Okay. Okay, welcome everyone to the third quarter Analyst buy-side and sell-side briefing for DBS. You would have heard the media briefing, so we can go straight to Q&A. Before we start, just some brief instructions. If you have a question, you can click the raise hand button, and then accept the option to unmute yourself before you ask the question. If we can request that you please state your name and your firm that you represent before asking your question, if I haven't already done so for you. So without further ado, let's go ahead to the first question from Yong Hong from Citi. Yong Hong, please go ahead and ask the question.
Morning. Thanks for the opportunity. I just have three, broad questions. I think number one, you talk about corporate paying down loans, which is reflected in the underlying loans growth and lower CASA ratio. So are these translating into higher competition for loans and deposits, which together could put some pressure on NIMs? And also, would you have the October monthly net interest margin? That would be my first question.
So there's a lot of sub questions there. So, Yes, I mean, in the top end, so it's saying there's an impact on your loan, actually, the large corporate side, haven't seen it so far, the big lending. So we've been able to hold this up. Where we've seen some NIM compression because of the Singapore loans is trade, and we let the trader off. You know, trade is, you know, low margin. If you can get paid well priced, you should be able to get 40, 50 basis points. When it starts getting down to 25 basis points, you prefer to let it run off, actually. So you're seeing some of it over there. And the other thing, you're seeing a little bit of it in the mortgage book in Singapore.
So you can see mortgage through the door pricing. I said we get 2.8 or 2.9 for the quarter. But if you look at some of the newer pricing, people are pricing down to 3.1 levels. So you're seeing a little bit of it over there. But the bulk of our lending, which is a large corporate and this thing, we're not seeing a compression in that book yet. Right, so that was one question. The second question was something about CASA ratio. I didn't follow that question. Yong Hong?
Yep, I think, yep. Yeah, I think on the CASA, basically, you know, bit from your comments that corporates are paying down their loans, and that is reflected in the lower CASA ratio this quarter. So are these translating into higher, you know, competition for your deposits and maybe higher funding costs, yeah, for quarter and beyond?
So I'm not sure I know that the lower CASA ratio comes from there. I think a lot of it comes from the repricing. People move it from current accounts to fixed deposits. So if you look at our CASA ratios, you know, overall in the Singapore dollar book, our CASA, CASA ratio is still about 86%. And in the U.S. dollar book, it's lower, but still about 35-odd%. It's come down, obviously, from year to year, but it's not a big switch from understanding. It's actually moving to FDs, so our total deposits are doing fine. In terms of, actually, our cost of deposits held up better than we anticipated. If you look at our beta, deposit beta for the quarter, it was about 38% from beginning of cycle.
If you count it from the beginning of 2021, when we started hiking, it's at 38%. I would really guide it for it getting up to mid-40s. I think, you know, by the end of the year, we might get to 40. Next year, I think we'll probably still not hit the mid-40s. It'll probably still be closer to 42% or so. So you are obviously seeing an uptick in deposit pricing, but not as much as we had expected we might see.
Okay, thank you. My next question is on your outlook next year. I know you are expecting flattish net interest income next year. I just want to understand what kind of Fed funds rate are you factoring in, and any sensitivity for every 25 basis point movement in the Fed funds rate to your net interest income?
Maybe I'll leave this to Sok Hui to answer that.
So if you look at the outlook for next year, we are assuming that rate cuts will not happen until the second half, right? So that's one key assumption. So again, depending on the number of cuts, but at the tail end of the sort of second half, there'll be lesser impact. And then we will also have SGD 105 billion of fixed rate assets that will reprice into next year. So that also sort of helped in the NIM. And we also have the inclusion of the Citi portfolio, which will add about three basis points to NIM. So all in all, we are sort of guiding through at least, on the underlying side, there'll be probably some softening, but with the Citi portfolio, I think we should at least be able to hold over on the interest income.
Okay, got it. Just want to follow up on that. I think, can we check what kind of growth rate are you expecting for your non-interest income? I think you had mentioned double digits for your fees, but what about the treasury markets and customer sales income?
Same thing. So we think we'll get double-digit growth. If you look at our treasury sales income, it's also up 12%-13% this year, and that's been quite robust. A lot of that is obviously, say, consumer investments. So yeah, we think both that and the fee income, we should be able to do double-digit next year.
Okay. My final question is on capital. I think a post-dividend CET1 ratio is about 13.8%, and based on these, the excess capital you have, if you assume 13.5% kind of target capital ratio, will be about SGD 1.1 billion or SGD 0.40 per share. Just want to share if this number is roughly broadly in line with your internal capital target?
Sorry, what's your, how do you arrive at the 13.8%?
I think, your reported number is 14.1.
Correct.
Just taking that, the dividend payment off your reported CET1 ratio.
But then we always have, net profit-
Profit accretion
Every quarter, right? Which is why we said that, we were able to hold the 14.1% for this quarter. So, Citi, actually impacted us by 0.5 percentage point, but the organic, profit accretion, as well as some reduction in RWA, overall contributed a +0.5% increase after dividends. So we tend to actually be able to hold it at around the current levels.
So actually, I think that the just to your question, though, is different. So I did earlier, that we have almost, like, $2 billion-$3 billion of surplus capital. And so because first of all, our target, the capital ratio, is between 12.5 and 13.5, so 13 is a better number to work with than 13.5. And second, we think our CET will be stronger than you think because of what Sok Hui said, we have profit accretion. So we do think we have that much capital to return. And, you know, it is something that, we're mindful of. And so it is something that when we evaluate, the board takes a look at it, as you know, at year-end.
We did one earlier in the year, which was sort of mid-cycle, but we will take a look at it at year-end and come to a view on what we want to do with that.
Okay, got it. These are the questions that I have. Thank you.
Thanks, Yong Hong. The next question is from Akash Rawat, from UBS. Aakash, please go ahead and unmute yourself.
Great. Thank you. Thanks a lot for taking my questions. This is Aakash from UBS. I have four or five questions, short ones, most of them. The first one is just, wanted to get your outlook on the Hong Kong property. So when prices have continued to fall there, so what I want to ask is really how worried about are you about your exposure to the mid-tier developers in that market? And if you can share, you know, what is the split between mid-tier, top tier? What is the sort of gearing level, across these developers? And based on your Hong Kong financials, I think the provision coverage seems to be like 99%. Is that the right number to look at? That's my first question.
So on the Hong Kong property, obviously, first of all, I start with, I think commercial real estate in Hong Kong is under some stress because I think there's a lot of supply also coming on board. Now, again, anybody's guess whether, you know, the Chinese large companies will come in and take up the space or not, so difficult to say. Now, in our own case, our whole exposure is very top-end, so we really don't have a large mid-tier, next-tier exposure. We've been quite different from some of the other banks. And so the bulk of exposure tends to be, you know, the Swires or the Jardines or the Henderson, the top-end counterparties, so I'm not overly concerned.
Our secured book in that for the commercial real estate is like 50% LTV. So even if we see a big drop in prices, our collateral also holds value. But more than that, the companies themselves are fundamentally very strong. And so we're not seeing any signs of stress because of the counterparties that we bank.
The provision coverage, is that around 99% based on the Hong Kong financials? Is that the right number to look at?
I don't know the answer. Do you know?
Hong Kong financials.
So yeah, the DBS Hong Kong financials reported. I can take that separately.
Yeah.
The loans coverage ratio is 105% at the end of September for the Hong Kong, overall Hong Kong franchise.
Okay, fantastic.
Okay, Jacqueline, that's our Hong Kong CFO.
Yeah, thanks.
She confirms the number at 105%.
Fantastic. Thank you so much. The second question is just more broadly on China. So I think, you know, you've talked about your property exposure many times, but the question is just, if China is expected to grow much slower in the future, and given that DBS has a decent exposure to China, and a lot of the growth in the past few years has been derived from China-related exposure, should investors be lowering the EPS growth rates for DBS?
Like, I think DBS, DBS is at like a 70% EPS CAGR in the last, let's say, five, six, seven, eight years, right? Should that be much lower going forward just because China is gonna grow much slower? Or do you think that DBS is not a proxy for China system, so, you know, it can still keep growing at the same pace in the future? Just wanted to get your thoughts on that.
So Akash, first of all, we haven't grown our China-related exposure or our business now for the last 2-3 years. We've been treading water, if you will, and we've still been able to get, you know, high single-digit EPS growth rates. Obviously, it's not all coming from China. In fact, if you look at even this year, China and Hong Kong have been slow and negative even, and we've continued to be able to generate the growth. So one of our investment thesis for DBS has been that you get a diversified opportunity across Asia. It's not just dependent on one country. And even though they're smaller, but India, Indonesia, et cetera, are outperforming. India business is growing gangbusters. Indonesia has been very robust for us. And so the diversification helps.
And frankly, this is why I sometimes make the case that because we have, apart from two solid markets in Singapore, Hong Kong, we have four growth markets. We can handle the, you know, peaks and troughs in these markets better because the first half of the decade we were heavily China-driven, and we had challenges in Southeast Asia, South Asia. The last three, four years, China has been slow, but we've been catching up in Southeast Asia, South Asia. It's a good, it's a good balance, if you will. The second thing to me is even if we slow China and grow at 4%-5%, and because we are so tiny, I think we can still find opportunities for growth.
Some of the sectors are doing really well, and the China outbound business, the China plus one, is doing really well as well. And so in those sectors, the new tech, China plus one, we continue to find good opportunities. We also continue to find good opportunities in the Greater Bay Area. And so what happens is, when you're tiny, you can pick and choose your battles, and you don't always get buffeted by the macro aggregates.
Got it. I think it makes a lot of sense. Thank you, Piyush. Third question I have is on the loan growth side again. So if you look at the system data for Singapore, right, apart from higher rates causing people to repay loans, there's also a big drag coming from the manufacturing sector. And that manufacturing sector might have something to do with the global tech cycle, which has been pretty slow, and that tech cycle seems to be bottoming out now, you know, if you look at the data in Korea and Taiwan. So I just wonder, do you also see that in your book, that, you know, the tech cycle has had an impact on loan growth and that might actually reverse next year, in which case numbers can be better than expected?
So, Aakash, it's a tough thing. So remember, the bulk of our tech exposures are not in Singapore. We have tech exposures around the region, though. And the tech cycle, I thought it would bottom out by the summer, and you should start seeing some pickup in the back end of the year. It hasn't come through yet. So now from what I can see, that pickup has been postponed, and we might start seeing the pickup by year-end, early next year. Like you, I'm seeing the inventory levels are changing, so I do think there might be some upside coming from there. But tech is a broad category. So in our tech thing, we're also relying not just on the upstream, the, you know, PC, mobile industry, the flat panel industry, the semiconductor industry, the data center industry.
There's a lot of different moving parts in tech, and our portfolio is therefore quite diversified. And so you've got to figure out which parts of that sector or that entire value chain are going to pick up and which are not. Long answer, but if I had to bet, I'd say there is some upside in tech-related, sector going into next year. But again, it's too early to be definitive about it.
Okay, got it. Just my last two questions. The second last one is on wealth management. If you could just tell us what is the net new money in Q3? You said it was quite robust. What's the exact number there?
I think it was between SGD 5 billion and SGD 6 billion.
Oh.
So it's been consistent. We've been getting SGD 6 billion a quarter, or between SGD 5 billion and SGD 6 billion. And we got some money. I mean, we are on track in for the fourth quarter, so October looks okay.
Right. Got it. And then the very last question is, I mean, I think just back to the tech issues, it. I, there's definitely, you know, probably a higher scrutiny on DBS compared to many other banks, for several reasons. And I think there's been a lot of tech issues across banks globally as well, right? So banks are generally seeing more tech issues, post-COVID. But my question is, like, why do you think in Singapore it's mainly you? Or across the region in ASEAN, actually, why is it DBS that is seeing more issues compared to other banks? Is it because you're trying out a lot of new things which, possibly other banks are not? Or, like, how would you think about that?
Aakash, I think it's because we've progressed more than most banks in the world on a microservice architecture.
Right.
So what happens when you're... You know, we are really out there, which means that you put together and stitch a lot of other things, our own developed services as well as third-party services. And, you know, you sort of, stitch them all together. What that does mean, though, is that you're reliant on different people for different pieces of software, and each of the software has its own, release cycle, right? So they'll do their own upgrade path, they'll go to the next version, they'll put security patches and so on and so forth. And because we have relied so many of those, it increases your vulnerability to any one of them, right, if it goes up. And therefore, when you go down that architecture, my big learning is you've got to therefore be even more rigorous in your change, control and operation management.
That's the point I'm making at the media piece, that that architecture gives you massive advantages. It is quicker, it allows you to increase multifold your cadence, it allows you to be, more nimble, more adaptive, which is why all the big tech companies do it. But it does increase your surface of vulnerability for software bugs, et cetera, so you've got to be more rigorous. And that's something that we need to improve.
Right. Do you think many other banks will also be going down this route in the future, in which case they will also probably have to deal with the same issues that you're facing right now?
Every, every company in the world is going down this route. There is no company that is not. We just started in 2013, 2014. If you look at a lot of the global US Banks, Goldman, JP Morgan, they started in 2016, 2017. But everybody in the world figured out after Amazon and Facebook that this is the best way to build technology in the future. So almost every company that I know is heading in that direction at different pace.
Got it. That's all my questions. Thank you very much.
Thanks, Aakash. Next question from Nick Lord, from Morgan Stanley. Nick, go ahead and ask your question. Nick, could you try to unlock, unmute yourself?
Okay. Can you hear me?
Yes.
Yep, we can hear you.
Okay. Thank you very much. Yeah, a couple of questions just on the liability side. First of all, just in terms of the deposit side, I just wonder if you could talk about some of the trends there. I mean, are you still seeing sort of very strong inflows of deposits? How much flexibility do you have to manage your deposit inflows in terms of pricing, or is there a level of pricing you have to pay in order to sort of maintain the customer relationship? And then the second question is just on the wealth side. I mean, it's a good pickup in wealth fees. I think in the presentation you spoke about it being banca ssurance driven.
I just wonder if you could talk about, is it all bancassurance driven, or are you seeing a pickup in activity elsewhere in the wealth management business?
O kay, on the deposits, you know, we're quite thoughtful about deposit pricing, right? And so obviously it varies by currency, Singapore dollar, U.S. dollar, other currencies, et cetera. As like everybody, our CASA is moving on. About last year, we lost about SGD 90 billion of CASA, if I remember. This year, we're expecting to lose about half that, SGD 45 billion of CASA, which is consistent with our modeling. Our modeling had been that over two years, we'll probably lose up to about SGD 140 billion, so we're actually going to come in a little bit below that. Next year, our thing is we'll probably lose another half of that 45. So somewhere, you know, in the 20-25 range, we'll probably lose more if the rates stay where they are.
And that's consistent, and we factored that into our NIM projections. As CASA gets repriced, it's a deliberate choice on whether we go back and try to bring it back in fixed deposits or not. If we need the funding, then we price the fixed deposit, then you have to pay at market or close to market to get the FD money in. But where we have enough liquidity and we don't need to price the fixed deposits, then we let it go, right? And so it's a tactical choice we make depending on the nature and shape of the book that we have. On the wealth management, I told... I mean, I'm not sure. It's not just Banca. The investment activity is growing.
In fact, when I see the total growth of 22%, a lot part of it is driven by growth in investments, not just bank. I'm not sure. Was there another presentation where you have?
Straight talking. Thank you.
Let me see if I can just pull out the relative...
Banker is a smaller, much smaller group.
Yeah. Let's reach.
Yeah, so I, trying to figure banker grew, well, about the same. So banker and non-banker all grown about the same, about 20-odd%.
Sorry, is that, I mean, that therefore there must have been a pickup in the non-banker side. I mean, we've still got a very high rate environment, so what is it that people are sort of moving into, and why do you think people are more interested to invest now than they have been in the last two or three quarters?
So third quarter, actually, the investment activity did pick up. Our switch from deposits to investment in the third quarter are discernible. We moved up by 4-5 percentage points from deposit investment. And people are doing both ends, sort of like a barbell. So I think a lot of people are beginning to go into fixed income because these people figure that the rate cycle is peaking, then people are beginning to put some duration on fixed income bonds and so on. But equally in the third quarter, people were also moving into the equity-linked structures. And we saw that. Now, that slowed down actually into October because of this uncertainty around the geopolitics and so on. So the equity link part is slowed down, but the fixed income is still quite robust.
Okay, perfect. Thank you very much.
Thanks, Nick. Next question from Melissa, from Goldman.
Hi, thank you for taking my questions. I have three questions. Maybe firstly, just on the outlook, just want to clarify a few things. Firstly, in the net profit line, you said flat from this year, flattish. Can you just inquire, is it like the net profit or the core net profit you're talking about that is flat? Then also within that, in the expense line, in terms of the outages and all those ITs that you're doing, you mentioned that you'll be spending SGD 80 million. Is that SGD 80 million already included in the expenses forecast for next year? Then also in the margins, if I can just clarify. This quarter, the margins for Citi, I think you mentioned next year Citi will do about three bits increase in margins.
But for just this quarter, did Citi help in terms of the margins as well? That's my first question. Thank you.
On the first one, I think what we are looking at is a flattish bottom line on organic basis, and then we get a couple of hundred million bucks lift from Citi Taiwan on top of that.
Couple of million on the income line, at the bottom line, we-
No, next year.
Next year.
Mm-hmm.
200 here. Sorry, 200 is?
Is the contribution from Citi at the NPAT level?
Okay. Okay. And so the flat, net profit is flat net profit, so the flat core net profit, right? That's what you mean.
Yes.
Correct.
Okay.
Flat core organic, excluding the Citi component, we expect it to be quite flat.
Okay, got it.
Then your second question on the expenses, SGD 80 million. Actually, it's not all new money, because since we are stopping doing various activities, you know, the products and services and so on, so some of it we are redirecting the resources to doing the resiliency and upgrade. But there is some new money as well, and some of that we've already taken this year. So that's why expenses are up a little bit higher than we expected. But the rest of it is all factored into next year's assessment. When I give some guidance for next year's expenses, we've included all that.
Right. Okay, got it. Okay, then the second question. In terms of your SGD 3 billion excess capital that you have been mentioning, and, you know, board will consider what you will do at the end of this year. Just wanted to understand, in terms of this, you know, SGD 3 billion release or, or, thinking about that, will any of these issues that you're happening to have would kind of hold you back from doing it? Or do you, or, you know, it's just as normal, we'll think about it at year-end, and you might look to bring that level down?
Melissa, so it's hard, it's premature to say what. We will look at it at year-end. You know, assuming that we don't wind up having more problems and disasters and challenges between now and the next six months, because if we do, then, you know, we'd have to watch to see the regulators decide to impose more financial penalties. If we don't, then, yes, we should be in a position to continue on our trajectory or our plans to return capital. But, we need to you know, wait and come to a view over the next two months.
Right. Okay, thank you. And then just lastly, in terms of your CRE, your peer actually looked at the valuation and, you know, had to do a little bit of a valuation update and took some credit costs for it. Just wanted to get your confidence in terms of your valuations and what your LTVs are on your CRE book.
We also, we update our valuations, you know, quite regularly, and so we're quite confident. You know, our, the nature of our portfolio is slightly different, right? So we don't have a lot of U.S.-based commercial real estate, lending, including to real estate trusts, et cetera, in the U.S. with some, other banks have done. We never went into that line of business. So we don't have that, and, yeah, we update our valuations quite regularly. I'm quite comfortable with what we have.
Okay. If I can just quickly, in terms of your SP. In terms of your SP, you break down new NPLs and then existing NPLs SPE. The new one, I suppose, was for the money laundering. I just wanted to understand the existing one. I know it's same level as it is in first quarter, but up versus second quarter. Can you just share what drove the increase, quarter on quarter?
It's actually not very much. It's a few tens of millions SGD and a couple of cases out of China we just thought we'd top up based on the negotiations with the clients.
Right. Right. And the China one, is there specific sectors related to?
No, there are only a couple of names in there. Actually, a couple of... Sorry, it's a couple of the property-related smaller exposures we have.
Okay. Thanks, Melissa. I think the next question is from Harsh, from JP Morgan.
Hi, thanks for this. A few questions. First question on tech. Is there any business impact in the sense, let's say there's a small merchant who was exclusively using DBS for payments, and now they kind of have started looking at alternatives? As in, yeah, all the aspects apart, anything that you see can have any sort of impact on your deposit franchise? I know very low probability, but how are you thinking about that? I have a couple more follow-ups.
I don't think so. We're not seeing any of it, and I don't expect to see any impact in the deposit franchise, no.
Okay. Gotcha. Thanks. On Hong Kong property, bit of a follow-up. Yes, lion's share of your exposure is to the blue chip names, but it's always the tail which is, which is the worry. So effectively, as in my understanding of what you're saying, is there is no exposure at all to the mid and small or higher risk landlords at all in your entire Hong Kong book?
No, I wouldn't say no, but it's not material. And the LTVs of that, even on the updated collaterals, are very low.
Okay. So even if there is a default, there is, the loss given default is going to be minimal?
Correct.
Yeah. Okay. What will be very useful, Piyush, I know that exposures are well covered, but on overall CRE exposure for the group, we have details from other two banks. It just makes it easier if we have just dedicated disclosure on CRE across various geographies. That'd be very useful, if you can consider that.
Okay, can do.
Um-
Just for what it is worth-
Thanks.
The total CRE exposure in Hong Kong is SGD 19 billion. Of that, about 3 billion is pure office, 3 billion is
Retail.
retail, which is mostly, you know, the big REITs, Link REIT, Fortune REIT, et cetera. And the balance, SGD 13 billion, is more mixed-use, which is large scale, this thing. And again, all of these, when you think about a mixed-use project and development, they're all the big guys, right? So Kerry, Swire, Milang, Henderson, Jardine, those kinds of people.
Right. Right. Good, thanks for that. Now moving on to NIM. Should we see that this is peak NIM in either direction, interest rate goes up or down? If it goes up, you have some benefit on the deposit spread, but on the asset side, as you're seeing some competition, it kind of continues. If rates go down, you still have degree of repricing. So like 2.15, 2.20, does it kind of become peak NIM for next few years? Is it fair to say that?
Harsh, I think it depends on how many rates. If you look at our forecast, where rates are here of ±25 basis points, I think peak NIMs will peak there, 2.15%, 2.20% peak. If you go into the calendar, you see another three to four rate hikes, because, you know, Powell decides they're gonna, then, of course, we'll see NIM increase, right? So if you go back to, I think, our deposit beta is still in the 40s, and whether it's from beginning of cycle, even on a quarter-on-quarter basis, our deposit betas are relatively low. And therefore, if you see aggressive rate hikes, then you will see more NIM increase. But assuming you don't see rate hikes from here, then yeah, I think you should assume NIMs will peak at the 2.15%-2.20% level.
Okay. And that brings me to the last couple of bits on the mortgage competition. So last year we saw significant deposit competition. This year, as you said, deposit beta is low. No one needs to compete for FD because credit demand is low. But mortgage competition across all the three banks, and this is not the foreign banks small guys, the big three guys are competing, sub-3% kind of mortgages. How are you thinking about it? Because the logic given is to deploy excess capital, excess liquidity. It is still a core product. But it kind of can become bit of a spiral down, because if I can justify three, which is 70-80 basis points below T-bills, Singapore dollar T-bills, I can justify 2.50 as well.
As in, how do you think about the RORW on that product? Is there any Basel IV angle to it? Like, how do we think about the mortgage competition over the next, let's say, 6-12 months?
Well, first, mortgage is a very attractive returns product because RWA on that tends to be very low. So, you know, since RWA, especially in this thing, is very low, even with low NIM, we actually can make a very decent return. But having said that, I also don't think we need to continue to keep, you know, pricing now. I don't think it's sensible. Therefore, we're also quite selective. I told you our student loan NIM in the third quarter is 3.29, and not 3. And so we've been willing to let a little bit of share erode, just to be thoughtful about the pricing.
Right. No, so that's exactly what I wanted to hear, that if you come and say that you're willing to lose market share, then there's a floor on the deposit, on the mortgage pricing, then everyone's talked.
Go back and look, we've actually led market share on offer in the third quarter.
Okay, that's great to know. Okay. Thanks, Piyush. That's all from me.
Thanks, Ash. Next question from Neil Sinha from CLSA.
Hi. Thanks, Neil. Piyush, I think most of my NIM and related questions on the results have been answered. I had a quick follow-up on your other assets. I'd like to know how Lakshmi Vilas is doing and where. Now that it's been almost a year out of the lockdowns, you mentioned before, during the lockdown period, it wasn't the right time to put the foot on the pedal because the economy was off. Most other sectors that I look at in India, they're doing really well. There's pricing power that's come back in a major way in a number of the sectors. So I'd like to get your thoughts on that and where you think it will be in terms of your overall portfolio, asset portfolio, in about, let's say, three years or so.
And also, bit of an update on SRCB. That was a very promising entity. I think it still is, but yeah, China's gone, gone in the other direction now, right?
Yeah. So, I think your India assessment is consistent with ours. The market is doing well, and now that we finally got LVB integration all done, we have a great platform, which is-
Mute.
The echo is coming from?
Yeah, we muted him, so you can.
Okay. We're getting very strong momentum. I think our India business is up in the 30% range through this year. Our unsecured book, our secured book, the gold loan book, loan against property, we launched the corporate side, the SME book, everything is growing very vigorously. So, feel actually quite good about the India platform. And I indicated earlier that, you know, we think over the next three or four years, we can effectively double, triple the size of the business. I don't have the data or the numbers with me right now. I may softly remember the exact numbers, but it's on track. And so this year, we really beginning to see our performance. On the Shenzhen Rural Commercial Bank, likewise.
You know, if you look at the bank, I mean, as the underlying investment thesis is playing out, it's Shenzhen centric, it's a consumer retail deposit funded to a large extent. It focuses on the SME and some of the new sectors. It's retaining, maintaining a healthy NPLs. You know, we are on the risk committee of the bank, so we closely oversee the risk portfolio. So NPL ratios are, you know, 1.1-1.2. They're reasonable. The margins in the bank are still good. So the bank has continued to run and continue to throw up good dividend for us.
CET1 ratio is high.
Yeah, and the core equity ratio is high. So we're actually quite still quite constructive on the bank. And like I said, while we've been treading water generally in China for the last couple of years, we have been continuing to grow the GBA franchise. There we found opportunities, and that's on track. We set up a multi-year program for GBA, like 4-5-year program, and it's on track. We are continuing to track with that program.
Okay, we have a follow-up question from Aakash?
Yes, great. Thank you for taking my question again. Just this question is on the AML-related exposures, which you said is around SGD 100 million, and you've taken provisions for most of it already. Just want to check, is there any a chance that this, this number can grow bigger? I mean, this is the SGD 100 million out of the total SGD 2.8 billion that has been talked about so far.
Yeah. So we, you know, unless people find out new people as we've done a complete search. But this is not just the people which was arrested. We went and did a complete search of everybody else who might look similar, might have connection, might have association. We pulled out everything. So it's actually a conservative number. So yeah, there's nothing that I can see which might come out, but you don't know. They might find another syndicate or something and who knows? But no, right now, I'm just there.
In terms of the provisions, like, these are-- they seem to be very prudent, right? Because these are property backed, and if you manage to-
We assign zero value to most of the properties.
So it is prudent because, you know, I don't know. My big worry is, they're property backed with this thing, but if they decide to, you know, foreclose or take away all the properties because they came from these guys, then who knows? So we just basically wrote those off.
Okay, got it. And then the second question I had was, so your guidance for trading income next year is also a double-digit growth, which is on top of this year, which was already quite a strong year. How does this align with your... You know, you talked about this SGD 1.1 billion income per year number in the past. How do we align these two things?
No, trading income, we've got to get the definition right. When I talk about the T&M SGD 1.1 billion, is what I call my somebody to take the time and elaborate how we think of this treasury and markets income. And it doesn't necessarily conform to, you know, trading income, other income in the statement, because it's a mix of both things. A mix of non-interest and net interest income in the treasury book, plus the trading side of the treasury book. Right? When you add both those together, you get this, not customer sales related, but pure warehousing and positioning related. And that is actually down. So if you figure my original guidance, I thought we'd be able to do about SGD 275 million a quarter, or SGD 1.1 billion for the year.
Then in the last quarter, I guided it down, saying, "You know, because of the high funding costs on that book, that's likely to be closer to 2.30." If you look at the third quarter, we didn't even get anywhere near there. So we were actually down at, like,
160.
166 or something for the third quarter. And so the problem with that trading book is we're expecting it to improve, but I don't think it's going to go back to the 1.1 next year, because the funding cost of that book is still very high. This quarter, you know, we are able to shrink a little bit of the book, and so that helped a little bit. But when you're funding that book at these high, extraordinary high rates, it's not that easy to make money on that book. Outside of that, the customer sales activity of that, so the PNL, the markets products that we sell to our customers, that's growing very robustly at 12%-13%. And that will continue to grow quite nicely.
And then, the rest of the fee income obviously has nothing to do with that. That will continue to grow very nicely.
So, Aakash, just to be very clear, when we give guidance, it is... Like, if you look at nine months, page 5 of my presentation deck, we show that nine months treasury markets, the trading income is SGD 612 million. This is the number that would be... That would approximate to SGD 200 million per quarter for nine months this year. When we give guidance, whether it's SGD 275 million per quarter, SGD 250 million per quarter, we are talking about an aggregate number, which is, in this line. So this is the best line to look at when you see treasury markets income.
So the effort to try and split it up by lines of income, which we show you this time around, as a new chart on slide 10, it's very hard to forecast that SGD 1.1 billion that you talk about for nine months, because of the accounting asymmetry that exists between NII and non-NII. And therefore, we actually encourage you to actually try and start modeling based on the commercial book income, which is stable. You see the treasury markets customer income in that line as well, quite distinct from the trading income component, which can be volatile.
Okay, understood. Got it. Thank you.
Thanks, Aakash. Last follow-up is from Neil, from CLSA.
Yeah, hi. Hi, sorry, I think I got muted for the follow-up. On Lakshmi Vilas again, you mentioned, like, thinking about a threefold increase in the franchise. How much growth over the next few years, how much growth capital will that entail? I mean, beyond, of course, the current six-month restriction.
No. So the only part of our markets outside that we have to put some capital in is actually India. And we reckon that over the next three years, we're going to have to put in about $500 million-$600 million in India over three years. But when we dimensioned the surplus capital we have, we only factor that in, you know, what we need to put aside to fund India's group. I think you went mute again.
I think Benton is forcibly muting me. I said no, SGD 500 million-SGD 600 million is not much. Thank you.
Okay. Thank you. I think that's it for the call. We don't have any more questions.
Okay. All right. Thanks, everybody.
Thank you.