Dbs Group Hldgs Ltd S/Adr

Good morning and welcome to DBS's financial results briefing. This morning we announced first quarter net profit of $2.93 billion as total income reached a new high. As per our norm, our CEO Tan Tushan and CFO Cheung Sok Fee will share more about the quarter. Both will be speaking to slides which you can see on your screens. The slides can also be found on our investor relations website. And thereafter we will take questions. So without further ado, Sogdi, please. Hi, good morning, everyone. Let me start with slide two, the key highlights. We delivered a strong set of results for the first quarter. Net profit rose 1% year-on-year as total income reached a new high. While return on equity was 17%, return on tangible equity was 18.7%. Total income grew 1% from a year ago to a record $5.95 billion. While we continue to face lower rates and a stronger SING dollar, our strong deposit growth and hedging mitigated the headwinds. Meanwhile, robust wealth management performance drove free income and treasury customer sales to new highs, and market trading income strengthened from lower funding costs and improved trading editions. Compared to the previous quarter, net profit rose 24%, led by fee income, treasury customer sales and market trading income. Notably, group net interest income was little changed on a day-adjusted basis. Asset quality remained resilient. New MPA formation was at the low end of our quarterly range and was more than offset by repayments and write-offs. MPL ratio was stable at 1.0%, and specific allowance at 14 basis points of loans was below our guided range. Capital remained strong. The CET1 ratio was 16.9% on a transitional basis and 14.8% on a fully phased-in basis. The Board declared a total dividend of $0.81 per share for the first quarter, comprising a $0.66 ordinary dividend and a $0.15 capital return dividend. Slide 3. First quarter year-on-year performance. For the first quarter, net profit was $2.93 billion, 1% higher than a year ago. A good net interest income declined 5% as the impact of a lower interest rate and stronger SING dollar were partially offset by hedging and balance sheet growth. Within this, commercial book net interest income fell 7%. or $244 million to $3.48 billion. Fee income rose 16% or $207 million to a record $1.48 billion, led by wealth management. Commercial book at the non-interest income grew 10% or $54 million to $602 million, driven by record treasury customer sales. Market trading income strengthened 7% or $26 million to $389 million supported by lower funding costs and improved trading conditions. Expenses increased 4% or $88 million from higher staff costs. The cost to income ratio was 39%. Profit before allowances of $3.65 billion was little changed. Total allowances of $190 million was almost half that of the previous year when we had prudently set aside $200 million of general provision overlay. Slide 4, first quarter Q-on-Q performance. Compared to the previous quarter, net profit was up 24%. Group net interest income was little changed on a day-adjusted basis as hedging and balance sheet growth offset rate pressures. Within this, commercial book net interest income was 3% or $117 million lower due to a shorter quarter. Key income rose 35% or $383 million. Commercial book other non-interest income grew 24% or $116 million and market trading income more than doubled as all three grew from the previous quarter's seasonally low base. Expenses declined 3% or $70 million to $2.30 billion due to lower non-staff costs. Total allowances were 9% or $19 million lower. Slide 5. Net Interest Income Compared to the previous quarter, group net interest income of $3.49 billion was little change on a day-adjusted basis. Group net interest margin declined 4 basis points to 1.89% as SORA trended lower during the quarter. The impact of lower rates was offset by balance sheet hedges and by strong deposit rolls of $19 billion, or 3% in constant currency terms during the quarter. Compared to the previous quarter, group net interest income was 5% or $187 million lower. The average interest rates at the bottom of the slide highlight the extent of the interest rate declines we have faced. In particular, Singapore interest rates represented by SORA fell from 2.54% in Q1 2025 to 1.07% in Q1 2026. SORA is now less than half of what it was a year ago. Our proactive and nimble hedging strategy as well as strong deposit and loan growth helped claw back a large part of the interest rate headwinds. Our markets trading business also benefited on lower funding costs. Slide 6. Deposits. During the quarter, the momentum in deposits remained strong. Total deposits rose 3% on $19 billion in constant currency terms to $630 billion. The increase was led by CAFA inflows from both corporate and retail customers. As a result, our CAFA ratio improved to 55%. Compared to a year ago, deposits grew 12% or $56 billion in constant currency terms. Liquidity remained healthy. The group's liquidity coverage ratio was 151%, and net stable funding ratio was 117%, both comfortably above regulatory requirements. Slide 7, on loans. During the quarter, gross loans rose 2% or $8 billion in constant currency terms to $459 billion. The increase was driven by non-trade corporate loans as well as wealth loans. Slide 8, fee increases. Growth fee income rose 14% to a new high of $1.71 billion. The growth was broad-based and was led by record wealth management fees, which increased 25% year-on-year due to higher investment product sales and bank assurance. Transaction service fees also rose to record levels and card and investment banking fees were also higher. Compared to the previous quarter, gross fee income rose 24%, led by a 41% growth in wealth management. Slide 9. Customer-driven non-interest income. This slide shows non-interest income from the commercial book that is customer-driven. While fee income and treasury customer sales are recorded under different P&L lines due to accounting treatment, Both are driven by consumer and corporate demand for financial solutions and should be viewed together. For the first quarter, customer-driven non-interest income rose 13% from a year ago to $2.07 billion, as net fee income rose 16% to $1.48 billion, and treasury customer sales grew 5% to $592 million. Both were at new highs, driven by broad-based growth and led by wealth management. Compared to the previous quarter, customer-driven non-interest income rose 31% as the strong performance was amplified by the seasonally low-slow quarter. The continued strength in our customer-driven non-interest income reflects our efforts to broaden and deepen relationships with wealth, corporate and institutional clients. Slide 10, Wealth Management. The wealth management segment, which comprises treasurer, treasurer's private client and the private bank, was a key growth during the quarter. Total income grew 7% year-on-year to a record $1.59 billion, led by a 19% increase in non-interest income, which more than offset the decline in net interest income from lower rates. During the quarter, AUM reached a record $492 billion, up 17% year-on-year in constant currency terms. It was up 1% compared to the previous quarter despite softer market conditions as robust net new money inflow of $10 billion, more than offset market losses. Slide 11, Expenses. Expenses were tightly managed and rose 4% compared to the previous year. The increase was led by higher staff costs. The cost-to-income ratio was 39%. Compared to the previous quarter, expenses were 3% lower due to declines in non-staff costs. Slide 12, non-performing assets. Non-performing assets fell 3% from the previous quarter to $4.72 billion. New non-performing asset formation was at the low end of our quarterly range and was more than offset by repayments and write-offs. The MPL ratio remained stable at 1.0%. Slide 13 on specific allowances. First quarter specific allowances amounted to 157 million or 14 basis points of loan. This was below our guided range of 17 to 20 basis points. specific allowances more than half from the previous quarter, which included the downgrade of a real estate exposure. Slide 14, general allowances. At the end of March, total allowance reserves stood at $6.2 billion, comprising $2.31 billion in specific allowance reserves and $3.89 billion in general allowance reserves. General allowance reserves remain prudent. with the overlay at 2.4 billion. Allowance coverage was at 131% and at 200% after considering collateral. Slide 15, capital. The reported CT1 ratio declined 0.1 percentage point from the previous quarter to 16.9%, driven by higher RWA, partially offset by profit accretion. On a fully phased-in basis, The pro forma ratio decreased 0.2 percentage points to 14.8%. The leverage ratio was 5.9%, significantly above the regulatory minimum of 3%. Slide 16 on dividends. The board declared a total dividend of 81 cents per share for the first quarter, comprising an ordinary dividend of 66 cents and a capital return dividend of 15 cents. Based on yesterday's total share price and assuming that total dividends are held at 81 cents per quarter, the annualized dividend yield is 5.7%. Slide 17. In summary, we had a strong start to the year with record total income and a return on equity of 17% despite continued rate headwinds and heightened geopolitical uncertainty. The quarter was anchored by record wealth management performance alongside robust deposit growth, record transaction services fees and stronger market trading income. This reflects the resilience of our franchise and our ability to capture opportunities and support client needs amidst a challenging environment. While Iran war and its potential second order effects have added uncertainty to the outlook, Our stress tests indicate that our credit portfolio remains sound. Our solid balance sheets with good and general allowance buffers, strong capital position, and robust liquidity underpins our resilience. We also continue to invest in structural growth initiatives, including transformational technology to enhance how we serve our customers and capture long-term opportunities. Thank you very much for your attention. And I'll now pass you to Sushant.

Thanks, Dokhui. So I think the team did a really good job in the start of the year. I like to think of us as that lighthouse in the sea of volatility. You'll see that picture of us, our lighthouse and our annual report on the cover. And I like to think that we have built a fortress balance sheet so we are underpinned by a very strong foundation that will weather the storms ahead, if it's stormy. And if it's not stormy and it's sunny, heck, the light will still be shining and we will be, you know, we'll be partying. We'll be taking on all the growth opportunities ahead of us. So, we're going to weather the storm if things go stormy, but we're also going to get the upside if things look up. We don't know. The truth is, the future this year, the short-term future doesn't look very clear. Politics could go either way. And that's why staying resilient in a time of great stress is so important. And staying resilient means having a strong balance sheet, being nimble in being able to meet the volatilities ahead. But all this time, building a strong recurring base of good fee income, good new-to-bank customers, solid credit, no surprises, stress test, stress test, stress test, and also underpinning this, a constant focus on innovation, AI, agentic AI, and not keeping the eye off the ball on credit stresses. So that's kind of, in a nutshell, the analogy I want to draw for all of you, which was manifested in the first quarter. The first quarter, the team over-delivered relative to our budget and relative to the market analysts. having a record total income, record commercial book total income, record MPPT and record AUM, in spite of interest rates dropping as much as it has, I think does specify the strength of our franchise. So, record total fees, total income are only at 17% or decently to a decent momentum. We were very pleased by the deposit growth. That was certainly stronger than we anticipated. And it speaks to the plumbing work that we've done over the years around getting both operating cash accounts. GTS did a very good job on having a good momentum around new to bank customers and winning a lot more new cash mandates. Wealth did a good job on solid AUM growth. In spite of solid net new money growth, AUM was affected by market performance on the equity side. But nonetheless, our corporate treasury also capitalized on the high volatility by taking on a lot of hedging opportunities for us. We've maintained our fixed asset at $210 billion, but we were able to put on more hedges than we thought. And our NRI sensitivity will remain at $11 million for SING dollars, so $11 million change per basis point for SING dollars. and minus $4 million for US dollar per basis point. So I was really pleased by the record wealth management performance. Wealth management fees were up 25%, and what was interesting was it was broad-based. The new-to-bank AUM growth was also broad-based, but underpinning this broad-based growth was actually very, very strong banker sales. The banker sales was record high, and that speaks to banking long-term sticky relationships. It speaks to us winning share of mine and share of wallet, but also the next generation is involved, and that will create sticky fees for the long term. Transaction banking fees at 2.57% up 8% is also sticky. We hope to do a lot more with it. First quarter net new money was at $10 billion. That was, as I said, broad-based. And you would have read the press report that DBS Private Bank was the first Asian private bank to win the world's best private bank award, first time in Euromoney's 22-year history. Very, very proud of the team there. And for society, you would have also read the press that our Singapore team committed a new commitment of $10 million to help consumers and SMEs weather the crisis in Singapore. Expenses, pretty solid. We're up 4%. That's down from our normal plus 8%. Cost of income ratio slightly below 40. We will remain disciplined. We will remain very cognizant of not having too high a cost rise. So we will be disciplined in our costs. But we will also continue to support clients through these uncertain times. In terms of Middle East exposure, we have very limited Middle East exposure. And our new MPA formation was at the low end. And I think we've been very prudent. We mentioned our GP results at 3.9, our GP overlay at 2.4. We have stress tested the Middle East conflict over and over again. Stress tested all at a 120, 200 effect rates down for group B, group B, etc. I am pleased to say that whilst we're watchful, I think our GP is ample, our GP reserves are ample to cover any unexpected scenarios ahead of us. So we're not complacent, but I think we are very prudent and we have ample reserves. Next slide. So you will recall a year ago, we talked about all the structural growth focuses we have. So obviously wealth management, wealth management both onshore and offshore. We talked about FAPE, financial institutions and II coverage. We talked about TNT. We talked about payments, GPS. And so I'm pleased to report that all that structural focus on growth cylinders are being executed upon. They are yielding fruit and we're seeing the results and it's coming in nicely. So for wealth, both onshore and offshore, we've been quite aggressively growing our footprint. We've launched new wealth centers in China, Hong Kong, Taiwan. And we've also refreshed our TPC offering in places like Indonesia, Singapore, Taiwan. And we're seeing the fruits. Particularly pleasing was Taiwan. Taiwan consumer banking franchise is up strongly. Wealth management in Taiwan is up 30%. And we just opened in Kaohsiung as well, a special SEZ. So we have a new wealth management license there. So I think in Taiwan, GDP growth has been very strong. So the city integration, the new wealth focus, alongside our higher end cards focus is yielding fruit. North Asia is also growing very well. The Hong Kong wealth management business is growing very well, both at the treasuries and at the higher net worth level. China onshore wealth is also growing well as interest rates are low. DBS has a good branding for safety and good wealth management products. So we've been winning market share there as well. Over at IBG, the institutional banking group, our focus on TMT fake and institutional equities is also yielding results. TMT first quarter results were up 14% to 220. More pleasing though is the fee income there was up 27%. Even in China, TMT, our focus has been around both the semiconductor ecosystem for Taiwan, for TMT generally, also for data centers. We're also identifying new winners in AI for healthcare, for logistics, for advanced manufacturing, for robotics, EVs, etc. So really getting deep into those industry knowledge, but also penetrating some of the big, good quality clients. For FIG, our financial institutions group, that grew 10% as well. Our AI coverage for sovereign wealth funds, for fund managers, across banks, non-banks, insurance, Additional asset players is also growing nicely. So that will continue to churn both good fee and non-fee income as well. And then the institutional equity business, which we also put in some new focus. We managed to penetrate new to bank institutional equities. And first quarter, our cash equity business was up very strong double digits. Cash equity is up 77%. and total institutional equity was up 36%. So showing some real new prowess there. We started to do more block trading solutions. We're doing block placements, secondaries, etc. So I'm very pleased to see that starting to bear fruit. Also across the board, whether it's in SME, whether it's in wealth, it's in consumer bank, everyone's been very focused on user bank, very focused on supporting growth, very focused in penetrating with depth and width, And so I think that speaks to us getting a lot more recurring fee going forward. Why? Because as you onboard new clients, you get their cash management, you get their recurring payments fee, you get their wealth, you get a whole host of snowballing of recurring fee. That's just good for business. But as you win, as you get depth in industry coverage, you also get the lead for structuring, the lead for syndicated loans. And you will see that our loan fees are also growing very nicely. On the risk side, a year ago we started to de-risk, we de-risked our SME portfolios in some markets, we de-risked our unsecured consumer loans in some markets, and that's now turning out to be a good decision. So we've been circumspect on risk, we tightened up, and a year later I think we're in a good place.

So, next slide.

What's the 2026 outlook? Well, We are now saying that we're not expecting any rate cuts from the U.S. because of the war, because of the high price of oil caused by the war. We're assuming no rate cuts now from the U.S. We are maintaining our SORA guidance at 1%, or actually that's slightly below. We were looking at 1.25%, now we're at 1%. And we are not counting for SORA to trade higher, but if it does, well, that's upside for us. So again, our full year guidance is total income should be at or around the 2025 levels. And what we're seeing, though, is I think we're seeing higher than expected deposit growth. So deposit growth should be at the higher single-digit range. Loan growth will be in the mid-single-digit range. And as volatility continues, we will continue to capture hedging opportunities. So again, just relentless focus on growing customers, deepening wallet share, focusing on the growth corridors, focusing on what you do best, focusing on recurring fee, building a fortress balance sheet, maintaining cost discipline. Okay, so let's talk about the next. Oh, actually, so to close, I think what I want to say is I think first quarter was testimony to the hard work that the team has put in to build a solid foundation, solid foundation to weather the storm, a solid foundation to grow. And you will see from the fee growth, the new-to-bank customers, what we're doing on AI, etc., that the foundation for growth is there. We will weather what storms come ahead of us, whether it's a prolonged war, high inflation, or rates coming down in Singapore, etc., We are ready for the worst case scenario, but we hope for the best case scenario.

Thank you. Thank you, Sushant. We can now proceed to take questions from the media. So if you would like to ask a question, please do raise your hand in WebEx and find the icon on the screen. And when we call on you, you will receive a notification to unmute yourself. Please accept the invitation to unmute yourself before proceeding with your questions. We have a question from Rithika from Bloomberg.

Hi. Hi. This is Rithika from Bloomberg. I have a couple questions for Sushant today. First thing, I want to talk about deposits. Deposits grew 9% while loans rose about 4%. How are you thinking about this deposit blood? And what's CBS doing with the excess funding given that lending isn't keeping pace?

Okay. We can take that. So generally, you know, loan growth should follow GDP growth, maybe slightly higher. It depends, right? Depends on how businesses feel about their own growth opportunities. And obviously, if the war is prolonged and businesses don't feel confident or business or credit starts to be looking bad, then loan growth will not be as strong as GDP growth or will be just at GDP growth. So with single digit, I think it's fair. What I saw in the last few months is the IBG non-trade loan is growing. It's particularly growing in where there's structural growth. So semiconductors, TMT, you know, SPIG, et cetera. So I'm quite happy with the, and some of the GLS, the government land sales, both in Singapore and Hong Kong. So I'm actually constructive on the kind of loans that we're putting on, even though it's sort of single digits. deposit growth, you're right. It is very strong. It tends to follow M2, plus or minus a little bit. It tends to follow M2. But our game is to get more than our fair share of deposit growth. And we're doing this because it's very good for us. Whatever new extra deposits we will deploy in HQLA, that's high ROE business, that's low risk, and it's liquid. And If we can continue on this path of high deposit growth, especially for CASA, high low cost deposit growth, that's all upside. So the team is very focused on delivering.

And I want to pivot a bit to your statement mentioned some newly launched wealth centers to capture flows. Where are these located and how are you seeing meaningful inflows from clients moving out of the Middle East?

Okay, I'll take the, well, we're seeing flows across the board, right? It's not, you know, suddenly Iran happens and you have flows from the Middle East or whatever. It's really, our growth is across segments, across different countries, across both onshore and offshore. What we are also seeing is the wealth centers create a onshore focus. So whether it's Taiwan, China... Indonesia, India. Of course, Singapore and Hong Kong are the two wealth hubs. But all the other growth markets, we are growing our onshore wealth centers because there is capital in all those markets. Taiwan is creating wealth. The GDP growth is so strong. The whole semiconductor industries and the spillover of the supply chain, the mid-cap SME guys are also growing their wealth. The stock market's been great. So there's a lot of organic growth to capture. So the city... franchise that we bought is turning out to be very good, and the customers that we got, the staff that we got is turning out to be very good, and we're just, you know, really setting down that franchise. I'm going to pass it to Sukun to layer in. Sukun is our consumer wealth head.

Thank you, Sushant. Yes, just to build on what Sushant has said, the wealth centers that Sushant was talking about are primarily ready to serve the onshore wealth that's built up. So we have in our whole wealth continuum a full spectrum, right, from the affluent space, which is what we call treasures, into treasures, private clients, and then the private banking franchise. Now, the PPC and PD, right, are really global businesses where we already serve over 120 nationalities, primarily booked in Singapore, Hong Kong, being two international wealth hubs. But apart from that, where we have our onshore presence in several of those markets, those that Sushant talked about, China, Hong Kong, Taiwan, India, Indonesia, Singapore, we have these wealth centers. And these primarily serve the affluent customers, so the treasured segment in particular, who will walk into wealth centers and open their accounts and have their accounts served. Now, obviously, within Singapore and Hong Kong being wealth hubs themselves, even in the affluent space, we do see travelers coming in from various places, and they do tend to also show up or make appointments to meet at our wealth centers to open up their treasures accounts.

Right. And just going back to Sushant, I just have two more, sorry. With $10 billion in net new money this quarter and wealth fees at a record, Are you hiring more relationship managers to keep up, and where are you focused on growing headcount? And my second question is on AI. MAS has flagged concerns about anthropic's mythos model, and J.P. Morgan is the only bank with early access through Project Glassway. Is DBS currently in talks with anthropic to get access, and, you know, how is the bank thinking about the cyber risks, the model of possessiveness?

Sukun can answer the RM question and I'll take the entropic one.

Thank you. On hiring, the answer is yes. We are certainly still in a growth mode because we do see a huge potential as Sushant alluded to as well. There is a rapid growth of wealth within Asia and we are also still seeing wealth flowing into Asia. And for that reason, Asia has become really a very credible place for wealth management. So we are still hiring on all fronts across all three segments of Treasures, TPC, and PB.

Right, and is there some sort of scale or number that you can give us, like a mega percentage increase in how much higher it has gone up?

No, I don't think we... We don't disclose it. Yeah, and as far as we are concerned, we are on a growth mode and we are constantly looking But, you know, with good talent, we will have the talent in there if we see a good talent.

And the truth is we also have an internal bench, right? We started the wealth continuum very early, 2010. And so we moved our RMs from retail to priority bank, priority bank to treasurer's private clients, from treasurer's private clients to private banks. So it's a nice continuum in the RMs. go up the continuum along with their clients as the clients grow their wealth. So it's fairly organic as well. So we have both internal bench and external, we attract talent.

And just to add to that, we are also aware that this is a growing space. So apart from those that we hire from outside or we move through the continuum, we also have been consistently hiring fresh graduates over the last couple of years. So we work with the local universities, We have a program ongoing where these university students come in in the midst of their course and spend six to nine months with us in a special program that we tailored with the universities. And it is from there that we also then hire when they graduate. And this is how we continue to grow our own timber, build our own strength, and do the right thing by society as well.

Okay, so your question on ethos... Needless to say, everybody in the financial industry, particularly here, is very, very focused on making sure that we are on top of this. What Methos does, it doesn't actually, you know, it's not a new attack as such, but what it does is it amplifies the risk from both a speed perspective, it's faster to market, and from a volume perspective, the blast radius is fast. What it can do is it can chain together a few vulnerabilities to broaden the attack path. So it's not a new class of attack, but the speed and the barriers to attack is now shorter. What does it mean? It means, number one, attackers can use this tech to detect vulnerabilities faster, but it also means banks and our cyber team can use this tech to detect vulnerabilities faster as well. So you need to protect yourself faster than the attacker, right? So the immediate task at hand is to make sure that you've got all the patches, You have your strong internal hygiene inside and out. You have what we call layer defense to prevent chaining. So we do that anyway. And we use it. We can augment with AI. So that's all I'll say about this.

Okay. And nothing on whether you guys are trying to get access.

Oh, no. Project Last Ring, I'm told, is all U.S., right? It's all U.S.

For now, yeah. Okay. Thank you.

Thanks, Rebecca. We've got a question from Ultra from Reuters.

Hi, good morning. Can you hear me? Yes, we can hear you. Thank you. And yes, my first question, I have a couple of questions. The first one is, does DBS still stand by your earlier guidance that from fourth quarter that net profit may be slightly below 20 to 25 levels and that GP writebacks are possible?

I think it's a more nuanced guidance that we're giving for this quarter. Things may still pan out, but as far as we can see, it's actually turned slightly more positive than the last guidance. And therefore, we have a good shot, I think, at getting close to 2025 levels. So it's not like definitely will be flat, but it's better than the guidance we gave last round that it would be below 2025. So that's the first thing I would say. I think general provisions, we have $3.9 billion, of which $2.4 billion is what we call overlays, and it cases for a lot of stress tests. And you remember that we actually put out about $1.8 billion during COVID, and then we put out some more along the way, including $200 million last year due to the Liberation Day. So I think we are in a good place. Whether it's timely to release, we'll have to look at – how the situation turned out in the Middle East. I think it's too early to call. It could be possible that if things looked better, we would be in a position to release, but we'll wait and see.

Yeah. I think to add on to what Sokhi just said, we were quite honest on our outlook. So we said, look, we are predicting Sora at 1%, and we're using that as a guidance, and our sensitivity is minus... well, it's 11 million per basis point, right? For Sing. And then for US dollar, it's minus 4 million per basis point. So, you know, so analysts, you know, on the call can figure that out based on their own judgment call and where rates are going to go. The fees, you know, the wealth entry fees will go up and down with the markets. That's harder to predict. But the more important thing is we're getting new to bank, we're getting AUMs, and our kind of regular... fee from either from third party funds or discretionary funds with our CIO or from GTS or from loans fee, all that should turn higher and our banker fees as well is helping to mitigate whatever volatility we see in investment fees, right? We feel good about the fundamentals, but the macros are very hard to tell, very hard to call, because the market is volatile. Interest rate volatility is the highest we've seen this, right? So when the interest rates are in our favor, we hedge what we can. When it goes against us, well, we were expecting it, right? So I think that's the way to kind of pitch, because it's very hard to pinpoint with a crystal ball just because we don't know when the war will end.

Thank you so much. That goes directly to my second question. How do you see the Iran conflict can affect DBS asset quality via oil prices, inflation or customer stress? Should we actually expect any change in credit courses or impairments?

We did many stress tests. As I said earlier on, our Middle East exposure is very limited, and it's really to sovereign wealth funds and to state-owned assets, so it's a very high credit rating, so we're not too concerned. So the first-order impact is really quite muted. The second other impact is what we are more focused on because obviously if inflation remains high, price of oil remains high, but more importantly, it's not just the high inflation, it's the lack of supply, right? So if companies don't get access to fuel oil, if airlines don't get access to fuel oil from June onwards or from late May onwards, if chemical companies, fertilizer companies don't get access to upstream chemical inputs, like methylene, ethylene glycol, polypropylene, etc. That's a problem. And I don't think this issue, this supply crunch, will be solved by higher rates or tighter monetary policy, because it's a supply-side issue, which will be solved over time. But we're going to have to live through, you know, potentially one or two quarters of supply chain breakages. You will see in the long term now, everyone is planning... for diversified supply chains for energy, for example. This will quicken the investments in renewables. That's good for us because we've got a strong renewables team and we're very focused on that as a growth asset class. So it'll be more focused on renewables. You already see EV car purchasing going up. There will also be a lot more infrastructural spend around gas pipelines and energy pipelines, and we're also on top of that. So that's the long term. But the short term, we might have to live with supply chain breakages, very high inflation, and lack of supply of some stuff, which we have stress tested. And as I said earlier on, we de-risked our SME and consumer unsecured loans already a year ago, last year, rather. And I think on that side, we're okay. For the large corporates that will suffer, whether it's from high freight rates or logistic costs or just lack of input, or lack of supply, whether it's of chips or whatever, helium, we stress tested that, and we're okay, but we're watchful.

Thank you. And just one last question, following the nice questions asked by our lead at Bloomberg, I just want to get your view on following this NIPOS event, do you still see AI as a net benefit to productivity and profits, or rather a new cause for risk now? Thank you.

Oh, absolutely. We see it as a net positive. It's really, you know, ADBS is doing a lot around AI. As you know, we started our AI journey in 2016 with a more deterministic model-based AI. We've created enough models. We look at the AD testing and the outcomes have been very good. So that's what I like to call the classic AI. Then when ChatGPT came in in 2023, we started to experiment and use generative AI for both horizontal use cases, so everyone can use it, within safety guardrails, and vertical use cases, whether it's for the call center, whether it's for credit memorizing, for cards, for wealth, for corporate banks, etc. And then when the agentic world came in, and we just took our board to Silicon Valley in March this year, early March this year, And we've been talking and working with a lot of platform companies, LLMs, frontier models, startups, the whole world, right? And my team has gone to China. So, you know, our tech teams, our transformation teams, our AI teams, our data teams are all on top of what's going on. What's happening is at such a speed and scale that sometimes I think the human mind can't digest all this quickly. But We want to do the right thing, both by our customers and by our employees. So what does that mean? Number one is get your hygiene, get your house in order. That means get your data in order. So you know that we've already created a data lake for structured data. We're now embarking on a project to ensure that end-to-end data ownership, security, hygiene, all that is clean. We continue to work on our deterministic models. We continue to use generative AI to help our staff synthesize, summarize, do simple tasks, do complicated tasks in the verticals. And we have started work on an agent control plane where we will also create enterprise-based agents. Anything that touches production, by the way, we are very cautious, but we are creating a control plane where we have 11 big enterprise use cases that we think will be game-changing for us. I don't want to say too much because it's early days, but we are excited to look at initial outcomes are very good, you know, especially the use case for technology, for coding, the use cases for operations, they're all very good outcomes. It helps to make you more resilient because, you know, it takes away the human error. Even when you have maker-checker, sometimes you have human error, so this AI helps to prevent the human errors from happening so often. It really crunches down the time to market for development and coding. It really helps the human eye take a lot more information, put in your policies, put in your procedures. We're creating a whole knowledge base to make sure that every single thing that we know about our products, our plans, our procedures and all that's being done. So a heck of a lot of work that I haven't unveiled yet. is being done to build the right foundation on which we can grow to become the best AI-enabled bank with a heart. Thank you.

Thank you, Sushant.

Thank you. Thanks, Altra. A question from Gula from The Edge.

Hi, Gula.

Hi, Gula. You need to unmute yourself.

Hi, can you hear me now?

Yes, we can.

Okay, thanks, thanks. Anyway, thanks, Edna. Congratulations on the very good results because times are very volatile. I just want to ask a couple of very small questions. I believe that the flows between the Middle East and India are quite big. So what is it like for DBS India? And I think the Indian banks have reported some impact on their loan growth and NIM. So is there any impact on DBS India? And additionally, also I've been told that there's been a lot of volatility in the rupee and the rupiah. So how have these affected, you know, DBS and could you put your Southeast Asian markets as one segment. And the second question is, which markets have you de-risked your SME and consumer loans? Are they these two markets?

Yes, so your first question on India, India being a net importer of oil, we'll watch all over some of the vulnerable borrowers. We've watch-listed all the ones that we think are vulnerable. It's not much. the additional watch list is very, very small right now because in India still our main focus is to the large corporate MNCs and the top corporates in India who are multinational. But we are stress testing for rupee and rupiah volatility and that's why we have been fairly conservative there. And The markets that we reduced our CCUL, credit card unsecured loans, is in India, Indonesia, and a little bit in China.

Okay, thanks, thanks. Is the China book all right?

Is the China book all right?

Yes, I mean, we've heard, you know, there's been some... stresses in some of our listed entities that have exposure to China.

Yeah.

Well, you know, in last quarter, right, we were very prudent. We took one exposure to NPL. So we haven't increased any of our China. If you're asking about real estate, we haven't increased anything there. So, you know, flat, but we took one out as an MPA, so we were being cautious, even though actually that company is still current, but anyway, we were just being conservative and we took it last year. What is our view on China? I think, you know, China's standing out now in terms of the lack of volatility, if you will, right? I just came back from the China Development Forum and I was struck by the persistent openness of the country, the transparency. What they say, they do, they do, they say. It's a very competitive market. But China, you can identify your winners by focusing on what are the growth cylinders of China. It's science and technology. It's EV, it's battery, it's AI for logistics, AI for healthcare. So we have a whole infrastructure team to focus on what we call these new economy winners. They are identified and they will grow and they will win. They will win the manufacturing 4.0 game. They will win, I think, the med tech AI game, the medical device game. And the data usage is pretty good. So whilst the LLMs and all that may not be valued as highly as the US ones, we are seeing that two things are happening. there is a strong focus on R&D by the country. There is a strong focus on talent usage, number of engineers graduating from top schools, something like 16 million, and a lot of them are being deployed in robotics and high-end R&D. So we're excited to see what will come out of this focus for the country. In the meantime, we're not really in the SME or unsecured business. The consumer confidence there is still, I guess, a little bit muted, but we see green shoots. Hong Kong certainly is seeing strong recovery right now, right, both in residential as well as central commercial buildings, you know, Kowloon West, etc., the northern metropolis, etc. So, and then Taiwan is obviously, you know, it's going gangbusted. So, I think North Asia is looking rather better than a year ago in totality, and there are green shoots that we're seeing out of China. and you're also seeing, I think what will come is probably more focus on the internationalization of the RMB, the use of FIPS, and the use of RMB, slowly, slowly, but the use of RMB as a funding currency and a currency for trade settlements.

Okay, thanks. Thank you very much. It's all for me. Thanks, Rula. Are there any other questions? Just wanted to give the media on the call in a moment. If you do have a question, please raise your hand. Yeah, it looks like we're good. Yeah, so thank you everyone. Since there are no further questions, we'll end the call here. The analyst briefing will start at 11.30. Thank you.