Good morning, and welcome to DBS's first quarter financial results media briefing. On the call today are DBS CEO Piyush Gupta and CFO Chng Sok Hui. Sok Hui will first take us through DBS's performance in the first quarter, followed by Piyush, who will provide additional observations on the operating environment and the business outlook. Without further ado, Sok Hui, please.
Thanks, Angela. Good morning, everyone. We start with slide two, highlights. We achieved strong first quarter net profit of SGD 1.80 billion. It was the second-highest on record and was exceeded only by the exceptional first quarter last year. ROE was 13.1%. Business momentum was healthy and broad-based. Loans grew 2% from the previous quarter, and fee income streams other than wealth management and investment banking were higher than a year ago. Net interest margin benefited from higher market rates, rising 3 basis points from the previous quarter. This was the first increase in three years. The performance was moderated by lower wealth management fees and treasury and markets income from exceptional levels a year ago. As a result, total income fell 3% to SGD 3.75 billion.
Expenses rose 4% from a year ago due to the mid-2021 salary adjustment. The cost-to-income ratio was 44%. Asset quality was stable, with the NPL ratio unchanged from the previous quarter at 1.3%. Specific allowances of 15 basis points were partially offset by a write-back of general provision. Capital remained strong and liquidity ample. CET1 was 14.0% above the group's target operating range. The liquidity coverage ratio and net stable funding ratio were 138% and 122%, respectively. The board declared a first-quarter dividend of SGD 0.36 per share, unchanged from the previous quarter. Slide three. First quarter net profit of SGD 1.80 billion was 10% lower than the record quarter a year ago.
Total income was 3% lower at SGD 3.75 billion, as higher net interest income was more than offset by declines in fee income and other non-interest income from their respective record levels a year ago. Net interest income rose 4%, or SGD 80 million, to SGD 2.19 billion. Higher loan volumes more than offsets the impact of lower net interest margin. Fees fell 7%, or SGD 62 million, from the record a year ago to SGD 891 million. Lower wealth management fees and lower investment banking fees more than offset higher loan-related card and transaction service fees. Other income fell 16%, or SGD 125 million, from the high base a year ago to SGD 669 million, as investment gains and trading income both declined.
Expenses were 4%, or SGD 57 million, higher at SGD 1.64 billion due to base salary agreements carried out in mid-2021. Credit upgrades and transfers to non-performing assets resulted in a GP write-back of SGD 112 million, compared to a GP write-back of SGD 190 million a year ago. Specific allowances were 33 million lower, at SGD 167 million. Slide four, quarter on quarter, performance. Compared to the previous quarter, net profit rose 30% from higher total income and lower expenses. Net interest income increased 2%, or SGD 47 million, as loans grew 2% and net interest margin rose three basis points. On a day adjusted basis, net interest income was 4% higher. Fee income rose 9%, or SGD 76 million, from higher loan-related fees.
Other income increased 98%, or SGD 331 million from higher trading income and customer treasury activity. Expenses fell 2%, or SGD 27 million, as higher staff costs were more than offset by declines in other operating expenses. Total allowances increased by SGD 22 million to SGD 55 million, as a SGD 100 million increase in specific allowance was part, partly offset by a SGD 78 million increase in general allowance write-back. Slide five, net interest income. Net interest income was SGD 2.19 billion, 4% higher than the previous quarter, after adjusting for the shorter day count. Loans rose 2% in constant currency terms, and net interest margin was up three basis points at 1.46% as interest rates began to rise. The higher net interest margin was the first quarterly increase in three years.
Compared to a year ago, net interest income rose 4%. Loan growth of 8% more than offsets the impact of a 3 basis point decline in net interest margin. Net interest income will continue to benefit as interest rates rise in subsequent quarters, lifting the net interest margin. Slide six. Gross loans increased 2%, or SGD 8 billion, in constant currency terms over the quarter to SGD 422 billion. Non-trade corporate loans rose 2%, or SGD 6 billion, faster than in recent quarters. The growth was led by Singapore and Hong Kong across a range of industries. Trade loans grew for the first time since mid-2021, rising 5% or SGD 2 billion amidst rising commodity prices. Housing loans were little changed as bookings fell due to the additional cooling measures in December. Wealth management loans were also little changed.
Compared to a year ago, loans grew 8%, led by non-trade corporate loans. Slide seven, deposits. Deposits increased 4% or SGD 18 billion in constant currency terms over the quarter to SGD 520 billion. Current and savings accounts or CASA grew 3% or SGD 11 billion to SGD 392 billion. This takes the growth in CASA since the onset of the pandemic to SGD 152 billion. The CASA ratio of 75% was similar to the previous quarter and 16 percentage points higher than before the pandemic. The higher CASA ratio has increased the interest rate sensitivity of our net interest income. We estimate that a 100 basis points increase in the U.S. federal funds rate increases net interest income by between SGD 1.8 billion and SGD 2 billion. The loan to deposit ratio declined 1 percentage point to 80%.
Surplus deposits continued to be deployed to high quality liquid assets. Liquidity was ample with a liquidity coverage ratio at 138% and the net stable funding ratio at 122%. Slide eight on fee income. Gross fee income fell 6% from the record a year ago to SGD 1.02 billion. Wealth management fees fell 21% to SGD 408 million from the exceptional levels a year ago due to weaker market sentiment. Lower investment product sales were moderated by an increase in bank insurance sales. Investment banking fees were also lower by 12% to SGD 43 million as fixed income activity fell. Other fee income activities were higher. Loan related fees grew 21% to SGD 144 million.
Card fees rose 11% to SGD 187 million as debit and credit card spending exceeded pre-pandemic levels and travel picked up. Transaction service fees grew 4% to a new high of SGD 240 million, led by cash management fees. Compared to the previous quarter, gross fee income rose 7% due mainly to higher fees from loan related activities. Slide nine on expenses. Expenses rose 4% from a year ago to SGD 1.64 billion. The increase was due to base salary increments carried out in the middle of last year. Compared to the previous quarter, expenses were 2% lower as higher staff costs were more than offset by lower non-staff expenses. The cost to income ratio was 44% for the quarter. Slide 10 on non-performing assets. Credit quality remains healthy.
Non-performing assets rose 2% to SGD 5.98 billion. New non-performing asset formation, which included a significant exposure this quarter, were offset by repayments. The NPL ratio was unchanged at 1.3%. Slide eleven, specific provisions. Specific allowances amounted to SGD 167 million or 15 basis points of loans similar to recent quarters when significant repayments were excluded. Slide twelve on general provisions. Total allowance reserve stood at SGD 6.81 billion, with SGD 3.06 billion in specific allowance reserve and SGD 3.75 billion in general allowance reserve. During the quarter, there was a general allowance write back of SGD 112 million from credit upgrades and transfers to non-performing assets. General provision overlays were maintained. General allowance reserves remained prudent.
The reserve exceeded the MAS requirement by SGD 0.2 billion and was SGD 1 billion above Tier 2 eligibility. Allowance coverage was at 114% and at 193% when collateral was considered. Slide 13 on capital. Capital remains strong. The common equity Tier 1 ratio declined 0.4 percentage points from the previous quarter to 14.0%. The CET1 ratio included a temporary 0.4 percentage point impact from the digital disruption in November 2021 that had been announced previously. The CET1 ratio was above the group's target operating range of between 12.5% and 13.5%. The leverage ratio of 6.3% was more than twice the regulatory requirement of 3%. Slide 14 on dividends.
The board declared a dividend of SGD 0.36 per share for the first quarter, unchanged from the previous quarter. Based on yesterday's closing share price and assuming that dividends are held at SGD 0.36 per quarter, the annualized dividend yield is 4.4%. Slide 15. In summary, we had a strong start to the year. This was underpinned by strong and broad-based business growth, cost discipline and robust asset quality. Our capital and liquidity positions remain strong and the general allowance overlays we had built up in prior periods were maintained. Looking ahead, geopolitical developments in recent weeks have created macroeconomic headwinds and financial market volatility. We have stress tested our portfolio and we expect asset quality to remain resilient. While there are revenue risks to certain activities such as wealth management, our overall business pipeline continues to be healthy and will provide sufficient opportunities for growth.
We'll also benefit significantly from interest rate increases in the coming quarters. Thank you for your attention. I will now pass you to Piyush.
Okay, thank you, Sok Hui. I have just two slides to supplement Sok Hui's observations. The first slide, which is called Outlook. I guess it's quite, yeah, I don't need to repeat the fact that the world has changed dramatically in the last three to four months. The issues in Ukraine have caused a massive slowdown. I think both World Bank and IMF growth rate forecasts are down by close to 1%. Inflation coming through, particularly in the entire commodity complex, metals, food systems, and obviously there's potentially some downstream impacts of that. Supply chain disruptions continue to be the case. Even the earlier disruptions from chips, but also now added to that other supply chain disruptions coming out of the war.
Finally, obviously, the COVID-19, by and large, most of the world is opening up. As you know, lockdowns in China, and there's still some attendant issues in Hong Kong continue to persist. That's a little bit of a mixed story. I think about the world, the macro at large, and here I think about the Ukraine situation in particular. You know, the first order impact for most of East Asia, and certainly for us, is de minimis. We really don't do too much in Ukraine and Russia, et cetera. There is a second order impact, and that comes principally through the commodity complex. You know, gas prices are up, oil prices are up, metals are up, like I said, food is up.
That obviously is likely to create idiosyncratic risks in banking. You know, you have customers who deal in all parts of the spectrum, so you never know, you know, who might stub their toes. It's really the third order risks which are likely to flow through, which are very hard to understand and model right now. That's what I call the macroeconomic flow through. You know, what happens to sales as a function of, you know, prices go up, but volumes come down. That might have some impacts on, you know, the sales outlook for, companies and corporations. The second question, what happens to margins? Interestingly, ...
So far we're finding that in many sectors, companies are being able to push prices through, particularly in food and agri and industries with inelastic demand. I don't think that's going to be the case everywhere. You'll probably see margin squeeze in some industries. As interest rates goes up on the back of inflation, debt servicing is going to start creating its own set of headwinds. As I mentioned before, that's likely to be more acute for small and medium enterprises than for large companies. When you put all of these together, it's quite clear that the outlook over the next year or so is going to be difficult to forecast. It's something that you've got to keep a careful eye on.
Fortunately for us, our own portfolio continues to remain quite resilient. As Sok Hui pointed out, we have spent the time doing a lot of stress tests. We've stress tested the entire commodity complex, the food and agri, metals and mining, all of the usual industries you'd expect to get impacted by Ukraine. We've been stress testing our property portfolio, the consumer side, FMCG, in the context of China lockdowns, et cetera. In that, we're seeing no imminent areas of concern or stress in our portfolio. As said, SME is likely to face more pain, but again, it's a well-tested and well-stressed portfolio in the last few years because it's been challenged for the last few years. Our portfolio is largely secured. Retail portfolio is also well secured.
Our non-secured book is quite small. The rest of it is mortgage. We really see no material impact from the China lockdown still again, given principally the nature of our exposures, it's very high-end. It's our target markets are high quality. We really have very little in the FMCG complex, which is downstream. So we're not seeing too much of that. That notwithstanding, we will continue to be somewhat cautious about releasing general provisions. As Sok Hui pointed out, we've built up a good buffer of general provisions over the last couple of years. Given all the uncertainty in the environment, we will continue to be thoughtful about when we start releasing those general provisions and when would be appropriate.
Now, obviously, because we're going to be benefited by the tailwind that comes from interest rates, we can afford to take a more cautious view on GP release, without really impacting the bottom line materially. Next slide on outlook, which is on the business. If you look at the business, and as Sok Hui pointed out, a very strong first quarter. Despite all the doom and gloom around the world, underlying business for us continues to hold up quite well. Loan growth was 2 percentage points, very broad-based across countries, across industries. It was in property, it was in TMT, it was in energy. So quite broad-based. Our pipelines are still robust.
I think we're you know in good shape to do 3%-4% growth in the first half of the year. The second half of the year would remain to be seen you know how much growth rate comes through. One of the areas that we're not seeing the growth that we originally anticipated obviously was the mortgage book. The tightening measures in Singapore in December has obviously slowed down that book. We think we'll get some growth in the book this year, but nowhere near what we originally thought we would. The fee outlook is mixed. Some parts of our fee income continue to do really well. Cards is benefiting. Again, as Sok Hui pointed out, the card spend on credit and debit is up over 2019 levels.
The spend on travel is coming back, though it is still much smaller than the 2019 levels. As the borders continue to open up, the increased travel should give us another boost on card fee income. The transaction banking fee income is doing well, and our cash management and payments volume is up almost 15% last year. That's quite strong. I think that should continue to do quite well. On the fee income side, there are two uncertainties. One is wealth management. The first quarter wealth management was down 20% over first quarter last year. Of course, first quarter last year was exceptional. As we are going into the second quarter, I think we're tracking closer to last year's levels.
You know, relative overall to last year, that could prove to be a little bit of a headwind. The other is investment banking. Debt capital markets, fixed income was slow in the first quarter. In the last two weeks of March, there were a flurry of deals, and we did quite a few, but for the whole quarter it was slow. ECM was also slow. Issuance out of Singapore and Hong Kong was down some 75%-80% for the first quarter. We actually outperformed. We did 10 deals in the first quarter, including a couple of SPACs. Overall, the environment for investment banking continues to be somewhat challenging, so unless, sort of, markets don't open up, that could create some small headwinds. The thing that really outperformed is treasury and markets.
We continued to have a very robust quarter. It wasn't, again, as strong as the first quarter of last year, which was exceptional, but all things considered, it was fantastic. We benefited really from market volatility across most of the desks. The interest rates in particular, but also credit and FX. A lot of big moves, as you know, and I think we're able to capture most of these big moves quite well. I think, as I mentioned the last quarter, in part we've benefited from the far more robust flow business that we have. The fact that we've got digital connectivity into customers, we see a lot more of the customer flow, and I think that's allowing us to position well rather than position our books much better.
Obviously the big, you know, upside for us as we go forward is the sensitivity to interest rates. We continue to model our book, and it seems to us that SGD 18 million-SGD 20 million per basis point is something that is quite robust. Which means that, as Sok Hui said, if rates go up 100 basis points, we should expect to benefit to the tune of SGD 1.8 billion-SGD 2 billion. If you look at the track record, when rates went down, the eight rate cuts between late 2019, early 2020, and we said before, those eight rate cuts cost us about SGD 2.8 billion in interest income.
It's not that illogical to assume that if you get those kinds of rate increases back, you should be able to accrue a lot of that income back. That's a positive. If rates go up faster or sharper, then obviously that benefits us even more. Finally on expenses, we continue to be quite thoughtful. There is inflationary pressure, as we mentioned before, wage inflation in particular is coming through. We're being thoughtful about how we manage our expenses to make sure we're investing sensibly for the future, while keeping an eye on the what we need to do in the short term. I'll stop there and happy to take any questions.
Okay, thanks, Piyush. We will now open the time up for media Q and A. Before you ask your question, please state your name as well as the media house you represent. Diana, can we see whether there are any questions from the media, please?
All you participants with questions to pose, please press zero one on your telephone keypad now and you will be placed in the queue. To cancel the queue, please press zero two. Once again, zero one on your telephone keypad now. We have got the first question from Takashi Nakano from Nikkei. Please go ahead.
Hello. You have a number of digital projects, such as DBS Digital Exchange, Climate Impact X, and Partior. Are these businesses expanding as planned? Are there any new projects planned for the digital business?
Well, actually, as we indicated last time, we have a few, what I call focus on the fires that we put out in the last year. The DBS Digital Exchange was one of them. We floated Climate Impact X where we are a 25% shareholder. We also floated something called Partior, which is a blockchain-based settlement system. We've launched something called DBS FIX Marketplace, that is to facilitate fixed income issuance for clients. We're actually also looking at monetizing some of our other software capabilities that we built over the years. There are quite a few digital activities that we have floated and spawned.
The truth though is that these are still relatively small, so it's going to take some time before they hit stride and before we start seeing the impact of that, of these, in terms of P&L. On the DBS Digital Exchange itself, our assets under custody are slowly creeping up towards the $1 billion mark. We're just a tad shy of $1 billion right now. Trading volume for the first quarter actually slowed a bit, and again, reflected the issues I cited earlier on wealth management. People are doing a little less activity right now. Nevertheless, as we go into the year, we're expecting to make this whole offering online for our accredited investor customers. I do expect that volume to continue to pick up in the course of the year. We are also doing tokenization and listing.
We've done one last year. We have a couple of more in the pipeline of different asset forms, so you should expect to hear more from us in this space.
We can take another question.
Our next question, Goola Warden from The Edge. Please go ahead.
Hello. Hi. Hi, Piyush and Sok Hui. Thanks for the call. I've got about four questions, but I may compress them. Has there been any change? I mean, you guided on loan growth and the interest rate impact. Has there been any update in your guidance on the credit costs because the economic outlook has changed so much? Okay, that's one question. The second question is about your funding mix, because you largely have 62% CASA. You know, are there any signs of customers looking to switch to FDs, and what sort of impact would this likely have? Okay. The third question is on the balance sheet.
One of your peers said this morning that there was an interest rate impact on the valuation of its high-quality liquid asset, which you hold for your liquidity coverage ratios and your NSFR, net stable funding ratio. I noticed that your HQLA has actually risen quarter-over-quarter. Is there any impact on this from rising interest rates, and how would this be treated? Then last one was the impact of rising rates on your net interest income, but you've mentioned that. Thanks. Thank you.
Okay. Goola, I'll take the three questions. Maybe Sok Hui can pitch in on the third. In terms of credit loss guidance, really there's not any material change in our specific provisions guidance at this point in time. You know, a couple of quarters ago, I'd said that in the past, I used to guide that we should be looking at 22-25 basis points of SPs, but in the last three years, we have got a lot more confident about both our portfolio and our credit discipline. Therefore, you know, on the SP line, somewhere between 15 and 20 basis points is likely to be a more considered level of provisions that we might have. The difference is a subtle difference only that in
I had guided earlier that whatever we get on SPs, there's a good chance that we could release general provisions this year, so the net allowances number could be like last year, close to zero. At this point in time, as I said, we will be a little thoughtful about whether we do release the provisions or not. If we get a lot of benefit and tailwind from interest rates, we might hang on to those general provisions for longer. It's too early to comment on that right now. Outside of that, our credit guidance hasn't changed. Like I said, all our stress testing and underlying testing is not showing us any imminent issues in any part of our book or any part of our portfolio.
In terms of the funding mix, actually, our CASA ratio is 75%, not the number you mentioned.
Mm-hmm.
It is, as Sok Hui pointed out, it used to be sub-60 pre-pandemic. It's now 75. It's very broad. So far, we're not seeing any material outflows from CASA into fixed deposits. In our modeling, we assumed it will happen. As rates rise, people will switch from CASA to fixed deposit, and we factored that into our interest rate sensitivity, return to FDs, et cetera. But we're not seeing too much of that happen at this point in time. The interest rate sensitivity guidance we've given of SGD 18 million -SGD 20 million per basis point is actually modeled for all that. It's included in that number. Finally, on the balance sheet, the impact on our fixed income portfolio is like everybody else.
We obviously hold a long bond portfolio of high-quality liquid assets and other assets. When rates rise, that portfolio gets marked down. The way accounting works, that mark down doesn't go to the P&L. It goes directly to equity. You can see that in our shareholder fund. Our shareholder funds are down by about SGD 1 billion, and that's because we have taken the impact of that directly into equity in the quarter. Sok Hui, you want to elaborate on that?
Yeah. Large part of our high-quality liquid assets are held in the investment book because we actually think that we will, in the course of time, have to hold this high-quality liquid assets. Because they are held under the FVOCI format, Fair Value through Other Comprehensive Income, rather than direct mark-to-market in the P&L statement, you'll find the effects will show up in the FVOCI line and affect the book capital. It doesn't affect the P&L as much.
Okay. It won't affect your dividends, will it?
No, it wouldn't.
Okay, thanks. Just one last question on the investment banking outlook, especially for your equities. What's the pipeline like? Is there any impact from, you know, the China problem or any other areas?
Actually, Goola, our pipeline is very strong, both for fixed income and for ECM. There are a lot of people who would like to continue to access the public market. The pipeline is very strong. The question really is, are the markets open and are investors willing to come in to deals and issuances? Like I said, we did 10 IPOs in the first quarter, which included a couple of SPACs. We launched the SPAC business in Singapore and some interesting deals. By and large, investor appetite is meager. With the ECM and DCM, we've got to continue to keep an eye on. If we get a market window in which investor appetite picks up, we can launch some deals, and if not, then we just have to wait.
Okay. Because we've not seen any REIT IPOs this year.
We did a couple of REITs as well in the first quarter.
Oh, okay. Thanks. Thank you. That's it. Thanks.
Thank you. Our next question, Anshuman Daga from Reuters. Please go ahead.
Hi, Piyush. This is Anshuman here. So overall, I mean, obviously the results had a tough comparison from a year ago. Specifically talking about the wealth management business, do you see more pain for the next few quarters? I mean, can you give some color on how weak do you expect this to happen? Because this will obviously weigh on the performance. Thanks.
Yeah, Anshuman, like I said before, the first quarter last year was, I mean, just off the charts, and therefore first quarter this year is about 20% down from first quarter last year. It's early days, but as we are going into the second quarter, I think we'll track closer to last year. It looks like that right now. I don't think you'll see a continued fall on a year-on-year basis. Then beyond that, it depends on market sentiment. If consumer confidence turns, you know, if the markets look up, then obviously the underlying secular nature of our wealth business is very strong. By the way, AUMs are up for the quarter. As you can see, we have SGD 3 billion in AUM, and our net new money is also up. We continue to benefit from incoming flows.
In other words, there is a reasonable amount of dry powder in the system. If the market turns and confidence improves, then we will go back to, you know, getting growth in the business. If confidence is slow, I suspect we might track closer to last year.
Thanks. Is the issue that clients are deleveraging and also or is the bank doing that on its own as we see the collapse in tech shares and others?
It's mostly client driven. We haven't had a problem in terms of, you know, too many margins. We're quite conservative in margining, so we haven't seen a lot of issues with respect to margin calls or anything that's caused us to cause deleverage. As the clients are being a little bit careful and wary with all of the volatility in the markets.
Okay. Thank you.
I know we can take another question.
Thank you. Yes. We've got Carly Lau, Asian Private Banker. Please go ahead.
Hi, Piyush. Good morning. Sir, I also have a similar question on wealth management. Would you be able to share a little bit more color on the performance this quarter, given that the first quarter last year was a record high? Now if you see like the Singapore, Hong Kong and even South Asia, they're opening, do you expect that client activity will resume in the second quarter, I mean, in the second half of the year? Thank you.
Carly, I think just to repeat what I said to Anshuman, you know, the year-on-year comparison for first quarter was unusual because first quarter last year was great. On a year-on-year basis, our AUMs are up, and therefore, even with lower activity, our overall income will hold closer to last year. Whether it starts going back to double-digit growth really depends on market sentiment. You know, your guess is as good as mine on whether market sentiment comes back in the second half of the year or not.
How about the AUM performance in the first quarter?
Say, what is the question?
The AUM in the first quarter.
I just said our AUM was up by about $3 billion. We went up from, I think, $291 billion to $294 billion. We are up by $3 billion in AUM. That includes some net new money as well.
Okay. Thank you, Piyush.
Thank you. We now have got Prisca Ang from The Straits Times. Please go ahead.
I have a question about savings account. Given the current environment, do you plan to increase or restore rates on the Multiplier Account for retail customers going forward?
Sorry. You're not coming through clearly. There's a big echo. Can't follow you.
Hi. Can you hear me clearly now?
Yes, that's better.
Yeah. My question was, given the current interest rate environment, do you expect to restore rates on retail customers' Multiplier Account, and is there a time frame you're looking at for this?
Prisca, actually, it's not coming through clearly.
I heard you till you said, "Given the current environment," and then you got garbled again.
Oh, yes. Okay. Let me repeat myself. Given the current rate environment, do you expect to restore interest rates on customers' Multiplier Account for retail customers, and is there a time frame for this?
Prisca, maybe I'll repeat for you because you WhatsApp me as well.
Okay, sure.
Okay. She's asking whether in the current interest rate environment, whether we intend to reinstate rates on the Multiplier Account.
I frankly, I haven't given it too much thought. Obviously, as the interest rates and the overall environment go up, they start getting reflected in all of our pricing, both our loan pricing and eventually our deposit pricing. At this point in time, though, because we're sitting on so much CASA, we will be quite thoughtful about what new liability products that we create and the pricing on those.
Now we take the next question, please.
Thank you. Our next question, Rebecca Isjwara from S&P Global Market Intelligence. Please go ahead.
Hi, Piyush and Sok Hui. Thank you again for hosting this conference today. It's a great quarter. Just wanted to get a little bit more of your thoughts. You said that the interest rate would impact your net interest margin quite well. Could you talk a little bit more about that? Thank you.
Yeah, I guess, you know, as you know, for us, because our book is so heavily CASA funded, 75% CASA ratio, and if you look at our underlying loan book, the Singapore dollar loan book is all funded by CASA, and the U.S. dollar loan book is 80% funded by CASA. What that means is when rates start going up, and by the way, the bulk of our loan book, U.S. dollar is all floating rates, and Singapore dollar is predominantly floating rates, two-thirds. When rates start going up, obviously the yield on the book starts going up, and our cost of funding tends to lag. Therefore, that gives you this net incremental NIM.
Depending on, you know, when the rate hikes happen, if the rate hikes happen earlier, then the NIM grows through quicker. If they happen, like, if there's seven or eiight rate hikes, one every, you know, Fed meeting, in a more graduated, then you'll get NIM impact will be less this year. But eventually, over two years, you will see the full impact of the NIM through our portfolio, or most of the impact of the NIM through our portfolio. That's why we've modeled it effectively. We've given this guidance of the $18 million-$20 million of impact per basis point increase in rates. Sok Hui, you want to add to that?
Yeah. The 18-20 million per basis point, you should note that it is how the sort of rates play out over a full year. It's very much dependent on timing of the rate hikes. There's some dependency on pass-through assumptions as well as conversion to FD or outflow. We have been quite, I think, prudent in our modeling. It takes into account all these factors, and we think this range is a reasonable range.
Thank you.
Thank you.
The next-
We've got Faris Mokhtar from Bloomberg.
Hi, can you hear me?
Yes, go ahead.
Hi, Piyush. Just a quick question. It's really a clarification and then.
Sorry, you're not coming through clearly either.
Yeah, can you hear me?
It's actually not clear.
Okay. Can you hear me now?
Okay. Why don't you try speak slightly slower and see if I can follow you.
Can you hear me? Is this better?
Much better. Much better. Yeah.
Okay. Yeah. I just wanna seek some clarity. I mean, of course there's so much interest in cryptocurrency and Singapore's stance on cryptocurrency, and you have mentioned it before in the last earnings that, you know, you were looking to extend crypto trading services to retail clients by at least at the end of 2022. Recently at the AGM, you were also saying that, you know, probably this might not happen in the near future. It would be great if let's say, you know, I can get a definitive stance from you on, you know, what's the plan with regards to extending crypto trading services to retail clients.
Yeah. Faris, it's first of all quite clear we won't do any retail crypto in Singapore this year. But what we will do is, you know, get our current crypto offering online so people can deal on mobile and on internet banking. We have a fairly large affluent customer base and an accredited investor customer base. So we have the opportunity to continue to scale this business quite nicely, just focused on the AI base in the course of this year. On the retail, this thing, I would've liked to see people trying to retail this year, but there are two things. One, it's taking a little bit longer than I anticipated to put the technology apparatus and the processes around it. Also regulators are not that comfortable.
Around the world, regulators are a little bit more careful about letting retail access to crypto. The consequence I figure if we get to retail, it's unlikely to be a this year activity. We will start getting our arms around that at the earliest next year.
Got it. Thank you so much, Piyush.
Thank you. The Q and A session is still open. If you would like to ask a question, please press zero one on your telephone keypad now. If you would like to ask a question, please press zero one on your telephone keypad now.
Okay. It looks like we don't have any questions, in which case then let's draw this time to a close. The analyst briefing will commence at 12:15 P.M. Thank you, everyone.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.