Please go ahead.
Hi, everyone, welcome to our results briefing. You've seen the media broadcast, we'll go straight into Q&A. Diana, can you open the floor for questions?
We will now start the question and answer session. All you participants with questions to pose, please press star one one on your telephone keypad and you will be placed in the queue. To cancel the queue, please press star one one again and you will be removed. We now have the first question from Aakash Rawat from UBS.
Can you hear me?
Akash, please go ahead.
Yes. Yeah, sure. Okay, thank you for taking my questions. The first one is just on the loan growth. Piyush, I think you mentioned some of the reasons why you saw the decline in Q4. I'm just wondering, like, why shouldn't we extrapolate these, you know, headwinds into FY 2023? On the basis of that, would there be any downside risks to your FY 2023 mid-single digit loan growth guidance? On a related note, I think, you know, you also mentioned the strong tailwinds to the wealth management inflows and the new family offices that you're seeing. It's a bit surprising that we haven't seen the impact of that on the loan growth so far. You know, how are you thinking about this?
Sorry, Aakash. The first one, yeah, there is actually, there is a little bit more of refinancing which was done in the early part of this year, January, but it's already pretty much tapered off. Our projections for mid-single digits have been guided by our pipeline and by the loans we are booking right now. I think the risks on that are limited. There might be some upside, because right now, if you look at fourth quarter, the wealth management loans were actually down by a couple of $ billion. There's partly we're getting a lot of money, but people are not doing margin financing to go and buy stuff. In the fourth quarter, nobody was buying equities. By and large, people buy equities and bonds, they take margin financing, but that wasn't happening.
If the markets turn around, right, my general view is Asia markets is the price on the upside, North Asia is already looking good. Then you might see a pickup in wealth management loans, that we've not factored in, into our projections. I think a mid-single digit is relatively secure from what I can see right now. Your second question, I think I've answered. That is still why you're not seeing uptick in wealth management despite the inflows. My point is the money's coming in, but people are leaving it in deposits. They're not putting it to work.
I see. Okay. Makes sense. Thank you. Second, similar on the cost. Again, you know, the very strong pickup in Q4. You're sounding quite positive on FY 2023 guidance as well. There might even be upside risk to the 9%-10% number. How should we align that?
I think the fourth quarter was two things. One, I just took the opportunity to clean up some of these tech things that we've built over the last six, seven years, and some of them were not giving us the value we originally expected. We did a clean up. We did a, you know, one time for staff, SGD 500 to each staff, we gave it year-end. That's one category. The second category is fourth quarter, we did bonus accruals. We hadn't, you know, we had a strong year, so we wound up having to do more bonus accruals in the fourth quarter. These are all one-timers. As we project like fences out through this year, I'm fairly confident that, you know, we'll get to that 9 odd percentage range. We could be better than that.
Okay. Got it. The credit cost, again, you know, your outlook is quite positive. I just wanna gauge, like, what is the conviction on that for you? Because last time, you know, in the briefing, you mentioned that you were a bit cautious. One, like, what has changed since then? Secondly, doesn't it seem, like, a bit early to be taking a view on the impact of higher rates? Because rates are still going up, and, you know, usually there's a 6-12 month lag before which you start seeing issues.
That's true, but one of the big changes is China's opened up, and the Chinese have put in a lot of support mechanism into the system. I think the idiosyncratic risk in China is down. They put liquidity into the property sector. They changed the property rules. They're putting some support into the system. That's one material change in the last three, four months. The second is that, you know, as we've been another four months into this, the rate's now at 4.5%, 4.75%. I'm not seeing delinquencies go up. Delinquencies are flattish in SME. Delinquencies are flattish in CARD. There are a few basis points that creep up in consumer in a couple of markets.
By and large, there seems to be a tremendous degree of resiliency in the sectors that are normally expect to see some pain in. Because, you know, we wound up last year at 8 basis points. Right now from line of sight and what we can see, I see no, I mean, there is nothing out there which would cause me to expect SPs to go up materially from there. The reason I'm saying 10, 15 and not 8 is because of what you said. I don't know what the lag impact of interest rates might be. I think maybe it'll be 10, 15, based on that. The other thing that you should have to remember is that we do have this massive management overlay we built up. We didn't touch it.
We didn't reverse it last year. We didn't reverse it year before last, which a lot of banks did. Therefore, you know, we do have the capacity to take... even if you do have some unexpected more SP with the capacity to take it into GP.
Got it. The next question is on dividends. You know, like with the, with the peaking NIM, it's arguable, I think that the outlook is not, you know, as exciting as it used to be. Our higher core dividend, if you had done that instead of a fancy, you know, one time special dividend. That could have been something small for the long-term investors to kind of hang on to, right? You instead chose to have a special dividend. I'm just thinking, like, if you do even if you use half of that SGD 0.50 special dividend to raise the core, you could have easily taken your core up to 46, 47, 48 levels. What is the rationale behind doing a special dividend as opposed to having a higher core dividend?
Again, I think in the future also you seem to be more inclined on special events than the core.
No, no, that's not true. I mean, we've This is only the second time we've ever done a special. We did one in our 50th anniversary, and we've done one now in our 55th year, so we're not inclined to doing specials. Our general view is to focus on core, but to do it in a sustained way over time. We do have the capacity to do more without a doubt. You know, but in the course of the year, we'll take stock of when to do it and how much more we can lift it. I mean, we certainly have capacity to do more with core dividends.
Okay. Just on related points, like the Basel IV impact that we've been talking about, the 200 basis points, what sort of conviction are you getting from the prelim conversations with MAS? I think the reason I'm saying that is because some of the other banks in Singapore are sounding a bit more conservative on this. I mean, is it also fair to say that these relaxations are actually supposed to help the banks, but we'll face capital headwinds, right? It sounds a bit. Again, it's not unclear whether MAS will actually allow the Singapore banks to benefit from this relaxation.
No, no, we've had a lot of discussions with MAS. It's 100%. It's the rules. They can't change the rules. They won't not let you benefit from the relaxation. We've discussed it with them. We explained to them how it benefits us. We call it transition, because it benefits us 2% in the first year, and then as the rules slowly slide in, that benefit disappears in the end of 5 years. Five years is a lot of time to have that 2% benefit for, and that allows you to do several things like pay back core Tier 2 for 5 years. You can, you know, pay back Tier 1 for 5 years. You can do a whole bunch of things in that 5 years. MAS understands that, and MAS is quite comfortable with it.
Okay. Just the final last question that I have is on the funding costs. Are you still expecting the time deposit rates to keep going up or do you see them flattening out in the market?
They already started flattening out. In fact, they're coming out because the T-bill rate also came back to 3.8, 3.9, and the time deposit rates are also flattening out. If you look at in Singapore, I think most of the banks have anchored around 3.85 to 3.90 on the FD, even though they'd gone north of 4% at one stage. Yeah, they are flatting a lot.
This would translate into CASA outflow also slowing? Because system data suggests that the CASA outflow is actually not slowing at all.
Sorry, I didn't follow the question. Say it again.
The CASA outflow from the system.
Yeah.
It will reflect into the slowdown in CASA outflow as well, right?
Yeah, yeah. We also see that. By the way, we're also seeing a slowdown in the CASA outflow in the last couple of months. I think it's begun to level off. The biggest actually challenge I think was not the CASA outflow to FD. The wild card was the CASA outflow to T-bills. That was the wild card. I think that also, if you look at, you know, MAS and the government, they've used sterilization in 2 ways. They use effectively the domestic market. For most of this year, that's what happened. Both through the T-bills and MAS, they were sterilizing in the market, which kept those rates high. In the last couple of months, they started sterilizing through the exchange rate policy.
That's why they started strengthening the Sing Dollar rate. I think the headwinds from that front are going to ease off as well.
Okay. Do you see any chances that the government might raise the level of interest that they pay on the CPF for the, you know, CPF money to consumers?
I-
I think it's uncertain , so it's too early to say. The allowance for customers to draw on CPF funds to buy T-bills, right?
No, no. Will they change the CPF rate?
That's cold.
It's very tough for us to say. That's a political decision.
Right. Okay. Understood. Thank you very much. That's all my questions.
Thank you. Our next question is from Harsh Modi from JP Morgan. Please go ahead.
Hi. Thanks for the call. Couple of questions. First, on wealth management, we see such a massive pickup in AUM, broadly in Singapore and DBS. What are the second, third order effect where you think you can benefit over a couple of years in addition to just the transaction flow in terms of the plumbing of the system as in custodian, as in are there any meaningful delta in revenue over and above what we are seeing right now?
Harsh, I guess those were of course are meaningful, but, you know, as a general rule, you should expect that banks can make anywhere. It depends on where you are, but in Asia, plus minus, 80-100 basis points on AUM you can make, right? If your AUMs keep increasing, you know, you should expect to see a percentage point increase in the revenues coming from the fact that we have more money and clients put more money to work. There is a dependent benefit, because, for example, a lot of the AUMs that are coming in are now ultra high net worth family office kind of stuff, and that allows you to create 2, 3 additional ecosystems. One is the private access ecosystem.
Our ability to improve the deal flow between the investment bank and large family offices who want to participate in private equity and. That's improving dramatically. Last time. We've got some 40 or 50 such deals in our pipeline, where these private wealth people are looking at participating in the investment banking activities of companies and firms. It plays well to us because, you know, we have 200,000 corporate clients in South Asia, even in Southeast Asia, we're many. To make that connectivity work is a good opportunity for us. It improves our deal flow on both sides, on the iBanking side as well as showing different deals to private bank customers. I do think that's an opportunity. The other is alternative assets in addition to this kind of deal.
It takes Aakash's question about digital asset ecosystem. I do think that, you know, despite the crypto winter, eventually digital assets or tokenized assets, digitized assets, they're going to have a role to play. Many of these stores of money which come in over here will want to participate in those kinds of opportunities as well. I do think that there are attendant, you know, incremental benefits, if that's what you're referring to.
Yeah. Yeah. Basically what I'm trying to understand is, and both of these, IP deals and digital assets seem to be more risk on trade. Assuming similar pickup in liquidity, you have a probability of making higher return on AUM because the AUM.
Yes.
Size has gone up. Okay. Okay. Thank you.
Yes.
Second question. Okay, thanks for that. Second is on around capital. Could you just walk us through the thought process on determining SGD 0.42 and SGD 0.50, please?
It's a basic thing. You got to go back to our stated capital dividend policy, that we want to pay sustainable dividends which grow with earnings over time. If you start anchoring your capital thinking around that, then you get to these kinds of outcomes. Whereas our earnings are growing nicely and so we can support higher capital. The earnings will grow this year. We can support even higher dividend and capital payment. The only thing is, you know, instead of doing all the goodies at one time, we like to pace it out. We like to pace it out and make sure it's consistent with the earnings trajectory of the bank. Earnings of the bank were, you know, up some 20% last year.
We've been able to take core dividends up to about that level, you know, I think 17%, 18%. If the earnings of the bank go up another 20% this year, we can take dividends up another 20%. That's the philosophy, that we try to keep the dividend, core dividend payment sort of in line with earnings growth. Because we have too much capital, so on top of that, we said, "Okay, we have a lot more capital still, so let's just do SGD 0.50 on a, on a special." That's the underlying logic.
Basically, as we think over the next couple of years, should we think broadly in terms of payout ratio with a downside protected by on an absolute basis? Is that how we should broadly think? The previous framework of CET1 base payout seems to be kind of changed.
No, no. Let me First of all, if you look at our previous history, even though we don't give payout ratio guidance, our payout ratio tends to be in the 48-54 range, right? It's around ±2 of 50. That's what our history has been. That's a starting off thing. You could use that to say, "Okay, earnings grow 20%, that's what we pay." The fact is, as I told you guys last time, that you have to overlay that with the CET position. It's true that we have a lot of CET. Even if I ignore the transition to Basel, we still have more CET than our guidance of about 13%. Therefore, we do have the opportunity to actually bump up beyond that.
Whether we actually change that and take the core dividend itself up to beyond our specific or whether we use specials or whether we use buyback is a question that we will still continue to debate.
Okay. The excess capital, you referenced 13%. We're at slightly over 14.5%. How do you think this excess capital gets used? Is it how much of that may be in Lakshmi Vilas? How much of that in some of the other things here you are contemplating? Or is it both organic, inorganic? Or, and how much you think is more for, at some point in time to kind of return to shareholders? How do we think about that? Is there a glide path towards 13% or not at all?
No. First of all, I'm going to add Citi Taiwan into our books this year, right? That's 0.6% or 0.7% of capital erosion that comes from there once I add that into my book.
Mm-hmm.
After we do this payout of dividend et cetera, I will be at 14.3-ish.
Yes.
Right? You take off the 0.6, 0.7 for Lakshmi Vilas Bank, and that brings us to 13.6% range, right? When I take that out. That's your starting position. That post Lakshmi Vilas number about 13.6% capital. How much do I need for organic activity? Especially Lakshmi Vilas. Lakshmi Vilas, as I said, over 3, 5 years, I need maybe SGD 300 million-SGD 500 million bucks max, so it doesn't move the needle that much. Right now we don't have any massive inorganic ideas either. As you know, we keep an eye open. If something comes up, we'll do it, but I think its sizes are not huge.
You know, we wind up, even if you wind up putting another SGD 1 billion against that, we will still wind up with SGD 3 billion-SGD 4 billion of surplus that we have to return to shareholders.
Got it. Thanks a lot.
Thank you. Our next question is from Jayden Vantarakis from Macquarie. Please go ahead.
Hi. Thank you for the opportunity. Can you hear me okay?
Yes.
Okay, great. Just wanted to follow up, some of the comments on the credit charge guidance. I think now you're at 10-15 basis points. Does this sort of represent, sort of a new normal level, or are there some sort of short-term cyclical factors at play, as you mentioned, you know, with respect to China, et cetera? Just wanna sort of understand, you know, how the sort of sustainable credit charge is going forward.
Jayden, the short answer, I'm not 100% sure. If you know, go back in time to 2016, 2017, right into 2 years ago, my guidance used to be 20-23 basis points. It used to be 20-25, then it went down 20-23 as we got more confident with our credit process. And then in the last couple of years, we've been guiding for 15-20, 17-20, 15-20 basis points because we've got a lot more comfortable with our underlying credit process, our target markets, our customer selection, et cetera. I think on a going concern basis, that I'm very confident of. But as you know, the last couple of years were single digits, you know, 8 basis points.
Whether that reflects the new normal of, this thing, I'm not 100% sure. I'm pretty sure over line of sight for this year that I don't see how we will actually have more than 10-15 basis points, probably at the low end of the 10-15 basis points. Whether we make that our future ongoing guidance, I think I want to wait and see this cycle through and decide how confident we are that, you know, that is the future benchmark that we can use.
Okay. Just with the general allowance, when you released some this quarter, it was down to sort of model impacts. You didn't sort of touch the management overlays, right? Can you confirm how much those are and sort of how much is sitting there that's available, you know, for future use?
Yeah. We didn't touch the model overlays on top of what the general model suggests. It's still at SGD 2 billion.
The model overlay is about. Our total GPs are 3.7, but 2 is in model overlays. Those have come down to 1.7-ish. We've topped it up, so it hadn't come down. They were 1.7.
Yes.
We took it up to 2%. What's happening is the rest of our portfolio, the way the models work is that if we are upgrading the portfolio, if people repay the loans, if the maturity of the loans reduces, all of that the model is that and we're having to keep less GP. Through the year, because a lot of these things are happening, our portfolios are well-placed. You can see from our NPAs, it's come down from 1.5% - 1.1% through this year. The portfolio keeps improving. Our customers keep repaying us. Our tenures keep reducing. That has actually been a reversal of that model-based GP over time. That's what happened in the fourth quarter. We got more repayments of some of these weaker credits.
The tenures came down, and that has acted in this 100 and some change of GP reversals.
If I get this correct, there's sort of two things happening. The sort of, the model is suggesting to hold less because of the factors you mentioned, but you've actually taken the opportunity to up the management overlay a little bit from 1.7- 2. Did I hear that correctly?
We did that in the third quarter, not in the fourth quarter.
Right. Okay.
We took it up from 1.7- 2 in the third quarter. This fourth quarter we left it at 2. You got to appreciate, actually, quite honestly, it's not that, you know, the auditors question you, every time you come up with a system that you want to increase the management overlay there. You got to have very good, underlying justification, to increase that management overlay on top of what your models are suggesting.
Okay. Second or final question I had was just following up on some of the fees for wealth. I'm sure you're gonna get quite a few questions on it. Look, the AUM build is very encouraging. Given that we're sort of, you know, almost a month and a half into the year, have you actually seen any pickup in activity? 'Cause I remember before, you know, the weakness in Chinese markets had an impact. Have you actually started to see the fee generation improve year to date?
Yes. Yes, yes. We started seeing it improve in January, and that's after starting Chinese New Year. You know, all of North Asia shut for several days because of that in January. Fee activity improved in January, and client conversations are very good. Everybody's talking now about doing stuff and deals, a very active conversation with all of the people who brought in deposits to us last year. All of them were in active conversation about putting money to work.
It's basically that plus the normalization of travel spend that you highlighted before, now that, I guess, Hong Kong especially has reopened, that gives you the confidence for the better than 10% growth in fees. Am I right?
Yes, that's correct. Actually, the other thing, investment banking. Last year we got You know, we're not a big investment bank, but we were down about SGD 120 million on our ECM and DCM because the markets were shut. In the first six weeks alone, the market seemed to be reopening. We've done more DCM deals than we did in the last several months. Our ECM pipeline is also beginning to get more active. We have a couple of deals, which we're going to bring to the market soon. I do think there's some upside in investment banking as well coming through.
Okay. That's really helpful. Thank you so much, Piyush.
Thank you. Our next question is from Nicholas Page. Please go ahead, Credit Suisse.
Yep. Thanks for taking my question. Most of it been answered. Just want to understand the thinking behind, I guess, you know, we have quite a big GP overlay. You've hinted at more room for capital management. This is the first step. Just want to understand the thinking going forward. Is it the case that, you know, we're waiting to put the book kind of through the test of seeing this anticipated recession come through before looking at, you know, writing back more of that GP overlay, also then paying out that special dividend or essentially doing more capital management, bringing that CET1 closer to that 13%?
Additional question I had to that was, in terms of the CET1, could you remind us, is the additional capital requirements for that digital bank outage already reversed, or we're still waiting for that to come through? Was it about 40 basis points impact or so?
I see. Okay, Nicholas, you're asking about the GP overlay, right? You have a question on capital management and then the reversal of our risk charge. The GP.
Yeah.
overlay, you will remember we created big overlay at the time of COVID. We signaled to the market that we'll see sort of how the situation pan out, and we would be in a position to release it if the external environment becomes more favorable. As it happened, while we were tracking the opening up from COVID, we had the Russia and Ukraine situation, and therefore we did more stress test. I think we do have a prudent approach to ECL, and therefore we decided that based on the stress test, we were going to sort of. We came to a number that was pretty close to the sort of ECL that was needed. That's why we have not released the overlay.
I think this is an ongoing exercise, so depending on the external environment, if we see it improving, we'll be in a position to release. That's ongoing. The other question is the CET1, and you had a question around this 13% average that we were guiding to. Is that your question, Nicholas?
Right to the link. On the GP, as Sok Hui said, because we do have the opportunity to start releasing it. I think it would be unwise to release it before we see the full impact of interest rates flow through to the tail end of this year. Beyond that, if it comes, if we have to release it due to unexpected loss, of course, we'll use that cushion. If we don't need to use it and once we've seen the back of the recession, I do think we will start releasing some of the GP eventually. Whether it happens in this year or early next year or first half of next year is anybody's guess. On the capital, as Sok Hui pointed out, they're not necessarily the same thing, you know.
On capital management, like I said, we're pretty clear that even after this payout of SGD 0.92, we are still extremely well capitalized. We do have the opportunity to return more capital back, and our preference is to do so through dividend, not through special. That's our general approach. We will take a look at it between now and year-end. So far, we've been taking capital up in line with earnings. Whether we take capital and return capital in excess of our earnings growth is a possibility, but we will explore that in the course of this year.
Operational risk charge. That's 0.4 percentage points, that one is, we'll continue to review it with the MAS. I think once we, I think we have strengthened our resilience to the extent that the MAS is okay with it, I think we should expect the 40 basis points to be released.
Far it hasn't been released, no.
Yeah, not released yet. Nicholas, I think your question must be around surplus general provisions. That counts as Tier 2 capital. Because we have GP in excess of what can be counted as Tier 2 capital, the fact that we release GP will not actually impact the Tier 2 number, if that's your linkage question.
Okay. Got it. Thank you.
Thank you. Our next question is from Nick Lord, Morgan Stanley. Please go ahead, Nick.
Thank you very much. Can you hear me?
Yes, we can.
Yeah. Perfect. Thanks. If I could just ask 2 questions on capital and then 2 other points. First of all, just on capital, can you quantify what the currency benefit to CET1 ratio has been in Q4? I don't know if it's possible to give a sort of a rule of thumb sensitivity. I'm guessing it's Sing Dollar, US dollar that matters on that. Secondly, on capital, can we just understand the mechanisms that you need? Obviously, you know, at an AGM, you can seek approval to buy back shares, so I was just wondering if you need additional board approval on top of that.
In terms of changing either extra special, as you said, you know, thinking about the dividend payout policy, for the sustainable dividend, is that sort of board approval at quarterlies or board approval at half yearlies? I mean, what sort of approvals do you need to do that?
Maybe let me take your first question on the currency effect. For the quarter, we improved 0.8% points in CET1. Half of that came from the usual sort of core earnings, less the dividends for the fourth quarter that we paid. Not the one that we are going to... No, the new one that we just announced, which will hit first quarter cap. That is 40 basis point lift in the first quarter. The currency effect is about 0.15%. And we also benefited from a lower sort of RWA charge from counterparty credit risk as well as lower market risk RWA. That you can see in the performance summary.
Perfect. Then maybe the approvals you need.
The approvals? You mean to do share buyback?
Dividend buy. Dividend policy is only a board thing, and the board meets every quarter. So that's a quarterly process and just up to the board to determine what. For buyback, we need.
Yes.
Enabling provision at the AGM. We take it as a matter of course, when we are at the AGM, the capacity to be able to do buybacks.
For this year's AGM is at 2% of the total number of shares that we can buy back. That's about 50 million.
You don't need additional board approval beyond the AGM to do that?
No, of course, we need. For everything we need board approval.
Yeah. Okay.
The AGM is enabling...
Yeah.
The board meets every quarter. The board can have the capacity to review the dividend policy every quarter.
Okay. Good.
Whether it's a buyback or dividend or special, the board can do it anytime. They can do it every quarter.
Okay. Perfect. Thank you. Just on your cost guidance, is the base you're using an underlying base, X plus one, so Q4, or is it the full cost for full year?
For full year, we are guiding with 9%-10% on the full year numbers.
Just the reported full year numbers.
For full year. Yeah. That's right. That's right.
Yeah. Yeah. Okay. Finally, can you just remind us what the pricing split is of your Hong Kong and Singapore book? Assume Hong Kong is pretty much all prime minus, sorry, HIBOR and prime minus, but maybe if you could just confirm that and then give us an indication as to what the pricing split is of the Singapore mortgage book.
The Singapore mortgage book, today on a total basis is... Hang on. I have it somewhere.
Yeah. I was showing it to you. Sok, you have that, do you?
Yeah.
Yeah, that's the slide. If you look at our total Singapore mortgage book, about 50% of it is fixed rate, and another one third, 32% is linked to our fixed deposits. That's 82% is based on that, 10% is based on SORA. If you look at this, right, the fixed rate takes time to reprice. The one linked to our deposits also takes time to reprice. SORA in effect also takes some time to reprice because SORA is backward looking, the base of pricing. Of that book, only 5% is SIBOR, and that's the only thing that is repriced fully to market. The other three are still lagging. In Hong Kong, the mortgage book itself is not that big, SGD 17 billion and it's prime minus. You're right.
Our large book in Hong Kong, which is the corporate book, is by and large priced off, HIBOR.
That's one month, presumably.
Yep.
Would we, I mean, given what's happened to HIBOR in January, would that be one of the things that's adding to a little bit of pressure on margins for this year?
It came off, but in the last two weeks it's corrected again.
Okay. Okay. Cool. Thank you very much.
Thank you. Our next question is from Weldon Sng, HSBC. Please go ahead.
Hi. Thanks for taking my questions. I just one question on the ROE you mentioned that you have. You said that ROE, I think on your slide, you say ROE is up 17% is 12 percentage point higher than when NIM was last at these levels. Can you speak briefly about why that is? Is there any change in like, you know, is it mainly leverage or is it structural improvement in ROE? I guess related to that is that when you look at investing or, you know, DBS in the medium term, what is that medium-term ROE would you think about after, you know, like, after the rate hike cycle? I think at one point you mentioned like 13%.
You know, what is that, medium-term ROE and then what's the structural improvements on ROE?
I think the one significant structural improvement is the change in the mix of our business. To think about cash management, transaction banking and wealth management, between the two of them, they've doubled from about 20% of the bank to now close to 40% of the bank, right? PB alone and wealth management alone, and these are very high return businesses. That changes the complexion of our average returns because we're doing a lot more with the high businesses, it's driven by, certainly all of transaction banking and to some extent, wealth management is driven by the digitization agenda that we have.
That's actually been quite helpful, change in the mix of the business itself. The actual digital agenda in Singapore and Hong Kong with SME and consumer, that's giving us some clear benefits as well. We pointed out before that our share of wallet and our penetration of these customers improved. If you look at the digital customer base gives us about 10, 12% point higher ROE than the non-digital customer base. The share of the digital customer base is increasing quite materially compared to the non-digital customer base. That's the second big structural shift, that we continue to get better ROE on a larger and larger pool of customers. The third structural shift is that, you know, the drag we used to have is in areas like treasury market and transaction banking, right? Where there were no single-digit ROE.
Today, even there, with the digitization that we've done, both digital distribution, taking out of costs and, you know, algorithmic processes, the ROE of even these businesses has now gone into the double digits. In fact, we have a investor day scheduled for May this year. The bulk of our focus is going to be to point out how our digital strategy has impacted not just what we showed the last time, which is consumer SME in the retail side, but how the digital improvements are beginning to show up across the bank, including in the corporate bank and including in the treasury markets business. Your question of long-term sustainable ROE. I think ROE this year for the full year will be north of 17%.
On if so the question of as long as rates don't go back to zero. If rates go to a normalized level, the rates will come off from where we are now. I think we are pretty confident that we can do north of 15% ROE on a sustainable basis.
Right. I just want a follow-up question, please, on what you said about digital. If, because when NIM was asked at current levels, I guess was about 10 years ago, would you say that what metric reflects this digital improvement? The cost to income ratio looks quite similar, right? Is it more on the revenue gains or like what or is it efficiency or where is it reflected?
It's reflected in the ROE. That's the best place to go look at it, right? being able to generate-
Got it.
A lot more non-asset income, from our wealth management, transaction banking, et cetera.
Okay. Sure. Thank you.
Thank you. Our next question is from Shane Matthews from White Oak Capital. Please go ahead, Shane.
Hi. Thank you for the opportunity. My question has two parts. One is regarding DBS trade form, right? Given the recent developments in 2022 about the RCEP, does that make you a bit more bullish about the volume of business that can flow through, DBS Trade Bank? The second question is regarding your exposure outside Singapore. Could you remind us of your medium 3-5 year targets in the different markets like Taiwan, ASEAN and India? Thank you.
On the first one, I think the RCEP right now is not the principal driver of trade. It is really that intra-Asia trade continues to grow quite strongly. Intra-Asia trade continues to grow faster than global trade. We are seeing that, you know, with this geopolitical problems, actually, the intra-Asia trade is continuing to not only stay robust but increase. The bulk of the China supply that people are looking at diversifying from China, by the way, including the Chinese companies themselves, it's pretty much hanging around in the region. Moving to Thailand, moving to Indonesia, moving to India, the FTAs, and therefore then the trade also goes there. The component parts get bought, sold, et cetera. We see that from a...
If you ask me, underlying driver is that, you know, not only the production in Asia, but the markets are now in Asia. We're not just producing here, we are also consuming here, and that's what's creating this very steady growth in trade business. The other thing to reflect our trade business is that, you know, we've also evolved our trade business. We're not just a cross-border documentary trade player now. We're doing a lot more supply chain. Supply chain includes inventory financing, the people financing programs, vendor financing programs. In fact, the fastest growing part of our trade book now comes from there as opposed to the classic cross-border documentary trade. Your second question is on the non-Singapore. We really don't have targets set for any of the countries.
As you can see, you know, Taiwan after the add to the end, will be SGD 1.3-1.5, right? It goes SGD 1.3-ish billion revenue base. India, you know, our vision over the next, you know, 4, 5 years is to triple the size of the business, that should also get to comparable size as Taiwan. Now, in the big scheme of things, because Singapore, Hong Kong are so big, this is still, you know, mid-single digit % at best of the total bank. The truth is we don't have targets. We look at the opportunity, we put money to work based on what we think the market opportunity is.
That's very clear. Thank you.
Thank you. Our next question is a follow-up question from Harsh Modi, JP Morgan. Please go ahead, Harsh.
Yeah. Thanks for that. Follow-up on margins. From looks of it, asset yield side of it seems we have significant visibility even now, at least for next 12 months, if not slightly longer. In terms of cost of fundQuantify how much is the delta and is it coming from this broader move up in DD rates from mix change between as in CASA ratio. Third is the special CASA yields, for transaction accounts and all of that, where my understanding is the all the 3 banks have been competing for. How much of that is impacting the cost of funds? I have a follow-up on that, on the underlying assumptions on the cost of funds. Thanks.
I think maybe one way to think about it is, you know, look at, why don't you describe our deposit betas over the year, and that might give you a sense for things. If you look at end of 2021 to mid end of 2022, our overall deposit beta was about 32%, which means of all the total cost of increase in rate, about 32% of it we wound up having to pay out for funds. That's actually very big because in Singapore, Sing Dollar is very low in single digits. It's 7%-8% of Sing Dollar. The bulk of it comes from our US dollar book, where all our CASA in the US dollar book starts repricing very quickly. For the US dollar book that, year-on-year, Sing was about 60%.
We had to wind up paying close to market rates of 60% of the CASA. Outside of US dollar is about 20%, all the other currencies, right? That is actually in the fourth quarter last year. That was full year. The fourth quarter last year accelerated a bit. The Sing Dollar moved from 7-8 basis points to a low double digits. The US dollar moved from 60 to close to 80 in terms of the payout ratios. That's pretty much where we are. I think it's stabilized. The last month, we've somehow seen that pick up a lot more. Maybe that's one way you can actually look and see what is the impact of funding costs and what to expect.
Right. Right. Your guidance right now is assuming a deposit beta of sounds like closer to 50 odd percentage. Is it fair or thereabout?
40, mid-forties, actually.
Mid-40s. Okay. Okay, thanks for that. Your base assumption of where does Sing Dollar and US dollar rates are 12 months from now behind this guidance?
Our assumption is, I can say, the US dollar rates don't get cut. They hit about 5.25 and then stay there through the course of this year. We've not modeled 2024 at this point in time. By token, we assume that the Sing Dollar rates also hang around the current levels.
Right. Here's the question, Piyush. In case if we do end up, let's say, getting to 6, on dollar rates, do you expect deposit beta to go up or still stay, let's say, at mid-forties where your current assumption is?
I think that it will go up, which is why I'm not projecting, you know, if it goes to 6%, if you ask me if the NIM go up to 2.30%, I'm doubtful because as rates go beyond this point, I think the deposit beta start climbing quite sharply.
Yes. Yes. That makes sense. Got it. Okay. Thanks a lot for that.
Thank you. Ladies and gentlemen, this concludes today's conference call. We have now come to the end of the Q&A session. Thank you for your participation. You may now disconnect.