I think our NPR ratios as we have guided remain stable. It's 1.1% NPR ratio and the NPA formation is lower than recent quarters. We've over the last few years been pretty circumspect on the kind of assets that we bring onto our books. As I said, we focus on industries that we know franchises that we are comfortable with, and we've gone deep. And the high loan fee speaks to that sort of structural change. We've been quite circumspect on SME loans. We've not taken too much risk there. If anything, in some of the emerging markets, we've been very risk aware. We've also been circumspect around the consumer unsecured loan book as well. So the GP reserves, I think it speaks to our prudency, given the high uncertainty that we're seeing because of the tariff uncertainty. But I'm comfortable. I think the GP allowance that we took and the GP overlay that we have of about 2.6 billion or about 60 basis points of our loan book is more than sufficient. So our total dividend, as Tommy said, $0.75. $0.60 comes from our current income stream. Capital returns of $0.15 comes from our previous stock of capital that we want to return to shareholders. As long as our ROE stays within our range of 15% to 17%, I'm comfortable that we can continue to deliver this dividend payout. Slide. So let me talk now about the outlook. First, the geopolitics and the markets. So with Liberation Day, we all know this is the potential end of a rules-based world order and multilateralism as we used to know it. And so we need to learn to shift to work in a multipolar world. And for us, we looked at how we could crystallize our risk. As I said, we've basically stress tested for different risk scenarios. We need to stay resilient across these different risk scenarios. And so we figured the best way to crystallize our risk is look at first order risk and second order risk. The first order is which countries will be affected, which sectors will be affected. The second order is then the macroeconomic risk parameters that we have to stress test for. That includes trade disruption, drop in GDP, drop in consumption, slowdown in trade, this intermediation of current trade flows, et cetera, leading to credit stresses and consumer confidence taking a drop. There's also been a lot of volatility, as I said, in interest rates and effects, and some clients and countries looking to diversify their trade currencies and reserve currency assets. And the other trend is obviously shifting trade flows in a multi-polar world. Some countries, you kind of prepare for trade with the US or China. You might have to have China for China, US for US. The good news is the trade outside the US still remains pretty robust and you work towards that shift in focus more. from just selling to the US or the West to really looking at trade flows outside the US. Having said that, because of the uncertainty that we saw after April 2nd, there has been a pause in some of the longer-term investments until there's clarity. And clients are now looking at a reconfiguration of both their trade flows and their payments and technology stack. Next slide. And so what is the impact on tariff on our business? As I said, we stress test for all scenarios. And other than the trade disruption and the global slowdown, we're testing for both a stagflationary environment a recessionary environment, but knowing full well that we have to learn to work in a multipolar environment. We've been stress testing for interest rate uncertainty, interest rate volatility, and weaker sentiment all around. And based on the stress tests that we have done, actually, the first all the stress tests, we are not so badly affected. There are some industries more affected than others, for example, the consumer goods, discretionary consumer goods, the auto sector, the electronic sector. And we're looking to see what announcements come out on semiconductor and healthcare pharmaceuticals. The good news is our direct exposure between China and the US in terms of flows to the US is pretty muted, very limited. So I don't see a lot of impact there. The secondary impact or the second-order impact, we have been stress testing, and that's based on a slowdown in macro growth. For most countries, the slowdown delta is between 0.5% to 0.9%. We're also stress testing for U.S. recession or a U.S. stagflation. And in those scenarios, a stagflationary scenario, whilst you may not have any cuts or you might have one cut, In a recessionary environment, you could have anything from three to six rate cuts. And in the multipolar world, actually looking at which corridors will be affected and which countries will be affected, but also the companies that are quite leveraged in the mid-cap and SME sector will also be affected. So what are the opportunities, though, in this multipolar world? Number one is if trade flows and trade supply chains shift, actually, it's good for us because we are looking at new supply chain links, new sea logistic links, and helping to finance potentially more inventory financing and alternative currencies and liquidity solutions. And that speaks to the strength because we have been investing in such payment solutions and alternative currencies of payment flows as well. The new growth corridors and sectors, the structural growth that we're seeing in India continues. There's been some geopolitical noise, but the first quarter, India did very well. We saw very strong 20-over percent growth in India. Our investments in Lakshmi Vilas Bank has laid foundation for us to grow both our large corporate and SME business, but also to our CBG business, making use of the growing middle-class population and trying to beef up also our onshore wealth business. We're also seeing good trade flows between Northeast Asia into India, and that speaks to the strength that we have that connectivity, and also the Western MNCs to India, be it for Apple or Boeing, Nokia, Ericsson, Samsung, LG, et cetera. So again, as I said, those new growth corridors and sectors are where we are seeing structural growth. So as rates come down, and you've all seen the rates go down in the first quarter and in April, the good news is this is mitigated by CASA growth. Our CASA growth was very strong in the first quarter. It continues to be strong in April. And with the high volatility comes more trading opportunities for our GFM colleagues and also corporate client demand for hedging has increased. Okay, let's go to my last slide, which is the 2025 outlook. As I said before, I feel good that we have done a lot of work creating a strong, resilient business. Our structural growth remains, and the structural growth It's focusing on high ROE businesses like wealth management, like FAY, like payments, like GTS. And that shouldn't stay. The cyclicality and the volatility that comes with a slowdown, with tariff uncertainty, we can deal with. And so the business momentum has remained resilient in April. We have stress tested for different negative scenarios and our structural growth remains intact. The group net interest income, we think, will be slightly above last year's level. And that's based on what the market is forecasting, which is three rate cuts. As I said, we will see lower NIMS, but this will be offset by balance sheet growth, particularly in CASA. volumes. And market trading also will benefit because of their lower funding costs. And if loan demand does drop in the second half, the second quarter looks okay. But if the second half loan demand drops, then there will be other assets that we have, other alternatives that we can deploy our deposits into, which will be interest bearing and good ROE. So we continue to look for the commercial book non-interest income to grow at about the mid to high single digits. We have said that we are committed to keep our cost income ratio to the low 40% or so range, and that still looks okay. SPs, we should maintain 17% to 20%. Whilst it's still too early to see impact, as I said, the first order impact, not too big. Second order impact, we have stress tested. We are ready for it. We've got our GP buffers and we've got a high GP overlay. And net profits, whilst it will be below 2024 because of the global minimum tax of 15%, I still think the pre-tax profit could be around last year's level. So with that, I end the CEO observations.