Hey, welcome, everyone. I think you would have heard the media briefing, so we can, as usual, go straight to Q&A. It's a hybrid session this time, so there's some people in the room. For those of you on the call, if you have a question, as usual, please press the raise hand function, then we'll call upon you to unmute yourself. But why don't we start with some questions in the room first?
Yep, thanks. Thanks again. Congratulations. Thanks for doing it in person and great results. Two questions. First on buyback, second on ALM. The point you made, Piyush, on comparing to JPM and Apple was very interesting because these guys over the last decade have canceled about 30-odd percent of shares. So the question is to you and Su Shan, is this more one-off because you guys had this big capital release and maybe another SGD 3 million-SGD 5 million we are done, or is it beginning of that decade-long journey where you cancel out a big chunk of shares? And then the related question to that is, does the Temasek shareholding at some point in time become an issue? So how do we dimension that? And also, how do you do this share buyback? Is it a buy on weakness, or is it you buy every day kind of thing?
Some of those details on buyback. Second one on ALM and.
So on buyback, JP announces about 5% of the market cap as buyback as a program, and they take the program over two to three years, right? So they've done cumulatively over time, and they continue to buy back as P/B price to book goes up. But they're quite sensible. You can see the buyback, they buy back more when there's an opportunity as opposed to it. For the time being, that's what we're going to do. And for the time being also, our total buyback capacity, we can do this, we can do another tranche of another couple of billion SGD before we run into the Temasek challenge. So we have that much cushion. And that's what we've projected for now. If you look at the total capital that we need to still return, there's another SGD 3 billion-SGD 5 billion based on final.
And if we have our transition capital, which we have a lot, we'll use some of it to not repay 81, then 82, so we have about SGD 6-odd billion in transition capital. We'll use about three to repay the 81, 82, so we'll still have another three that we haven't formed a view whether to return it because then you'll need it again, so we might think about that differently. We could return some because we'll create profit also along the way, but the balance between this buyback, we have the reserve of another buyback, doing specials and continuing to step up our dividend. We think we can return a chunk of the capital that way. That's the way to think about it.
I'll just add that we would obviously repay as we earn, and we have enough buffer. We will continue on this path of returning back capital to shareholders when I take over. This just increases our toolkit, as I said. The three different prongs approach, we will continue.
Thanks. And that Temasek challenge, is that what shareholding level? Is it 33%, 35%, 40%?
No, the problem is only that challenge is only that at 30%, technically, they need to make a general offer. So unless they get a whitewash, and I think everybody's reluctant to try and go for a whitewash for this thing. So that's the big thing. Do you want to get to a stage where they have to do a general offer to mop up all the shares or not? And absent that, there is no challenge. They'd be happy to do anything. So it's not an insurmountable challenge, but it's something we've always kept in mind. We want to get to that situation. There's also an underlying policy. How much do you want to be owned by the sovereign and the state? Where does it start? So there's an underlying issue around that as well. So we're a little thoughtful about that. And again, how will we do it?
We'll do it on weakness by and large. We're giving ourselves enough cushion to do it on weakness.
Thanks. And the second one on ALM, that was one of the main discussions last quarter that we are lengthening the duration, managing so that you can keep delivering. And you kind of said that 2025, 3x almost similar, potentially even net profit as well with the rate environment. But if we think about, let's say, 2026, 2027, because these are very elevated earnings capacity, how are you thinking about now doing ALM? What kind of duration extension?
We're actually so far doing the same. This year, we had about SGD 45 billion of fixed assets that came up for renewal. We replaced them with about SGD 60 billion. So we actually added another SGD 15 billion of new by the end of the year, about SGD 15 billion-SGD 16 billion of incremental. And if you look at the delta, assets which are coming off are roughly at about 2.2% yield. And we've been adding them at about 3.8%-4%. So we're getting about 170-180 points pickup on the maturing and the new that we are adding on. If you look at next year, our maturing assets are about SGD 55 billion in this thing. And prior to yesterday, with our rate-cut assumption and so on, we were still getting a yield pickup in the first half of the year because there's still low-yield assets coming off.
But we were not getting a yield pickup in the second half of the year because that would be the three-year-old assets and so on. But net net, we were still getting a pickup next year on this thing, but nowhere near like this year. The main thing, though, is if you look at going forward, we will not continue to get pickup in assets. But if you assume that the neutral rate winds up at 3-odd percent, you will not go back to the 0%, 1%, 2% levels either. So you will continue to get income drip. This will not be a source of more of this thing, but then the function is really what's the outlook on rates beyond that? And it's anybody's guess. If you think rates are going up, coming down, whatever.
The other question, sorry, the last one is on how much of NIM are you willing to give today to lock in, let's say, two years out? For example, to mortgage point, like if you do a SORA plus spread, you're talking 3.5-4, market rate is 2.5. So you're giving up a lot in a bid to fix, let's say, three years. So yes, mortgage, as you said, you would not need it. But are there other pockets of assets where in a bid to lengthen duration, you have to give up a lot? And how does that change with much higher rates and extra?
It depends on the outlook on rates, right? So if your overall outlook is the declining interest rate environment, then you would make the trade-off and lock in rates because you think you're going to give up more on the floating rate. If your outlook is a steady rate environment or a rising interest rate environment, then you won't do it. So we take that view every month. We sit in the GALCO and take an interest rate view and then decide whether we're sensible to add duration at these levels or not. It's not a set-in-stone policy. It's based on our view on where the rate comes out.
You see that we've been quite sensible. On the way up, we were 18-20 million per basis point of net interest rate sensitivity. They're on the way sort of downward. We told you we're about 4 million. This monthly process at GALCO is very helpful to align everybody on how we want to take interest rate risk. What do we give up in the short term versus what we are able to extend longer term? It's a dynamic week at every ALCO.
In the two-year in Australia, durations, we don't go that long. Average duration is about three years max. So we just operate in the value of the curve. We don't commit to it.
Which is why for the fixed rate repricing portfolio that Piyush talked about, the SGD 55 billion that's coming out in 2025, based on our model and versus yesterday, I think there's potential room for rates to go up, and therefore we'll get another lift ride, and so not everything has been baked into the forecast that we sort of try and guide the market.
Yeah, a couple of questions. First is just you've mentioned about thinking about loan growth at 3%-5%, about 5% next year. So I'm just wondering where you think that might come from because that seems like quite a big recovery given where we have been this year. And then secondly, a bit more technical question for Sok Hui, but you spoke about the tax. Could you just explain to us what is the dynamic that about 15% that actually needs your tax rate to go up because you're already above 15%?
So look at the loan growth. It's not a dramatic recovery, right? We're up 2% for the year this year. And if you get some loan growth in the third quarter, it could wind up the year at about 3%. So if you go from 3% to 4%, it's not huge. And our general view is that if rates come off, even if the Fed slows down and you still have one and a half and you don't have 2%, you have only one and a half, a declining interest rate environment, you'll see some pickup in your market. And Su Shan could comment on the areas and sectors we're seeing it. But we are seeing reasonably healthy pipelines across both geographies and sectors you want to talk to.
So actually, we had quite a lot of new loan growth this year. It's just that the repayments came in quite strong in the second and third quarter. It seems to be petering out right now. Our pipeline is strong. There's a return of leverage buyouts. There's a return in this real organic growth in Asia and the needs for data centers, semiconductor supply chains, food and agri, healthcare, etc. So we are seeing real structural need for growth, and that's in our pipelines. We've built some in-depth expertise in industries like renewables, infrastructure around renewables, and TMT and data centers, etc., as I said. So. And the China.
And property continues to be an area of growth. We're seeing a lot of it is deal specific, but there's consolidations, etc. But that continues to be an area.
The recovery in the wealth market will be helpful for the wealth's needed to do stuff. They haven't been able to do anything for a while, and now that will probably come back as well. So the structural pipeline is actually good. It's just that this year was difficult where there were a lot of repayments. And I'm constructive for next year's outlook.
So on the tax question, if you look at our disclosure under the Singapore Segment Performance, you'll see that our tax rate in Singapore today, because it's jurisdictional, is actually below 15%. And across all the other markets, Singapore would be sort of the country where we would be facing this minimum tax rate issue. All our other locations, by and large, they're above the 15% tax regime. So come next year, IRAS has already announced that tax rates will move to a minimum of 15%. That's in line with global. And because today we are paying less than 15%, and there are sort of dispensations, for example, on derivatives trading, on some of the bond trading activities, where actually today they are taxed at lower rates. So next year is going to be an accounting view, right? It's going to be whatever you're reporting in the Singapore market.
If you look at DBS Vickers in Singapore and all that, but the large ones at the back. And on that basis, you just have to pay 15% tax on that number. And therefore, that actually increases the tax that you'll be paying next year by about SGD 400 million.
Can I just have one more? Just in terms of oil and gas recoveries, is there a lot more of that still to come through?
Continues.
Any quantity buying?
We've recovered about SGD 130 million so far. The NPL this quarter, the SP reversal. Yeah, SGD 80-odd million. We could have maybe potentially had much more. We've been able to sell stuff. So some of the payments, but we've been able to sell a lot of the vessels and things. Yeah, we have some other things in the pipeline.
Aakash?
Hi, I'm Aakash from UBS. Thanks for having us in person, and congratulations, Su Shan, on the responsibilities. The first question is just around the buyback, Piyush. I think in your comments, I think you mentioned that other companies do it in two, three years' time frame. Is that sort of the time frame that you're also setting for yourself?
Yeah. Because back to this, we want to do it on weakness. So depending on how Trump tomorrow comes in and says massive tariff across Asia, I can tell you we'll have a buying opportunity.
The 24% core step-up that you have announced in the past, how long is that for?
We said in the past that medium term, and we said medium term could be three to five years. So that was about 18 months ago. So next couple of years, we're pretty sure.
I think in terms of the NIM sensitivity, which is obviously lower at the moment because of the fixed rate hedges that you have.
Hedges for two reasons. Back to the thing. If you take away the fixed rate hedges, they only account for 1/3 of the drop in. The bigger reason is the switch from CASA to fixed deposits. I think SGD 140 billion has gone from CASA to fixed deposits. When you're in fixed deposit, you lock in the rates, and it reduces interest rate sensitivity. It's a function of both things.
Both of these things, I mean, I think, as you were saying, CASA is starting to come back. That's a reverse sensitivity to go up.
So our current projection is that the NIM sensitivity end of next year, assuming before Trump, right, will move from four to closer to six because the asset repricing will be a little bit of a headwind, and some CASA will start coming back. So it's not one way. It will move to about that by the end of next year.
Right now it's two by mid of next year.
Right now it's four and by end of next year, it'll probably move up by another couple of.
SGD 4 million by next year.
SGD 4 million. Okay. I'll try to emphasize that.
Great. And then I have a couple of strategy questions, just high level. So you focus a lot on continuity last time when the transition happened. And I think a lot of investors are wondering if Mr. Peter Seah's contract is also part of the continuity because.
There's no contract either for him or for me. So when you look at this thing, we decided to plan transition to make sure that we won't both walk away at the same time, right?
What about one year later? So I think.
No, no. He's going to be around for some time.
Great. That's very good to hear. And then I think, Su Shan, for yourself, I think you're inheriting this bank with big profitability. Even if you assume rate cuts, like 10 rate cuts, you get a 16%-17% ROE. It's a very, very profitable bank, right? And I think this is bound to see a lot of competition as well, either from existing players or from new players coming to this market. How would you think about that?
I still see growth opportunities. I think the key message is continue to grow, continue to deliver, continue to execute, continue to perform. We've built a great base. We're not going to change course suddenly just because I'm the new CEO. It's worked for us to be very focused and focused on delivering. So we will continue to grow. The two big core markets of Singapore and Hong Kong are our core connectivity markets. You've got wealth management growing here. You've got trade growing. These are the two big hubs. The growth markets that we have right around India, Indonesia, China, there'll be years where one does better than the other. There'll be years where one slows down, one picks up. And we're well positioned to toggle the growth between these three growth markets.
Taiwan, obviously, with the Citi acquisition as well, is highly earnings accretive, and we're still seeing more upside there. The connectivity growth story is that we're seeing now a lot more sort of inbound traffic, whether it's intra-regional China coming to ASEAN. That trade growth is up 30-odd percent, right? We're seeing that as a big growth opportunity. We'll continue to double down on that. Wealth management is another growth opportunity. High ROE business, and there's still more to be done. New customers to be onboarded, new to bank, new to product, deepening, etc. We've had a lot of new RMs and the settling in, the productivity is kicking in. Still good growth opportunities around wealth, which is a big ROE growth driver. Growth opportunities around FIG.
When we started the FIG business, we were like SGD 500 million, then SGD 800 million, then SGD 1 billion, then SGD 1.3 billion, SGD 1.4 billion. There's pathways to go to SGD 2 billion. So we're seeing these good growth opportunities, high ROE payments as well. Another one, big cross-border, low-value payments is also another good sort of growth, high ROE business. So we're going to focus on delivering some of these high ROE businesses as well, right? And then the commitment to continue to use what we've built around technology transformation, digital adoption, AI models, now generative AI. You can have productivity rises. You save money. You become more contextual. Your models work better if you continue to work at it. We've created a data moat, I think, to keep us ahead. We'll continue to stay ahead with that.
I think the underbelly of strong growth and productivity, discipline on costs, focusing on where the growth is, being able to toggle between markets as some are higher growth than others, and focusing on high ROE delivery.
How keen are you on exploring newer markets like Malaysia or even Indonesia where I think the U.S. is not that big?
So if you're asking me about sort of M&A, I think the message we've always said has been very consistent. If it's in our markets, number one is the price right. Number two, is it a business we know how to integrate and operate? And number three, are there synergies? Is it part of our strategy? And if we tick all three boxes, of course, we'll look at it, right? So you asked me specifically around Indonesia or Malaysia. Indonesia, as I said, if it ticks all three boxes, we'll look at it. Malaysia really, of course, is interesting. It's close to our Singapore hub. But that depends on a lot of things like government views, etc., regulatory issues.
Thank you.
I just have two follow-up questions. First, in terms of you mentioned the NIM sensitivity, right, that moving from four to five to six, does that account for also the rolloff of the hedges that you're talking? That's why it goes from four to six. Or what if, let's say, the full rolloff of the hedge, then what does it actually move to in terms of this NIM sensitivity?
In our modeling, we do assume that the fixed-rate portfolio that's rolling off will be replaced by fixed-rate. So that's one assumption. Like I said, if we have more CASA flowing in, which Piyush mentioned, that will bring us also to a higher number. If we choose not to do some of the fixed rate and cut down on the rolloff, it also changes the number.
Let me say that first way to put it back. If we have a view that rates are going to rise, I won't do NIM sensitivity. I won't put on hedges and wait because that's what gives us the thing. If you figure rates are going to come down, then I'll put on the hedges.
So there are some hedges there, so you'll just let them roll off?
Yeah. It depends on our view on rates, right? So if you look at our total, SGD 190 billion of fixed rate is what we have, 36% of our commercial book. That comprises three different things. It comprises the fixed-rate assets we have in the retail business, fixed-rate mortgages, fixed-rate loans, etc. It comprises the duration-only portfolio. We go and buy some fixed-rate bonds and so on, and it comprises the hedges we put on top of that. That total gives you 36%. So all three are subject to a view on the markets. We figure the duration needs to be put on because the interest environment means we need to lock in rates, then we roll over and do it.
If we think that it's going the other way and we would be better to let the balance sheet float, then we just let the hedges roll off and don't go and buy more.
Just comment on this CASA thing. So you said that CASA, that we've seen CASA come back, right? But then the spread between CASA rates and FD rates are still quite decent. And in a higher rate environment, that would remain as it is, right? So does that impact your NIM outlook or?
The interest rate outlook. So if you wind up getting a lot more CASA back, our interest income will be much higher.
But do you think it'll come back because the spread is still going to be quite?
Your guess is as good as mine, right? So we've lost SGD 140 billion moved out, right? If you look at historic this thing, about 3% is a good tipping point. When rates start coming below 3%, people are less sensitive to the difference, and so you expect a lot more to come back from fixed deposits to CASA. Has consumer behavior changed? And so today, do people think about it differently? Maybe. I think it's instructive, though, that even you look at the Singapore rates, right? As the T-bill rates have been coming down to the headline rate of around 3, our outflow to T-bills has come down by half, and the inflow is coming in at 8, 10% higher than what went out, right? So I think the general thing that consumer psychology is such that at some tipping point, people stop bothering to go and look for yield.
I think it still plays. Whether it changes the margin, it could, which is why I can't project how much CASA will come back. But the general rule, I think CASA will start coming in. That's helpful for us, obviously. It technically changes the sensitivity, but it improves our interest income massively.
And then just on clarity on the 24 step-up, like you said, it's going to go up, right? In terms of payout ratios, is there a point where you say, "Okay, it's capital flat, not generative anymore in terms of the payout"? Is there what, 70%, that kind of thought that 70% will be capital flat?
We've never actually guided to a payout ratio for that reason. We said we'll sort of do it on an evergreen basis. But yes, and the Aussie banks go up even higher. Some of the Canadians sometimes go up higher, but depends. They've got some tax reasons for going up higher. But yeah, given our overall outlook, that's not a bad assumption. People probably get up to that level.
If I just squeeze one last question for Su Shan, we talked a lot about where you want it to go, right? But maybe is there one area you think that needs a little bit of a stronger look at for the bank as you said in next year? Is there one division or one segment that maybe you want to add on a little bit more?
So interestingly enough, India, the corporate bank, has been our best-performing market. It's been fantastic. And that's due to our early investments both in technology and also, obviously, in the purchase and also growing our network, but also deepening some of the big relationships. So that's been great. The consumer bank, that still needs some relook, and we will do that. We will do the work for the consumer bank. India has been a great growth market. We are very committed. We'll continue to grow there.
I think maybe on that, I don't think relook means that we will rethink our strategy. It just means that it's still not performing to where we need it to perform, so.
We need to work harder and find more.
Do you think it's working harder, or do you think you need to bolt on in India to make it more sizable, too?
If we could find the right thing, we would consider a bolt-on. But it's not straightforward finding the right deal. And we look at all of the big deals in the market. They're too big and too thorny. And so even doing the LVB deal is not easy, 500 branches across the same culture. So we're reluctant to do a really large-sized deal like IDBI Bank or YES BANK . Those are really big-ticket sizes and might not suit us. We have to find something. So right now, we're just trying to make sure that we sweat what we bought. Even the LVB, the 500 branches, even now, only about 300 of them are profitable. 100 will never be profitable because they're the semi-rural branches. The idea is just to get to big. But we still need to drive and make another 80, 100 branches, drive them to profitability.
We are not there.
Andrea from CGS.
Hi, thank you. Two questions for me. Firstly, how do we look at the GP writebacks that you announced? Will this depend on model improvements, whether it's from the MEV perspective or from your own portfolio in terms of PD, LGD, or will this be a more deliberate move? We're looking at a targeted number, for example. How do we look at this and perhaps how large this could potentially be?
Then the GP, why not the model? What will the model tell us? We let it flow through. So if the models give us an approval, we let it flow through. And so even in the last couple of quarters, when you see it moves up and down, what will the and the model is a function of two, three things, right? One is the underlying portfolio. So sometimes there's a repayment. If a weaker credit repays, then obviously that has an impact on what the model shows up and vice versa. So we don't tamper with that. So our main thing that, and obviously, sometimes there are model improvements, but those are episodic, and they're not huge. So the main question is the overlays. So we've got SGD 2.3 billion of overlays. And those overlays are sort of judgmental.
We link them to macroeconomic variables and our assessment of downside scenarios and the probability of downside scenarios. And based on that, we come up with this thing that is prudent to keep. And so if your assessment of the economic conditions changes or the assessment of the probability attached to those conditions changes, then you could wind up releasing GP. Most of the big banks who built up GP in the COVID period have, by and large, released a lot of it, including this year. We are a little bit unusual because we haven't released anything. We just hung on to that 2.3 all the way through. Frankly, we're coming under some scrutiny from our auditors who are saying, "You've got too much GP." So we'll see now with Trump and the uncertainty after Trump, it might still be sensible to keep some money in the hip pocket.
Okay. So there's no range of how much per se that you're looking to keep in your short-term leading term, not in that way.
My question is on your.
The other thing I'll point out is whenever we had NPLs, because we identify a lot of our watch list cases very early, we would have put substantial GP against it. GP is also released when we move into NPL. So there's some offset between the SP and GP lines.
Okay. There's been a strong recovery in the oil and gas sector. Is the bank a bit more positive on perhaps giving up more lines or more loans to the sector, or has your stance not changed?
Actually, our main difference. Look at the big write-offs we took in the oil and gas sector. They were in the mid-cap space in Singapore. So all of the big offshore services games and names, we revised our target market and our risk criteria for that. I don't think we're going to change that. We were just overexposed into that category of mid-cap. Outside of that, our stance on oil and gas has not been an issue. The large players in this thing, we still look at them. It's just not a big industry for us because there's not a big oil and gas other than trading. I mean, trading means the traders, the people who are buying oil. It's not a big sector for us.
A lot of them have now pivoted to doing the offshore wind and renewables.
Jayden from Macquarie.
Yeah. Hi. Thanks for the opportunity. Just a couple of follow-up questions. There's been some great questions already. But just on the wealth side, the performance was excellent, even if you strip out the Taiwan inclusion. But I think you mentioned during the media briefing that the proportion of investment AUM to total is now in the high 50s. How high do you think it could get? Is there sort of a previous yardstick you had, or is there any peers that you're looking at as a potential opportunity? And then do you sort of push each of the RMs to have a certain ratio, or do you look at it collectively?
So 56% is already a record for us, 56%. But you've got to understand that we've got three underlying segments, right? The pure private bank, the private client business, and then the affluent premium business. The investment ratio in the premium business is in the 30%s. And the investment ratio in the private bank business is closer to 70%. So it's a range that gives you an average of 56%. In the premium business, you will see some pickup, but I don't see a lot more. People like to invest with some. We are seeing some as our digital tools are falling into place, right? So financial planning, digital portfolio, etc. It's moving up, but I don't see that getting up to 50%-60%. I think it'll probably stay in the high 30%s.
Whereas in the other two segments, if you look at some of the pure blue-blood investment banks, they get up to 75%-80% cost-income ratios. So I think there is a lot more headroom in those segments.
So is it fair to say then that because most of the growth in the fees seems to be that switch, right? The AUM has gone up a bit, but a lot of it has been the higher switch. Is it fair to say that that's largely done?
No, no. Net new money is the other goal. We're growing SGD 6 billion a quarter. So we've put on last two years, we're growing SGD 6 billion a quarter. We're growing SGD 6 billion a quarter right now. We added 120 RMs of bankers in the last year, right, across 130 in the last 18 months. And many of the bankers haven't even started hitting the productivity levels. Our general rule is first year banker gets to SGD 500,000-SGD 600,000 of income. But by year three, they start creating SGD 4 million of income. So the productivity from these new RMs we added on is not even kicked in. So we see a lot of growth from the expansion in the base, from the net new money growth, on top of obviously continued movement in the investment. And I say that we said that it's gearing up.
I mean, we're in the high 60%s in the other two segments. If we can drive that to 75%-80%, there is still a lot more.
Okay. That's great to hear. And then maybe another question on the M&A front again. This is the first time I think you've openly discussed Malaysia, if I'm hearing correctly. And that would be different for you because it wouldn't be bolt-on. That'd be like integration of a new business. How much appetite is there to do something like that versus, say, a bolt-on? And then what would be the sort of preconditions you'd want to see before you moved into that market? Is it more on the political side, or is it more just finding the right franchise?
I think we'll go back to not in recent times, but some years back. I always talked about three and a half core franchise. The half is always in Malaysia. The problem in Malaysia is not lack of interest, but lack of government-to-government or geopolitical. The issue has always been quite clear. The Malaysians have always said, "We've got two big Singapore banks over here. So why do we need a third Singapore bank?" And so we've actually had no headway from that dimension. With the new administration, we think there might be a little bit more flexibility in that. So that's the only reason why we're happy to talk about it again. There is more flexibility we can look at it. But the underlying rules will still apply, right? And we'd have to find something that makes sense to us, suits us, etc.
Okay. Thank you.
Any other questions? [Yong Hang]?
Yeah.
[Suthin]?
Yeah. Just two questions. For me, one on the P&L and one on the strategy. Maybe just on the commercial non-interest income, just wondering what are the drivers for this quarter and how should we think about the commercial non-interest income from here. And second, maybe more on the strategy front. I think Su Shan earlier mentioned about connectivity and also the outbound with the China business. So what is it? How can we quantify this in terms of P&L, loans growth, geographic exposure? And on the other hand, have we done any stress testing on the potential tariff from China? These are my two questions.
And maybe let me take your first question, commercial book non-interest income. So we created that view because people tend not to be able to differentiate that from the markets trading, where there's more volatility. The commercial book non-interest income tends to have a bit more stability. And a large component of that is actually treasury customer sales income. So under accounting, you can't put what you manufacture internally and put into fee income. But in nature, they are not different. It's just treasury markets creating those products as opposed to third-party providers for the sort of consumer banking side. On the institutional banking side, all the flows go through T&M, and therefore they are all captured there. So there's a lot of stickiness, and that part actually has also risen nicely.
We always show you a chart on the overall treasury and markets performance, and you see the CBG component, the IBG component of the sales income. So that's to communicate that you should be a lot more comfortable with a commercial book non-interest income. Within that non-interest income, sometimes there's some noise from hedging activity, mark-to-market activity, but those tend to be corporate treasury activities that may show up in that line, but they tend not to be large. They are small fraction of their overall stack.
Got it.
[crosstalk]
Yeah.
So on the connectivity bit, I think it's important to just step back to share that we've actually done a lot of work in creating industry expertise in the corporate bank. So whether it's in renewables, project finance, syndicated loans, structuring, financial advice, in TMT, in EV, nickel mining, etc., I think we've created a name for ourselves to be the go-to bank for such deals. So in doing so, we've set targets also for each industry to see what are your connectivity dollars and is it growing. I've always given targets of, "You need to grow this." So every country, every industry has their outbound, inbound targets. And where we've seen opportunities, we've seen opportunities in TMT. We've seen opportunities, obviously, in renewables. We've seen opportunities in China plus one because Chinese supply chains have moved to ASEAN.
As long as we're embedded with the customer, we know their flows, we know their cash flow, we can help them to structure, we can help to advise. So we get the structuring fee, we get the advisory fee. If it's, for example, in renewables, for example, we're actually end-to-end. We start from the project, we find the blended finance investors working with multi-MDBs working with blended financial finance guys. We get paid on the financial advice. We find the off-taker, and then when it's matures, we asset recycle. That keeps the recurring income pretty steady for every project, and then we can recycle and do something else. It keeps the fee income. You've noticed our loan fee income, although it was down on the quarter, it's actually up over 20% on the year.
That's, I think, also an ability for us to take market share and be top in the syndicated loan or in the project finance. I see that continuing to grow because intra-regional trade continues to grow. The connectivity is also outside-in. Once we're within Asia, it's inside-out. There's also outside-in. We're seeing also Western MNCs want to come here. They want to go to India, for example, right? They want to come to Singapore as well, set up a regional trading hub here, and then go outwards, right? Our growth is also sort of linked to Singapore's own growth as a connectivity hub, and you can see that very closely correlated as well. The other interesting growth is also the pipeline between Asia and the Middle East. There's a lot more trade flows.
So we're seeing good LC growth there, our clients going out there. We know these clients, and if they want to do stuff there, we can help.
Also, have you done any stress testing in the event that some decided to do any tariffs and whether they move in currency? I think previously, maybe some stress testing on what does it mean for these customers? Yeah. If I were just to add to that question, these are big changes in macro analysis. Given the shape of the portfolio, you're being super conservative, very limited credit growth, but what are the potential areas of risk that you're monitoring as you do your scenario analysis?
So the stress test that we've had, we've done everything, right, from oil prices to inflation to tariffs. And if I look at the Chinese companies that we bank so far, a lot of them have derisked from the U.S. They've had sort of the last four or five years since the first Trump administration to really readjust their exports. So if anything, we're actually helping them to make that pivot, right? So I mean, whilst we've stress tested, a lot of our existing positions are not quite geared towards that pipeline.
I think, as I said, the bigger vulnerability, which is hard to stress test, is regulatory change, right? So if they change the sanctions regime or they double down on technology or they create a complete bifurcation around use of tech this thing, etc., etc., semiconductors, the classic case, it's not easy to stress test that. But the bigger economic, macroeconomic variables, we stress test everything. They're quite okay.
Logan from HSBC?
I have two questions. So on the non-interest income, I think your high single-digit growth. So I understand a lot of that is transactional in your wealth business. So does a lot of that assume some market sentiment in the next year? And then is any part of that trailer fees or if the percentage of AUM investors stays high, do you still get that kind of growth even if there's no transaction? So that's the first question. And then I also have a second question on a small clarification on the markets trading. So I think your 250% include the negative part of the NII. So if the negative part turns positive, then the non-interest income will come down, right? It will normalize such that the total is 250% now.
Yes, yes.
The first part, yeah. We've been changing the annuity component of the wealth fee consistently. The trailer fee, the discretionary portfolio fee, etc., is continuing to increase, but it's still only about 15-odd percent of the total. 80-odd percent of the income is transactional, and that is dependent on market sentiment. If the markets completely collapse and there's risk off, then you'll see an impact on the wealth environment. That's correct. Like I said, our current assumptions are based on the forecast of this thing. The interest in North Asian markets has been kind of slow for the last couple of years. It's really been predicated mostly on U.S. markets and all the other asset classes. You get a very volatile environment.
So you have risk off, but you do actually create a lot more opportunity in the underlying. Actually, it's her old business.
My old business. It's a perennial kind of move. At the end of the day, Asians like to trade, right? That's kind of the specialty of Asian high-net-worth clients. But we have been shifting to more annuity and more discretionary. And then this great wealth transfer of the first generation to the next. Now, I think as family offices get set up, people become more familiar with diversification and risk volatility, etc., then there is a lot more discipline now in how customers manage their wealth. They will have a strategic asset allocation bucket to funds and have that sort of steady returns. And then they might have a trading bucket that's more tactical for trading. So we're seeing that sophistication levels rise, and we're building the platform to meet this change in appetite.
Just one last question. I think you talked about these three segments of wealth management, right, and you gave us some information on the investment percentage. I'm just wondering if it's possible to start sharing this information in a more structured manner. What is the revenue contribution from these segments? And what's profitability? What's the AUM?
I'm on record, but I'm wary of doing that for comparative reasons.
That is fine. The reason I'm asking is because I think because your wealth management is becoming such an important part of the business, investors might find it useful to kind of value it separately, right? They can do an SOTP , in which case it increases the value for the group overall. They do it for some of the other big wealth management companies. And DBS, I think, is kind of getting there, so.
But let me give it some thought. But I don't know any other private bank or wealth manager that gives you that data. Nobody does. I look for it myself.
But I think the thing is you have these three segments, whereas some of the private banks that investors value it this way, they have a much larger private banking portion.
No, they don't. You go and take a look. HSBC's declaration this time, you look at the number, they've added retail plus private bank ultra plus asset management. But you look at what is in the retail and what is in the private bank, nobody knows where the cutoff is. Nobody knows which segment is what. So you go and look at UBS's disclosures. Nobody gives you what segments they run and where the cutoff and what this thing. I've looked for the information quite actively. It's not there. So we'll give it some thought. We have the data. I'm just not intending to be the first to start disclosing that if nobody else in the world wants to disclose that.
Nobody started this journey in 2010.
What did it happen to? How was it competitively? Would it impact you disclosing that?
If I tell you that, I'll have to kill you.
But the market looks at high net worth, which is normally like $1 million and above, right? And you can kind of look at it from two. So it's like accredited investor versus non-accredited investor. But in 2010, when Piyush and I started, we created this wealth continuum precisely because DBS has a great franchise to bring new-to-bank customers in, right? And once you get in and you get to know the wealth life cycle, you start from consumer, you work up to Treasures, then you go to TPC and you go to PB. You have a whole life cycle, right? And so as they grow, it is really a continuum. And then as they get older, they might retire and say, "No, you know what? I don't want too much risk.
I don't mind just having FD and a few funds." Then, okay, they might not want to stay in that sophisticated segment. So this continuum is precisely why we keep it so connected. It's where you get the most juice around upgrades and movements, and keeping it that way.
I will give it some thought. Let's see if there's other people doing disclosures. If there's any benchmarks we can look at.
Sure. Thank you.
Does UBS do it? It's such a nice question.
Does UBS do it?
It's from UBS.
That's why I asked him.
I don't think they do, but it seems like it's really good.
I asked the two and call them both in the last year or more. I know they does it. So maybe they don't have the information we do. It's possible that UBS data is not that clean.
I think Switzerland for UBS, the retail bank is separate from the wealth management. So that kind of creates a distinction already, right? I think for you, it's kind of a little bit of a mixed up. So that's why I think it's difficult to value your private bank at the same multiple that UBS's Swiss private bank would be valued at.
But you look at this thing, right? All three segments of us all operate at a cost-income ratio of 48%-49%, each one of them. So there is no efficiency difference across any of the segments in a cost-income ratio sense. But that's one of our big compared to all the other private banks who are all in the high 60%. We run a very efficient private banking unit.
Ah, just a follow-up.
Yeah. More housekeeping questions on non-interest income and cost. With rates moving higher now, how do we think about the sustainability of some of the market income? And also, you had some gains on the FVOCI on CET1. What is the quantum which potentially can be reversed with higher mark-to-market as in higher yields leading to mark-to-market on FVOCI?
We saw that in the last year, right? I mean, all of this is we still haven't clawed back all the FVOCI we gave up in the last year or two, right? So if you look at our total FVOCI, we're still negative about SGD 1 billion. At this peak, we've gone up to SGD -3 billion to SGD -4 billion. Now it's about SGD -1 billion in our other comprehensive income statement.
So we're just actually getting back a reversal of what we gave up in the interest rates in the last couple of years. And most of the delta is at fixed income or equity? Should be fixed income. Mostly.
Fixed income.
Fixed income, so basically now that rates have gapped up, especially long bond yields, but you're saying you're in the belly of the curve, so not a lot. Second one on card seems to be now stabilizing around SGD 300 . Should we assume that the big delta in card, even transactions, is kind of done with the rate and all the activity normalizing?
No, so I think we shouldn't assume much about beyond this. That mid to high single-digit growth in the 5%-8% is reasonable, both on spend and on income. Actually, our net fee income might do double digits because of rewards management and so on, but the headline is around there. The issue though is quite different. If you look at this quarter, it's slow, but that's deliberate, and that's because of the delinquencies.
Because the delinquencies are picking up around the region which I indicated, we tightened up on the card portfolio. That's a play of we want to take more risk in the cycle. We don't want to take risk in the cycle.
The last one is on cost. The next year guidance, 40s Cost-Income Ratio seems a bit higher than this year.
It has to be because income is now going to growth.
Yeah, but overall guidance of flat kind of pre-tax. So I'm assuming is that as in cost growth or is it going to?
It depends on if you don't get the upside from yesterday's thing. Our overall projection is a couple of percentage points of income growth. It's a couple of percentage points because we're assuming SGD SGD 500 million-600 million loss of interest income. If you think about 200 basis points reduction, and it won't be 200 average, so you take an average on that, let's say 150 basis points, 1% this year and 50 basis points average next year. 150 basis points on our book, that's SGD 500 million-SGD 600 million of interest income loss, right? We've got to then cover up that interest income loss through loan volume and through everything else. Our overall income growth, a couple of percentage points. Expense growth, Su Shan's going to bring it down. This year it's about 7% after Citi Taiwan.
If you shave it down and bring it down to 5.1%, you still have a higher cost-income ratio.
It's more income rather than cost.
Income rather than cost.