Okay, good morning, everybody, and, warm welcome to DBS's, Q4 and full year 2023 financial results briefing. This morning we announced a very strong set of numbers for 4Q, capping a record year. And, to tell us more, we have our CEO, Piyush Gupta, and our CFO, Chng Sok Hui. So without further ado, Sok Hui, please.
Good morning, everybody, and Happy Chinese New Year in advance. Okay, slide two. We achieve a record performance for full year 2023. Net profit rose 26% to cross SGD 10 billion for the first time. ROE climbed 3 percentage points to 18%, significantly above previous years. Total income rose 22% to SGD 20.2 billion. The Commercial Book drove the better performance. Net interest income grew 33%, boosted by a 65 basis point expansion in net interest margin. Net fee income rebounded up 9% on record card fees and improved wealth management product sales. Other non-interest income rose 18% as Treasury Customer sales reached a new high. The strong Commercial Book performance more than offset a 38% decline in Treasury Markets income due to higher funding costs. Expenses rose less quickly than income, resulting in an improved cost to income ratio.
Excluding Citi Taiwan and non-recurring technology and other costs, the underlying cost to income ratio was 39%. For the Q4, net profit grew 2% from a year ago to SGD 2.39 billion. Similar to the previous three quarters, higher Commercial Book income was moderated by lower Treasury Markets income. Asset quality remained resilient. Non-performing assets declined 5% from the previous quarter, and the NPL ratio improved 0.1 percentage point to 1.1%. Specific allowances remain low, at 11 basis points for both the Q4 and the full year. Allowance coverage was high at 128% and 226% after considering collateral. Capital was healthy, with CET1 rising to 14.6%.
The board proposed a dividend of SGD 0.54 per share for the Q4, an increase of 6 cents from the Q3 payout. The board also proposed a 1-for-10 bonus issue, which is intended to quicken the pace of capital returns to shareholders. In addition, we set aside SGD 100 million from this year's profits for our recently announced corporate social responsibility commitment to allocate up to SGD 1 billion over 10 years to help vulnerable communities. The Q4 dividend of SGD 0.54 per share brings full-year 2023 dividends to SGD 1.92 a share. This represents a 42-cent or 28% increase compared to 2022's ordinary dividend payout. Assuming dividends are held at SGD 0.54 per quarter, annualized dividends will be SGD 2.16 per share. The 1-for-10 bonus issue will further boost the payout.
The bonus shares will qualify for dividends, starting with the Q1 2024 interim dividends, and SGD 0.54 per quarter will apply to the enlarged share base, effectively raising the quarterly dividend of SGD 0.54 by another 10%. On an annualized basis, the post-bonus dividend would be 24% higher than 2023's payout of SGD 1.92 per share. The dividend yield, based on yesterday's closing price, was 7.5%. Slide four. Full year net profit rose 26% to a record SGD 10.3 billion, as total income grew 22% to SGD 20.2 billion. Commercial banking income rose 27%, led by a 33% or SGD 3.6 billion increase in net interest income to SGD 14.3 billion, with net interest margin expanding 65 basis points to 2.76%.
Net fee income rebounded from a drop in the previous year, rising 9% or SGD 293 million to SGD 3.38 billion. The growth was led by cards and wealth management. Card fees grew 22% as card spending reached a new high. Wealth management fees rose 13% as demand for bank insurance and investment products improved. The inclusion of Citi Taiwan from August further bolstered the growth in card and wealth management fees. Other non-interest income grew 18% or SGD 267 million to SGD 1.79 billion as Treasury Customer sales reached a record, led by higher sales to wealth management customers. These gains were partially offset by lower treasury market income, which fell 36% as trading was impacted by higher funding costs. Expenses rose 14% or SGD 966 million to SGD 8.06 billion.
Excluding Citi Taiwan and non-recurring technology and other costs, expenses rose 10%, and the underlying cost-to-income ratio was 39%. Profit before allowances and amortization increased 29% to a record SGD 12.1 billion. Specific allowances rose SGD 177 million from a low base to SGD 512 million, or 11 basis points of loans. General allowances of SGD 78 million were taken compared to a SGD 98 million write-back a year ago. Two one-time items were recorded for the year: a corporate social responsibility co-contribution of SGD 100 million and integration cost for Citi Taiwan of SGD 124 million. Including these one-time items, net profit rose 23% to SGD 10.1 billion. Slide 5. For the Q4, net profit rose 2% from a year ago to SGD 2.39 billion. Commercial Book total income grew 12% to SGD 4.89 billion.
Net interest income rose 7% or 232 million to SGD 3.64 billion, as net interest margin expanded 14 basis points to 2.75%. Non-interest income growth was broad-based. Fee income rose 31% or 206, 206 million to 867 million from increases across most fee income streams and the consolidation of Citi Taiwan. Other non-interest income rose 22% or 70 million to 390 million on higher Treasury Customer sales to wealth management customers. Treasury Markets income declined 45% or 91 million to 113 million due to higher funding costs. Expenses increased 12% or 242 million to SGD 2.21 billion. Excluding Citi Taiwan and non-recurring technology and other costs, expenses rose 3%. Total allowances rose from a low base.
Specific allowances increased SGD 65 million to SGD 139 million, or 11 basis points of loans. General allowances also rose, as SGD 3 million were taken compared to SGD 116 million write-back a year ago. Compared to the previous quarter, Q4 net profit was 9% lower, as total income fell 4% to SGD 5.01 billion. Commercial Book total income declined 3% due to a lower net interest margin and seasonally lower non-interest income. Net interest income was 1% or SGD 47 million lower from a 7 basis point decline in net interest margin, which I will elaborate in the next slide. Fee income rose 3% or SGD 24 million, as a higher contribution from Citi Taiwan more than offset the impact of seasonally lower wealth management activity.
Other non-interest income was 22% or SGD 109 million lower, due partly to seasonally lower Treasury Customer sales. Expenses rose 8% or SGD 167 million, mainly driven by the full quarter impact of Citi Taiwan and non-recurring technology and other costs. Excluding these items, expenses rose 2%. Specific allowances were SGD 58 million lower than the previous quarter, which had included provisions for exposures linked to a money laundering case in Singapore. General allowances were also lower by SGD 15 million. Slide 7. Q4 Commercial Book, net interest income rose 7% from a year ago to SGD 3.64 billion on the back of a 14 basis point expansion in net interest margin to 2.75%, driven by higher interest rates. Compared to the previous quarter, Commercial Book net interest income was 1% lower than the previous quarter.
Net interest margin fell 7 basis points in the Q4 to 2.75%, which was stable to the exit net interest margin in the Q3. The decline was due to a full period impact of higher deposit costs from the Q3 and the accumulation of fixed rate asset positions. CASA outflows slowed in the Q4, which will reduce deposit pricing pressure in Q1, 2024. For the full year, Commercial Book net interest income rose 33% to SGD 14.3 billion. Net interest margin increased 65 basis points to 2.76%. Combining the Commercial Book and Treasury Markets, the group's overall net interest income grew 25% for the full year to a record SGD 13.6 billion, and the net interest margin climbed 40 basis points to 2.15%.
For 2024, we expect to maintain the group's net interest income around 2023 levels, with a full year contribution from Citi Taiwan. Slide 8. Gross loans remained stable from the previous quarter in constant currency terms at SGD 422 billion. While trade loans and housing loans grew by slightly over SGD 1 billion combined, the growth was offset by a decline in non-trade corporate loans from increased repayments due to the high interest rate environment. Gross loans rose 1% or SGD 6 billion from a year ago, driven by the consolidation of Citi Taiwan, which added SGD 10 billion. Excluding Citi Taiwan, underlying loans fell SGD 4 billion. The decline was mainly due to trade loans as a result of lower activity and unattractive pricing. Non-trade corporate loans were stable, as a healthy level of pipeline drawdowns was offset by higher repayments.
Consumer loans fell slightly as wealth management customers repaid loans in a high interest rate environment. Slide nine. Deposits grew 2%, or SGD 11 billion from the previous quarter, in constant currency terms, to SGD 535 billion, as CASA and fixed deposits were both higher. Some of the growth was used to replace more expensive wholesale funding. Deposits grew 3%, or SGD 13 billion from a year ago. Citi Taiwan contributed SGD 12 billion, while underlying deposits were stable. CASA outflows decelerated compared to the previous year and were replaced by fixed deposits. LCR of 144% and NSFR of 118% remain well above regulatory requirements. Slide ten. Fee income growth continued to accelerate in the Q4.
Compared to a year ago, gross fee income rose 28% to SGD 1.07 billion in the Q4, faster than the increase of 14% in the Q3, 9% in the Q2, and little change in the Q1. While Citi Taiwan contributed to fee income in the third and Q4s, the underlying momentum, excluding Citi, also accelerated, with growth of 17% in the Q4 and 11% in the Q3 if Citi were excluded. Wealth management fees grew 41% from the previous year to SGD 370 million due to higher bancassurance and investment product sales, with Citi Taiwan contributing 2/5 of the increase. Card fees rose 27% from higher customer spending, as well as Citi Taiwan, which accounted for 2/3 of the increase.
Loan-related fees rose 80% from a low base to SGD 142 million, while investment banking fees grew 26% from higher debt capital market activities. Transaction services fees were slightly lower. For the full year, gross fee income of SGD 4.12 billion was led by growth in cards, wealth management, and loan-related fees. Slide 11. Q4 Commercial Book, non-interest income of SGD 1.26 billion, rose 28% from a year ago due to a rebound in fee income and higher Treasury Customer sales. It was 6% lower compared to the previous quarter, partly due to seasonality. For the full year, Commercial Book non-interest income rose 12% from a rebound in fees and record Treasury Customer sales. The Commercial Book accounted for about 80% of total non-interest income in the Q4 and the full year.
Due to accounting asymmetry, the best way to view Treasury Markets' performance is through an aggregated view of Treasury Markets' net interest income and non-interest income. Slide 12. Full year expenses rose 14% to SGD 8.06 billion, led by an increase in staff costs from salary increments and a higher headcount. The expenses included Citi Taiwan, as well as non-recurring costs, such as initiatives to improve technology resiliency. Excluding Citi Taiwan and non-recurring costs, expenses rose 10%, and the underlying cost-to-income ratio was 39%. For the Q4, expenses increased 8% from the previous quarter and 12% from a year ago to SGD 2.21 billion. Excluding the full quarter impact of Citi Taiwan and non-recurring costs, expenses rose 2% from the previous quarter and 3% from a year ago. Slide 13.
Full year Consumer Banking and Wealth Management profit before allowances rose 59% from a year ago to SGD 4.55 billion, as total income rose 35% to SGD 8.96 billion. The growth was led by loans and deposits income, which grew 51% to SGD 6.05 billion from higher net interest, margin, and volumes. Investment product income increased 18% to SGD 2.14 billion. Assets under management rose 23% to a new high of SGD 365 billion, underpinned by strong net new money inflows and the consolidation of Citi Taiwan. Singapore dollar savings deposits declined 7%, or SGD 10 billion, to SGD 128 billion, which was around half the pace compared to the previous year.
The regional Consumer Banking and Wealth Management customer base increased 6 million to 18 million from Citi Taiwan, and expanded ecosystem partnerships across the region. Slide 14. Full year Institutional Banking income rose 22% from a year ago to SGD 9.36 billion. The growth was led by a 73% growth in cash management, which was partially offset by lower loans and trade finance income. GTS deposits declined 3%, or SGD 7 billion, to SGD 190 billion due to unattractive pricing. Slide 15. Q4 Treasury Customer income grew 18% from a year ago to SGD 440 million on higher sales to treasury management customers as market sentiment improved. It was 8% lower than the previous quarter, due to seasonally lower activity.
For the full year, Treasury Customer income rose 13% to a record SGD 1.85 billion, led by wealth management product sales. Treasury Customer, markets trading income, which comprises both net interest income and non-interest income, was SGD 113 million for the Q4, 45% lower than a year ago and 32% lower than the previous quarter. For the full year, it declined 38% to SGD 725 million. The weaker performance reflects the impact of higher funding costs. Slide 16, Hong Kong. Hong Kong's full year income and net profit were at record highs. Net profit rose 12% in constant currency terms to SGD 1.58 billion, as total income increased 13% to SGD 3.21 billion.
Net interest income grew 21% to SGD 2.17 billion, as net interest margin increased 44 basis points to 1.91%. Loans declined 7% in constant currency terms due to a high interest rate environment and a continued rate differential with China. Total deposits were largely stable on a year-on-year basis. Net fee income was little changed at SGD 664 million, as high income from investment product and bank insurance sales were offset by lower loan-related and trade finance fees. Other non-interest income fell 3% to SGD 383 million due to lower trading income. Expenses rose 8% to SGD 1.2 billion, led by higher staff costs. The cost-to-income ratio improved two percentage points from a year ago to 37%.
Total allowances increased to SGD 138 million from SGD 56 million a year ago, due to higher specific allowances and the impact of a general allowance write back in the previous year. Slide 17. Asset quality continued to be resilient in the Q4. Non-performing assets fell 5% from the previous quarter to SGD 5.06 billion. New NPA formation remained low and was offset by repayments and write-offs during the quarter. The NPA ratio improved from 1.2% in the previous quarter to 1.1%. Slide 18. Q4 specific allowance remained low at SGD 139 million, or 11 basis points of loans. For the full year, specific allowances amounted to SGD 513 million, or 11 basis points of loans, slightly above the 8 basis points a year ago and remaining below the cycle average. Slide 19.
Total allowance reserves stood at SGD 6.48 billion, with SGD 2.58 billion in specific allowance reserves and SGD 3.90 billion in general allowance reserves. Model overlays were stable and stood at SGD 2.2 billion. Allowance coverage rose to 128% and at 226% after considering collateral. Slide 20. The Common Equity Tier 1 ratio rose 0.5 percentage points from the previous quarter to 14.6%. The increase was due to strong profit accretion, gains from fair value to OCI assets, and a decline in risk-weighted assets. The leverage ratio of 6.6% was more than twice the regulatory minimum of 3%. Slide 21. In summary, we achieved full year results with total income, net profit, and ROE all at new highs.
The franchise and digital transformations carried out over the past decade have reaped substantial benefits in a higher interest rate environment. The stronger profitability has enabled us to step up capital returns to shareholders through a bonus issue, as well as make an inaugural contribution of SGD 100 million as part of a 10-year CSR commitment of up to SGD 1 billion. While interest rates are expected to soften and geopolitical tensions persist, our franchise strength will put us in a good state to sustain our performance in the coming year. Thank you for your attention. I'll pass you to Piyush.
Thanks, Sok Hui. Let me just dive in. I've got four points I want to cover in my slide. So the first is a few comments on the Q4. As Sok Hui just pointed out, the Q4 was solid. It was strong. We had income growth of 9%, but the good thing is it was broad-based. Interest income obviously continuing to increase because NIM held up. But the big thing was fees, which were up 31%, and the other income, which are mostly treasury sales, which was up 22%, and those were both solid. I'll talk a little bit about fees, because momentum, that obviously included the impact of Citi Taiwan. But even excluding Citi Taiwan, the underlying momentum on fees and treasury sales has been very strong.
By the way, that momentum is showing up in the first month of 2024 as well, so I'm actually quite optimistic about where that is. Loans were flattish. Loans, we are still seeing two things on the non-trade loans, the corporate loans. It's been hard. We're growing in some segments, but there is still pay down at the high interest rates and people still shifting to onshore China. But the good news on the loan front is, after several quarters, the trade book started growing. So we got a $1 billion growth in trade, and that reflects the fact that pricing improved, especially the energy-related trade coming out of Korea and India that started turning around. So I'm a little bit optimistic on that front. NIM came off to 2.13.
So if you look at this on the surface, it's a 6 basis points decline from 2.19 in the Q3. Of that, about 4 basis points, we pretty figured we would get, because the exit NIM in the Q3 was already 2.15. And that reflected the fact that, you know, Q3 was the first time when rates stopped going up, but our CASA repricing and CASA outflow continued. So, the exit NIM of 2.15, we expected would be around there. Our full-year NIM of 2.15 is about what we guided, around 2.16, so it is there. However, on top of the Q3 repricing outflows, we took a conscious decision to put on some fixed rate assets.
In the tail end of the Q3 and Q4, we put on about $30 billion in that period of time just to lock in rates to protect us from a declining interest rate environment going forward. So that cost us another couple of basis points over our original planning assumption. 2.13 was... The good news, of course, is that the 2.13 has been flat. So through the Q4, we didn't see a further erosion. In fact, the exit NIM for the year was also there. The first NIMs for the first month of the year are also there. So you can see that the NIMs are holding pretty stable. And the reason for that is that the CASA repricing and outflow really eased in the Q4.
Our projections, our model in the past has said that in 2022, the CASA repricing was about SGD 90 billion. In 2023, we'd said it'll probably be about half, SGD 45 billion-SGD 50 billion. Actually, it came in only at SGD 40 billion, so the repricing was lower. In fact, in the Q4, it was only SGD 2 billion. So you're beginning to see that the impact of that is leveling off, and that's why we've been able to hold the NIM now for the last 3, 4 months. Fee momentum, I said I'd come back to this. Even excluding Taiwan, the fee income growth of 17% in the Q4 is very strong, and that's really powered by two things: wealth management, which is 41%, but excluding Citi Taiwan impact, is 24% growth.
That's very good because 24% growth means people are beginning to put money back to work. And we can see the impact of that. The ratio of investments to deposits in our AUMs is continuing to improve, and so people are beginning to put money back to work. Again, in January, that momentum continued, it was very strong. Our second was cards. Even excluding Citi Taiwan, cards growth was about 9%, but the momentum's continuing to build up. Travel spend is increasing, overall spend is increasing, and therefore we think there's momentum on that front as well. And the last is, treasury sales. Some of that obviously is to the wealth product, but overall, treasury sales to the customer segment, grew about 18%.
All of the non-interest income lines of business for the Q4 were actually very, very robust. On the costs, our costs are a tad bit higher, and they're higher principally because of the impact of integrating Citi Taiwan. We had to put in more money and some accounting changes in the Q4 on the Citi Taiwan thing. And then we had to take some one-time costs for the technology work that we are doing in particular. We took some one-time costs around that. But the underlying expense growth, if you back that out, is about 3% for the quarter. It's about 10% for there, but 3% for the quarter. It's not too shabby.
And then asset quality for the quarter continued to be very good. We're not seeing any stress anywhere in the system. There's a little bit of a pickup in delinquencies in unsecured lending, but as I said before, unsecured book is not very large across the region. One third of our book is in Singapore. So you're seeing a little bit pickup in delinquencies, but even now, for example, I think the delinquency rate is lower than what it was pre-COVID. So you're not seeing any real stress. It's just a pickup in a quarter-on-quarter basis.
So overall, a fairly good solid quarter with the key takeaways really to me are this: the momentum's coming back in the underlying business, especially in the fee income lines, and that's the principal thing to take away from the quarter performance. Sorry, the second thing is the outlook for next year. So, you know, we'd earlier. I'm a little bit more comfortable. As you know, both IMF and OECD have upped their global growth forecast. I think the macroeconomic outlook, therefore, on the world is actually a little bit better than it was when I spoke to you over the last quarter. There's still obviously geopolitical risks. China is still challenging, North Asia growth is still subdued.
But on the whole, the overall economic environment is actually a little bit better than I'd forecast three months ago. So on the back of that, we've given guidance that we should be able to sustain our underlying profits in the SGD 10 billion range, and I can confirm that. I think at this point in time, we think we should be able to sustain that, notwithstanding you know some headwinds on interest rates. What drives that? We are still forecasting that our net interest income for next year will be about this year's level. And around this year's level, our underlying assumption is about 5 rate cuts. We are assuming 5 rate cuts, but starting only in the June-July timeframe through to the end of the year.
But on the other hand, we get some benefit from the full-year impact of Citi Taiwan. We get, you know, some pickup from there. So adding that in, we think the interest income will be quite flat to this year. If NIM drops more because rate cuts start earlier or are sharper, it's not my base case, but if that happens, I think there will be swings in non-interest. I think we'll make it up through a little bit more pickup on loan growth, if that's what happens. Right now, our loan growth assumption is also low single digit, but if rates come down more sharply, I think loan growth could make that up. Our full-year NIM, our exit NIM for this year is 2.13. I told you, NIM's still there.
Our full-year NIM, we expect to be little bit short under the 2.13 level. Maybe a couple of basis points for the full year is what we think the NIM impact will be. On fee income, again, consistent with previous guidance, we expect fee income to grow double digit next year. I already said wealth management is looking very strong, cards are looking very strong, so overall, we think that should hold. We've continued to have very strong net new money inflows. We got SGD 24-odd billion in 2022, we got another SGD 24 billion in 2023. Early this year, the momentum looks like it's continuing. And like I said, people are converting some of this money from deposits into investments, and therefore, that helps the wealth fee income.
Our cost income ratio, we said low 40s; I think it'll still be low 40s. Our actual expense growth, I had guided earlier, will be high single digit, and I think that's where it'll be. But it's partly due to Citi Taiwan. The full year impact of Citi Taiwan adds into that number as well. SP, I'm saying 17-20 because I'd say through cycle, long-term average is what you'd expect. In actual fact, we are not seeing it. We are not—we don't have any, you know, pickup in, delinquencies or poor credits. Our NPAs are coming down. We don't have any challenges in any sector in particular or geography.
I'm being a little cautious in saying 17-20 because of the high interest rate environment, you might see a pickup, but it's not that we're seeing any issue anywhere. Like I said before, we have a little buffer. We have a lot of general provision. Sok Hui just said we have SGD 2.2 billion overlays built in over the models. So if we do see something more than that, we have cushions to be able to bolster that as well. You put all of that together, we still think that somewhere in the 15%-17%, which is our long-term guidance of ROE, is quite achievable. Next slide. The third thing I wanted to talk about was this point on distribution of earnings.
Sok Hui went through this elaborately on how much we've been able to give out on our dividends. The bonus issue of 1 for 10 effectively increases dividends by another 10%. So instead of SGD 0.54, it's closer to SGD 0.59 and change, SGD 0.59, SGD 0.60, effectively. We recognize that even after this, we still have a lot of capital. Our capital adequacy ratio is still strong. We decided to go for a bonus issue just because it gives certainty into the future, right? It builds it into the base, and so it gives some confidence that this dividend will be there. But this doesn't mean that, you know, this is the end of our payment back to shareholders. We will still continue to target the SGD 0.24 minimum that we've talked about.
On top of that, I think we still have opportunity to do more specials or other forms of give back, which we will do. I think some of this, we will have greater confidence, towards the middle of the year when we have better line of sight on what's happening to interest rates and so on, and hopefully some of our technology issues are behind us. I'm also actually quite pleased that we were able to kick off our inaugural commitment. We've made a SGD 1 billion commitment over 10 years, as part of our give back to society. So we put aside the first tranche of SGD 100 million, you know, from this year's earnings.
And finally, you know, because the National Wage Council in Singapore made a recommendation to make sure that we try to help the junior people with higher cost of living, given the high cost of living. So I'm actually also happy that we were able to cover almost half our population with a one-time special bonus award. It's just part of what we can do. Last observation, and this is really around tech. I thought people might want to get an update on where we are with the technology situation. You know, as I said, we started this technology revamp program, uplift program, I call it, in May of 2023. So we've been at it now for seven, eight months of trying to uplift our technology across the board.
In particular, the four areas: it's our cash management process, system resiliency and recovery process, the incident management process, and then just overall tech governance and oversight across the board. I'd start with the tech risk, governance, and oversight. As you know, we announced that we are taking accountability at the senior management, including, starting with me, but, also the rest of my senior management team. I think that's a good element of our governance. If you can establish accountability and figure, you know, that people take responsibility for making fixes, that's a good place to start. So, we've been able to demonstrate that, and that's obviously despite this record profit here.
I mean, you know, the SGD 10.2 billion, we nevertheless decided to take a collective responsibility for this. Also, we have, as I guided before, we've allocated up to SGD 80 million to actually spend on resiliency and uplift. We've spent about SGD 25 million so far, doing that, so, but we parked it aside, so we still have some more that we can put to work, which we will do. Once we get the program done, we hope we can achieve this. In fact, we should be seeing it now. One is greater service reliability, which means that fewer incidents and fewer downtime. The second thing we're focused on is that we want to make sure that there are alternate channels, especially for payments and for account inquiries.
So if there is a problem today, we sometimes have shared channels, so we want to try and make sure that for every service that we do, there's an alternate channel. If something goes down, you can still achieve what you want in a different way. And then finally, this thing that if we do have a problem, we should be able to recover faster. So there should be much faster recovery of our services. So that's the customer outcome that we hope to be able to demonstrate through the whole program, set of actions that we're undertaking. So what exactly are those actions? One, and from a governance standpoint, we are in the final stages of appointing a CEO. We're down to you know, a couple of people that we are looking at.
We hope to be able to make an appointment very soon. It will still take a few months for the person to come on board, given notice periods and so on, but I'm quite pleased we made good progress. We also hired another couple of senior people. We hired a new head of tech risk to put into our legal and compliance, into our line two function. And we've also hired another senior person to run our risk audit. So our line two and line three, we have actually beefed up with the additional resources and senior resources to be able to do that. So that's on the tech governance side. One of the other things we are doing on that is we have a lot of focus on our risk control mindset, behaviors, and culture.
We're training all our people, the 5,000 people going through rigorous training. We're tightening up the focus on controls, and to try and minimize, you know, we try and minimize human error by focusing a lot on that, controls environment and control culture. The second big category we focused on is around the change management. And in a nutshell, you know, what happens in change management today, because it is a microservice architecture, we actually use a lot of microservices, which are then brought together to create an overall, offering. And what that means is that every one of the microservices, we've got to be very, thoughtful about any changes, and changes come in every service. So you have, you know, patch upgrades, security upgrades, normal upgrade paths, improvement functionality, and so on.
So, we obviously had a good change management, but we're making it a lot more robust. We're putting in more automated tools, in fact, AI tools, across the change management pathway, so you, you'll have a lot more gates. Before any program is moved into production, it'll have to go through a lot more gates and a lot more automated checking, that the quality of the programming that is going into production is sound. So hopefully that will minimize what are called butterfly effects. You know, right now, we have a change somewhere and shows up with a problem somewhere else in the system. We're gonna try and minimize that by, changing and enhancing the development process and the CI/CD pipeline process.
The second thing we're doing is we're enhancing our vendor management, because we use a lot of vendor systems, especially for some very critical systems. As you know, our access control authentication system, which gave us trouble last time, we, you know, had from a U.S.-based vendor. So we are enhancing our vendor management quite tightly, which means more regular interaction with the vendors, better line of sight to what are the vendors' own production pathways, and more active dialogue to understand exactly what changes they're making in their software. So we know what the impact on us might be if it comes through the pipe. And finally, you know, we're creating a new production assurance testing environment, which is near live.
So today, what happens when we do, we have a test environment, obviously, we test everything, but we test new programs we do around the periphery of the programs. What we're now doing is actually creating an end-to-end production assurance environment, which is almost as good as the live environment. And so we're going to test and regression test stuff against the production live environment. This should be ready in the next couple of months. So with all of this, I'm hopeful that the entire change management process will get a lot more robust than we've had. On system resiliency and recovery, we're doing a bunch of things, but let me call out two. One is that we right now have an active-active configuration. So for every system, we have active...
We have at least two systems, which are concurrently processing transactions. So if one goes down, the other should still be able to work. One of our learnings is that in some cases, replication causes both the active-active to be impacted. So we've now figured critical systems, where we're also putting a passive hot standby on top of the active-active. And again, that's something that should be done over the next couple of months. The other thing we're doing is eliminating single points of failure. So there's some service, we'll take, for example, our mobile banking service and our PayLah! service. Somewhere at the back end, there is one machine which services both, and therefore, you have the risk of both of them going down at the same time. We are now decoupling all those.
So the service for mobile banking for PayLah! will be completely separate, which means that even if one goes down, the other should still continue to function. So we're trying to eliminate the single points of failure. Again, for the critical services, we think we'll be able to get this done in the Q1. And the last thing on incident management, we're dialing up the way we manage incidents if they happen. One change we already made is we had several control rooms, you know, so command centers. So we had a command center for the corporate business, a command center for the consumer business, a command center for the markets. And sometimes to coordinate between command centers is taking a little clunky, it was taking us time. So we've now merged the command centers together.
We've given them common instrumentation, common observability tools, and established a better escalation protocol. So if something is picked up in the command center, how quickly does it get escalated so we can manage the incident a lot better? And finally, we're also improving our real-time monitoring infrastructure. Of course, we monitor all the time what's going wrong, but we've increased the number of variables we monitor, and we've increased the number of analytics tools we use to make sure we can pick up incidents more speedily in quick time. So based on all this, at this point in time, we set up a whole set of actions. By the end of January, about half those actions are completed. By the end of March, I expect about 90% of those actions to be completed.
So at this point in time, I'm quite confident that these actions will give us demonstrable outcomes, and which customers will be able to see the benefits of these. However, having said, it's not going to end there. Our commitment is to continue to allocate and dedicate resources towards resilience efforts even after that into the future. Though, I do expect 90% of this to get done in the next 3 months or so. So why don't I stop now, and maybe you take questions?
Okay, happy to take questions. Let us know if you have any, and I would request that you speak into the mic, Pulak, and then-
... So I've got a couple of questions. One's around, well, the credit cost, of course. So I just wondered if you have any loans to commercial real estate customers in Hong Kong, China, the U.S., and Europe or Singapore companies that have expanded in those geographies? And have there been any valuation write-downs in this portfolio, and how do you treat them in your for your credit costs in your NPL? That's the first question. Second one is a broad one. So just wondering, you know, I mean, I'm sure shareholders are very appreciative of the dividends and the one-for-one bonus, but how have the additional costs, because I think your SGD 100 million is recurring, the CSR SGD 100 million is likely to be recurring.
So how will these additional costs and more dividends impact your, you know, your growth plans into the future? Because investors would want the dividends regularly. And, a couple of specific questions. I'm sure you won't answer them, but I'll just ask them anyway. Are there any IPO plans for India? Someone asked me to ask you this question. And, what... You know, at one point you were talking about, the possibility of listing one of your DBS, your, you know, under your DBS digital, there was a DBS remit. You said it was a $100 billion business or something like that.
100 million, I think.
Hundred million.
Hundred million.
No, it was billion. It was a billion-dollar business.
That could be a billion-dollar business.
Billion-dollar business. Okay. Yeah, those are the two.
Yeah. So the first, of course, we have exposure to commercial real estate. Our total commercial real estate exposure across the group, if I count loosely, is about SGD 90 billion. But that includes a big chunk of what is called mixed. So mixed projects actually are a mix of retail, and there'll be some residential, and so on. I'm counting it all. Though the actual office real estate part of that will be actually tiny. It won't be... 60% of that is in Singapore. So our biggest exposure, about SGD 50-55 billion in that, is the Singapore market, and the Singapore market is quite robust, I assume. Hong Kong is about SGD 18 billion. Last quarter, I told you it's about SGD 19 billion. It's come off by about SGD 1 billion, so it's down to about SGD 18 billion now.
But out of the 18, again, about 12, 13 is mixed use. And, you know, retail and office is about SGD 3 billion. Our Hong Kong commercial real estate is all to the top end, Hong Kong names, so we have really no other thing. So it's all to the, you know, the biggest names you can think of, Sun Kais and Cheung Kongs and Henderson and et cetera. We really don't go beyond that. So we have no concerns with the Hong Kong portfolio. Our actual loan-to-values for this portfolios are in the 50% range. So we also have a lot of headroom and a lot of cushion between the valuation and other things. But more important, however, that if you go and look at the financials of all of the big Hong Kong names, we give you the very solid.
There's just huge amounts of capital as well as liquidity, so I don't expect an issue at that end of the market. For what it's worth, we do continue to value, and we do valuations every year, and if you think the market is off, you could do it more frequently. So far, because we've got so much headroom and so much cushion, we've not had to take any valuation adjustments or any, you know, mark-to-market, et cetera, around that. So if you add between Singapore and Hong Kong, that's already 80% over of our commercial real estate portfolio is really in these two markets. Our commercial real estate book in the U.S. is $1 billion, and that's two Singapore names, right? So it's not consequential.
We have collectively another 6-7 billion dollars between UK, Australia, Europe, and again, they too are broadly Singaporean names, and who we actually bank on the back of the corporate balance sheet and the corporate strength, as well. So yeah, we've obviously, like everybody, been stressing our commercial real estate book. We've been looking at the underlying, but we're not seeing any challenge, and we don't expect any problems with that book.
What about in China?
We have in China. So China, we've told you before, our total exposure for all Chinese companies, Chinese names for property, is about $14 billion. Earlier, we guided 16, it's also come down to about $14 billion. That includes about 5 or 6 to state-owned enterprises. So this is the real estate subsidiaries of the strongest SOEs in China. It's another 5 to foreign companies, so the Capital Adequacy of the world who external and they go into China to do this thing. And then there's another $3-4 billion split equally between REITs and privately owned enterprises. But this is not commercial. Most of this is residential. So there is some commercial component of this, but again, it is the large SOEs and the foreign companies. Again, we're not concerned about that. So...
The commercial component of that will be under $5 billion out of that total estate. Your second question on dividends and, you know, so, you know, it doesn't constrain our growth because this is a reverse problem. We've got a lot of capital and too much capital, because currently our capital adequacy is 14.6. We believe that, especially with the new Basel IV regime, Chng Sok Hui will elaborate, but we have ample excess capital. So even after returning excess capital through bonus and other dividends, we have enough to, for our growth, and frankly, we have enough to even do more M&As if we want, right? So we have the capacity to do that without constraining growth. At this point in time, we don't have to put in capital into any new country. Most countries are self-sufficient other than India.
India is the only country we're still putting in new capital. Everywhere else is self-sufficient and generating capital. So not a big... You want to add to that, Sok Hui?
I think we have guided previously under the Basel IV regime, which will come into effect July 1, 2024, this year. We expect that our CAR ratio to go up by another 2 percentage points.
Another?
2 percentage points.
... That means by the end of this year?
But we'll, we will give you two numbers. One is the transitional number, one is the final-
Okay.
Phased-in number. Yeah. But the 2 percentage point is the transitional number, and that's the effective number, that is, required for compliance.
Then your third comment in terms of expansion, yes, we continue to expand. Whether we, you know, do an IPO in India, it's, we haven't IPOd anywhere in the world right now. But, you know, I don't see it happening till we... You know, we actually, India is good. India progress has been very strong. You know, the-
I don't see it happening till?
I wouldn't see it happening till we've got enough scale and size to, you know, it's got to be worth it. So you take any of our markets, you take India, even today, right? We make somewhere between $150 million and $100 million in India. And if you start trying to put a multiple on top of that, it would be interesting, but not scale. But in five years from now, if we wind up, you know, making $1 billion in India, then it becomes a lot more interesting to say, "Okay, should I try and do something?" So it's not imminent. Let's put it this way. And then the other one, listing.
Obviously, the, you know, the fact that the tech markets and the tech winter took the shine off a lot of these other possible issuances is material, so it's not been worth our while to think about it right now. But we're continuing to push, particularly on the business that you talked about. I think the money transfer business, and especially low-value, high-volume money transfer business, that continues to be a very attractive business, and it continues to go very nicely for us. I think we're now close to about $200 million in that business. We're going to continue to double down on that business. So, at the appropriate time, if, again, the business gets appropriate scale and size and is worth taking out and unbundling from the bank, it is still something that we would consider.
But again, the timing has to be right.
But this, sorry, this business, is it mainly retail or is it corporate? I mean, there's, because there's a lot of corporate.
It's actually the three parts of business. So one is the retail, so consumer payments. That part of the business, the market itself is growing, principally because a lot more people are doing online shopping. So earlier, the bulk of the consumer payments were either you went and paid your brother, sister somewhere, or you paid school fees or college fees. Today, what's happening is everybody's buying online, and they're buying on all kinds of websites, which means you have to make an underlying payment to get that. So that's the reason for the growth. The second part of the business is SMEs. So a lot of micro SMEs are also buying online so that they can then wholesale and this thing. So that's the second big piece of growth. So we cater to both. The third for us is what we call the indirect business.
So because we still, you know, I thought, Sok Hui made the point, we're now up to 18 million customers. In one year, we've gone from 12 to 18. In three years, we've gone from 6 to 18. So our customer base is increasing rapidly, but it's still only 18. And therefore, our third business is what we call indirect. We are white labeling our capabilities to other banks for them to be able to take to their consumer and their SME customers.
Michelle?
Hi. Yeah, my question is about Chinese capital flows to Singapore. Is Singapore still attractive to the Chinese post the anti-money laundering case and also amid stricter onboarding and family office obligations?
Sorry, what is the last part?
Stricter onboarding and family office obligations.
Yeah. So I think Singapore has continued to be an attractive destination, not just for Chinese, but for around the world, right? And all our usual things are still in place. You know, rule of law, English language, a trusted regime, extremely good professional advisors, but the point was nothing's really changed. And so, like I said, we're, you know, we got $24 billion inflows in 2022, we got $24 billion inflows in 2023, and that carried on into the last quarter. Our inflows in the last quarter was $6 billion, which is on track, so it hasn't changed since the scandal broke out in the summer. And our early look at this year is also intact.
Like everybody, we continue to tighten the, you know, AML, KYC, and the onboarding controls, and we continue to look for opportunities to do that. But I've also made this point before, that, you know, these are finding needles in haystacks. So given the total quantum of, clients and money, you would always find people who get through the system. And my analogy was, if you really thought it was impossible to make crime zero, then there should be not just for this, there should be zero... You shouldn't need police forces, right? Because there should be no crime in every country. But obviously, there's crime in every country because it's not possible to make it zero. So we've got to keep tightening up, and we continue to tighten up, across everything that we do.
Overall, I think Singapore's regime for looking at anti-money laundering is actually quite robust.
Felicia?
Hi, I'm Felicia from The Edge Singapore. You mentioned that there will be a variable compensation cut for the tech issues. I just wanted to find out, how did you arrive at 21% and 30%?
You're asking the wrong person about the 30%, because I don't determine my own compensation. It is determined by the board. So I think the board is best placed to figure how they... But as a general rule, we have a very robust balanced scorecard process, and our balanced scorecard process covers... And it's very structured, and we are anal about it. We spend, like, four weeks and about 20 meetings at the beginning of the year, the whole management team, into figuring what we need to get done. We set up very tight measurement rubrics. So for our financial, customers, employees, transformation, everything, what we need to do, we agree with the board upfront... that what we need to do to achieve, you know, achieved and outperform.
Then we marry all of this together to say, "Okay, how did we do as a bank?" I run this whole process both in the beginning and the end of the year, say: How did we perform? Frankly, last year, other than the tech incidents, we had a blowout year. I mean, it's not just the profits, it is every other part of what we're trying to do, our transformation agenda, our customer score, our customer feedback score, this thing, everything is just, extraordinarily strong. Then on top of that, the tech issues, obviously, there are huge negatives around that, but we balance all that together and come up with what we think the overall evaluation for the management, should be.
And then, based on that, I discussed it with the whole management team, and the management team said, "We think we should take accountability and, you know, this range might be the right thing to do, given the whole scorecard.
Okay.
Good morning. Can I get more details regarding the SGD 80 million commitment to implement the technology uplift? What would the part of this SGD 80 million be used, is it manpower or infrastructure? And secondly, because the outage is caused by a third-party contractor error, so will there be plans to move more such capacity in-house rather than using vendor? Will there be a change in this approach? Thank you.
Yeah. So, first, it's a mix of everything. So first of all, it includes we're, you know, paying a lot to consultants to help us, right? And so that's money out of the pocket. We're reallocating resources. So as you know, because of the pause, in any case, we're not doing new extra developmental work, so reallocating resources. But there's a body of the resources which we're counting because it's only dedicated incrementally to new things we're doing for resiliency. And then there's some hardware as well. So for example, we just went and bought a completely new mainframe to supplement our capacity, just in case, right? So that, that should come in, next month or early March. So it's a bit of all. Some infrastructure spending, some consulting spending, some incremental resources, for the things that we're doing.
On the vendor, actually, you know, issues are not just vendor. There's some vendor issues, some are own software issues as well. So I think this, as we in-source a lot more than most people, right, in terms of what... Most people actually give the outsource. In fact, you go to public cloud, it's all outsourced. We run 93% virtual private cloud, there are companies which are doing 100% public cloud, as well. So I think our balance and mix between what we do internally and what we use external for is actually quite good. As you continue to build the new modern tech stack, it's, you know, highly unlikely and unreasonable to try and do everything yourself. You have. You take generative AI.
What AWS and Google can do with generative AI is very hard for companies to be able to replicate that, so you're much better leveraging their services for creating stuff like that, as opposed to trying to do the same thing that, that they do. So I don't think we'll change our relative mix between what's out and in very materially.
I'm mindful, actually, we are fast running out of time, so maybe just one last question from Jackson, and, yeah, we have to close.
Morning, Suguna. Sorry, I just wanted to ask a few quick things. First, on the pay cut, obviously,
On the?
The pay cut. What was the kind of thinking behind that, and the kind of calculations you came to behind that? Two more quick ones. On shop houses, recently there was a bit of news about you guys how trying to get rid of some shop houses by the alleged plunderers. Can you give a bit of color behind the process behind that, and how many shop houses you guys are planning to sell? And you guys, you mentioned about the kind of China risk just now, like, what's out on China looking at? Do you think things will get a bit worse there?
You mentioned there's no liquidity issue as well, like, in terms of like thinking how to deploy that, are you guys exploring things like, like you did in the past, like lending more money, MAS, for example, or like you mentioned, M&A, what's your- how you come to kind of-
Yeah, four different-
Decision behind that? Yeah.
Questions. The pay, I already answered this thing, right? So there's nothing more to add. I tell you how we go about the pay process and what we came up with. The second question was on shop houses. The shop house-- You know, we disclosed last quarter that a part of our thing is that mortgage financing we've done for some of these the AML case to buy property. Our loan to values are very low, but we've given money for property. And in the normal course, if you have a challenge, we foreclose the property and try and sell the property, right? If we can sell the property, we recover our money. And so that's exactly what we're doing. So since we found this big, whatever, we're basically foreclosing and trying to sell the property, that's all.
It's in the normal course. We put in a receiver, they take the property, they go and sell the property. Once they sell the property, they, we get our loan back, right? That's all that's happening in this thing. Then the third question was around.
China.
Oh, China. I think China is still a challenge. China is slow. I don't anticipate... I think this year, growth rates will be between 4% and 5%, 4.5. Last year, 5+. I think this year will be slower. But I also think that they're trying to put a floor, you know, under the thing. So I don't expect a systemic financial risk, and I therefore don't expect a major issue with our portfolio. But at the same time, we're being careful, so we're not being very aggressive in our China growth right now because of the overall environment. And the fourth question was?
On your liquidity.
Oh, liquidity.
Excess liquidity.
So we're still very liquid. In fact, if you look at our performance, so you can make out. You know, we're continuing to get FDs and paying down, first of all, in the foreign currency book. We've been paying down our commercial paper and MTN because we're getting fixed deposits cheaper than we raise commercial paper. So one is we're replacing our wholesale funding with deposit funding. And on the Singapore dollar side, we're still very liquid, so, yeah, we're continuing to place with them, yes.
So in terms of how you guys are gonna use that, like, is there any thinking, like, how you guys deploy that? Like you mentioned, M&A, is that something you're actively considering or on, or other kind of deployment in terms of the money?
I didn't follow.
Like, are you guys... In terms of the excess liquidity, are you guys thinking, for example, deploying through M&A or other kinds of means?
Yeah, M&A and so on is not use of liquidity, right? This is use of capital.
Sorry, capital, right.
And, yeah, I mean, we've said before that we're not actively looking at any M&A right now, but we're opportunistic. If we find a right bolt-on M&A that helps boost our business, we'll always look at it. But that's not the use of the liquidity per se. The use of liquidity is, you know, can we give loans? Can we put on assets? And I already said, what we did this year, you know, between the end of the Q3 and Q4, is we actually put on a lot of fixed rate assets and built up duration in the book with the view that rates are going to come off. And some of that is loans, but a lot of that is through bonds and through other market-based instruments.
Thanks. Very quickly on the exposure to the AML. Are you guys expecting to make most of it back, the SGD 100 million exposure that you mentioned last time?
Oh, well, you know, it depends on what we're able to do from a... I was just conservative, so we decided to provide for it. But in the normal course of the property, values are low, so if we can sell it, then, yeah, we should recover it.
Okay, thank you very much, everyone. That's all the time we have, so we'll see you next quarter. Thanks.