Ladies and gentlemen, welcome to the Q4 2021 DBS Analyst Briefing. I will now hand the session to Michael to begin today's presentation. Michael, please begin.
Hi, everyone, and welcome to the session for the buy and sell side. You've seen the media briefing, so we can go straight to Q&A. Diana, can you open the floor for questions?
We will now begin the question and answer session. All participants please question to code. Please press zero, one on your telephone keypad, and you will be free to the queue. Our first question, Mr. Nicholas Teh from Credit Suisse.
Hi. Thanks for taking.
Please go ahead, sir.
Yeah, hi. Thanks for taking my questions. I just have two questions from me. First, can you talk about the CASA level that you guys have? You know, if we're going to an environment where interest rates go back to, you know, say, the previous peak, you know, do you expect the CASA to stay above that historical 60% level? And if so, is that because, you know, you think that the amount of liquidity in the world just stays high or, you know, has there been a structural change in your deposit franchise over the last couple of years? The second question is just on cost to income ratio. Again, you know, we move back to that 2019 NIM level, do you think that cost to income can get towards that or get to the aspirational below 40% level?
Okay, first on the CASA ratio. Our own sense is that while there will be a reduction in macro liquidity this year, there will still be a lot of money floating around. The Fed balance sheet was up to $9 trillion. You know, we look at the last time when they tried to bring down the balance sheet from $4.5, they got to 3.6, 3.7, and then it didn't go down much beyond that. I do think that while you know, they'll make every effort to start tightening liquidity, it's not going to be that easy. It's gonna take some time. First of all, I do think there will be a large amount of money in the system. The overall growth in money supply obviously will moderate.
Now this thing is saying you'll probably get money supply growth, which is more aligned to growth as opposed far in excess of GDP growth. Nevertheless, there will be a supportive environment for deposits, notwithstanding. Within that, we do think that some of the CASA will flow out. You know, we got to 76%, I'd say $140 billion of CASA. So some of that is likely to flow out. In our modeling, we've assumed that the delta growth, about 25% of that, will be repriced and flow out, both in Sing dollars as well as in U.S. dollars. There will definitely be some impact to that.
Now, at the same time, our understanding of the kinds of monies we have, the operating accounts and the underlying transaction volume growth that we have, cause us to believe that we will get sticky CASA. Our growth from the high 50s to 76, while growth stays 76, I don't think we'll get back to the below 60% level either. Therefore, somewhere in between are those two probably where we will wind up. The cost to income ratio, yes, is the short answer. You know, if you just do a simple math and you add back SGD 3 billion or SGD 4 billion of income into our numbers right now and keep the cost basically where it is, you get that cost to income ratio which is well south of 40%.
Okay, got it. I guess if you do get that improvement in income, you wouldn't kind of, I guess look at accelerating some of the digital spending or anything like that you have in the plans?
Well, you know, part of it is function of bandwidth. If you look at historically, even in good times, our total spending has over the last year gone up from $900 million to about $1.1 billion. Yeah, it's possible if you have a spend program, you know, we could go and hire a few more people. We want to create a new center with, do some more activity. But in the big scheme of things, we are talking about, you know, an incremental 50, 100 or million bucks, right? Relative to the upside where you're talking billions of dollars of delta.
Got it. Thanks a lot.
Thank you. Our next question, Aakash from UBS, please go ahead.
Sure. Thank you very much for taking my question. Three questions. The first one is to Piyush. You know, just to get your thoughts on the rate cycle and like what is the base case in your mind? Like you also said, you know, from the past experiences, it doesn't seem like the Fed goes all the way when they start raising rates and then they start backing off very soon after. What is the base case for you this time? What do you think happens? Do they have the capacity to sort of go all the way, like, you know, six , seven rate hike that is being priced into the market? Or do you think recession sort of, you know, fear starts setting in once they proceed?
Well, you know, for my money, I think we'll have a much better sense by June, by the summer. The reason for that is the question is how sticky is inflation. There my own view is that the inflation is. I've been saying for some time, if you remember last quarter I said, I don't think inflation is just transitory. It's not just supply chain snafu. Actually, you know, last year global trade volume went up 5%, so the supply chain held up quite nicely. Of course, there were, you know, backups in ports and in Los Angeles and so on, and that made a difference, and workers didn't come to work, but overall trade volume went up. The real shift came from the demand side. The demand for goods grew dramatically last year relative to demand for services.
The first question is, does the demand for goods fall off quite sharply this year, or not? The second question is commodities. How high is oil, energy and so on, how sticky does it stay? The third question is wage inflation. How sticky is wage inflation? My point last time was I'm seeing wage inflation creep through everything. We're seeing it in our own business, and we're seeing it in the business of our clients. Wage inflation is sticky. It doesn't go away. My view is that if inflation comes off the 7% handle, and they start seeing prints more in the 4%-5% handle, they'll be moderated in the interest rate increases. If for whatever reason they're not able to bring the inflation rate down, then they don't have a choice.
I mean, you know, federal government said. I think Raghuram Rajan said in India some time ago that if rates are high, then it doesn't matter what the cause of the rates is. You know, the central bank just doesn't have a choice. They have to take action. At our desk, my current base case, the thing is that one rate hike a quarter is my base case. As I said, you know, I could be quite wrong, but I'm currently assuming that we'll probably get four rate hikes this year.
Okay. Got it. Fair enough. Thank you. Following up from this, I think, you know, if I look at the dividend increase, now, from a capital perspective, you know, there's no doubt you're very, very comfortable. My question is more on the cash flow side. You know, if I look at the consensus estimates for this year, it's somewhere in the range of SGD 6.7 billion-SGD 6.8 billion for the full year. You need SGD 3 billion to maintain your 13% capital for the RWA growth. It's a 7% RWA growth is what I'm assuming. The remaining is SGD 3.7 billion-SGD 3.8 billion cash flow, which you're basically paying everything out, right? Now, this is in a year when your credit costs are very close to zero. Now rate hike comes through.
Yes, that will help you offset that for next year. If there's any change in the rate outlook, how do you think about paying this dividend next year?
I'm gonna leave Chng Sok Hui the question. I'm not sure. When you say cash flow, I mean cash flow is a question. You're saying liquidity, obviously that's not a concern. Presumably payout ratio, I mean how much payout am I prepared to make? Is that what you have in mind?
Yes. I mean, I think next year if your credit costs go back to a normal level, then would you still have that SGD 3.7 billion-SGD 3.8 billion in earnings to pay for the dividends?
I see. You've not understood fully, I guess, what the guidance that we have given. We are think this year our credit cost is SGD 52 million. We said next year.
This year.
This year in 2022.
2022.
We are likely to be in the SGD 0 million-SGD 100 million range, right? That's because we think that our line of sight on our specific provisions is that it will sort of normalize, but that we also see improvement in the credit quality that will allow us to release some of the general provisions that we've set aside. Our base case assumption is that barring unforeseen circumstances, our allowance line will actually be quite flat. I think your assumption is that it might not be. I think that's why you're asking.
I think for FY 2023. FY 2022 is very clear. Your credit costs will remain very low and you have a lot of room to pay this dividend. I'm just asking what happens in FY 2023 when your credit costs normalize back and if there's a change in the rate outlook, right? If your revenue increment doesn't come through.
I guess I understand what you're saying. You're saying if our profits fall, and it could be. You're saying that instead of 6.8 I go back to SGD 6 billion because cost of credit picks up. I can't rely on interest income growth and there's no other growth in the business, then you won't be able to pay a dividend. Then, of course, if you make those assumptions, then you're correct, I can't retain that dividend. But those assumptions to make that after 10, 12 years of regular growth, we stop growing, that the interest rates don't come through, our double-digit non-interest income doesn't come through and the growth in our balance sheet and this thing doesn't come through. Now, if you want to start with all of those assumptions, then yes, the dividend can't be paid. That's correct.
Sure. No. I mean, if you get only three, four rate hikes and then, you know, the Fed outlook changes, even you think in that situation as well, you will be comfortably in a position to keep paying this dividend for FY 2023 also. That's what you're suggesting.
Yeah, I guess if we get four rate hikes, I told you that that's worth about, you know, $2 billion of income to me if I get four rate hikes. If I go back to a normalized cost of credit instead of zero, I'll be at 800-900. I'll still be a $1 billion over where I am right now.
Right. Okay. Fair enough. Just a last question on rate sensitivity.
Yeah. Maybe to also highlight that if we have four rate hikes this year, we're not gonna see the entire sort of, SGD 1 billion-SGD 2 billion coming through this year. A large part of it will flow through next year, actually. Even on the assumption of four rate hikes, you're not gonna see a large part of that, in 2022. You'll see in 2023, simply because the rate hikes will take time to flow through, right?
I guess there's some other way to think about it. My non-interest income, fee income now is about $3.4 billion, right? There's fee income that has been growing double digit. I think we can continue to grow that double digit. I'll get $300 million-$400 million lift from there. My volumes and my, let's say if my loan book can grow even 5%, I will get another $300 million lift from there. Even if I go to normal, you know, SP levels. Just the underlying growth in that business should be able to take care of it by and large. If I get, you know, the rate hike, whatever else I get is over and above that.
Okay. Got you. Thank you. Just the last question is the rate sensitivity. You said, you know, SGD 18 million-SGD 20 million, between rate sensitivity calculation that you've done. It's more like a through the cycle estimate, right? For rate sensitivity. Is it fair to say that initially when your CASA continues to stay at 76%, the sensitivity might even be higher than that? Like, we might get, I don't know, SGD 25 million for every basis point initially.
Well, I'm not sure. Is it because I think what will happen is that as rates start going up, two, three things happen. One, people start moving from CASA to FD, right? That will happen, and that starts happening quite quickly. Second is that, as you know, the right thing to remember, the Fed is buying all the corporates or the, all the Treasuries. I think some of the liquidity in the world will go with banks, et cetera, stepping up to buy Treasuries. I do think start seeing some outflows very quickly, and you start seeing some repricing very quickly. You're right. I mean, maybe for a few weeks you'll see the benefit on the entire pool, but I think the consequent effects on that on both the quantum and rates will start coming through, and that's why we model that in.
And.
Okay. The rate cycling, I expect this is the number we should be using on average for all the rate.
Yeah. I think it's a good way to check. I mean, if you go back and look at our interest income over from 2019 to now, it's quite easy. You can figure out that our interest income is down SGD 2.8 billion. You can see the rate cuts and you know the rate cut, you know we're down SGD 2.8 billion, and that pretty much shows you our sensitivity on the downward part of the cycle. Therefore, on the upward part of the cycle, and now given that the book expanded so much more, it's not an unreasonable guesstimate.
Got it. Great. Thank you for that. That's one question for me. Thank you.
Thank you. Our next question, Ms. Melissa Kuang, Goldman Sachs. Please go ahead, ma'am.
Hi. Thank you very much for taking my question. I just have like two, perhaps, just two questions. In terms of the rate hikes that you're assuming for, so if we do assume like, you know, like a Fed forward seven hikes, in terms of thinking about, you know, asset quality and loan growth, do you think, you know, perhaps we might see a little bit more credit costs than we're expecting, and also that loan growth might slow? Or do you think it will more likely be the 2022 kind of scenario that will happen? Secondly, in terms of your dividend back again, just wanted to check. I mean, looking at the dividend numbers and you know, just analyzing it, like you said, 1.44.
If we think about payout ratio, is 50% the right kind of payout ratio if you're looking at mid-single digits growth? Somewhere how we can think about, you know, what kind of net profit you are actually thinking at for 2022, or is 50% the right number, or should it be lower, or can it be higher, you know, given the loan growth guidance that you have given us? Thank you.
On the impact of higher rates on both loan growth and on asset quality, Melissa, you got to remember that even if you take seven rate hikes, eight rate hikes, you're starting from zero. You're saying your terminal interest rates are 1.75% and 2%, and how severe, how steep are those, and do they start putting a dampener on companies' willingness to invest and to grow? My general view is not. This will take you back to where we were in the summer of 2019. The summer of 2019, you didn't see a disproportionate impact of the 2% rate. Now, you could argue in some countries might be, might not be.
I think a 1.5%-2%, 2.25% interest rate environment is not that material to impact people's investment cycle decisions. In terms of the cost of credit and credit quality, I said in the media thing, I think at that level, the only people to watch out for are the SMEs. Because there for them, debt servicing might start. If you add that to inflation and wage price increase and cost of goods increase, and now their, you know, interest burden also moves up to 2%, you might find SMEs start getting more crimped. As you know, I've always maintained that I just cannot understand why the SME sector has been so resilient in Asia for the last five years.
I keep expecting that SME shoe to drop, and so far that SME shoe hasn't dropped. It's you know a large part of our financing is secured, but we haven't even had to foreclose. We haven't had to go and get rid of collateral. They've just been relatively resilient. I'll keep an eye out on that. If rates go back up to 2%, the 2019 level inflation is high. Do you see more pain in that sector? From our own portfolio though, as you know, we've you know building and construction, retail, tourism all of the supply chain, textile, garments, all of the typical industries that could suffer, we've been very, very tight with those. We've been managing it very tightly.
All our own stress testing right now doesn't show any material, you know, cause for discomfort. Yeah, that is one part of the portfolio that you might see some more stress and pain in. We look at that. Your second question on dividend, actually, you know, a lot of it is opportunistic. We like to keep some dry powder in case a deal like Citi comes along or, you know, we get the opportunity to do something like we did in Standard Chartered Commercial Bank. I also hasten to add with our M&A deals, we probably need the next couple of years to try and, you know, consolidate what we've done.
I'm not sure we'll be rushing to add any more right now. In which case, it could be that we could afford to increase our payout ratios from 50%. In our modeling, we figure actually it could even go up into the 60s quite easily without being constraining the growth of our business. Yeah, we'll take a look at it slowly.
Okay. Sorry, just back in terms of credit cost. Does it mean that in 2023, you are still not gonna expect provisions to normalize 20 basis points, or do you think by then in 2023 you'll get back to 20 basis points credit cost?
The uncertainty for me is actually not the rate environment, but China. That's why I'm cautious about making a prediction for 2023 at this point in time because, you know, China, the idiosyncratic risk is high. We manage our portfolio well. We've not gotten to any of the real estate stuff. All our supply chains are working well. You know, between now and 2023, there are some party congresses which are being held. There is some, you know, Omicron related, the country continues to be shut down. The borders between China and Hong Kong need to reopen. I think we'll have to figure and see if there's any headwinds coming out of China and greater China, before we can, start making predictions about 2023.
Whether you get back to a normalized credit environment by then or you still have some cushion or not.
All right. Okay. Just to clarify on the dividend. You said that you think that you can increase it to 60%. Just thinking about the 1.44 bps , is it based on?
Sorry, there is no cross exchange. I'm not following you.
Sorry. In terms of the 1.44 bps annualized, would we be thinking that that is closer to the 60% that you're looking to pay out, or is that closer to the 50%? In terms of. Because you said that earlier that you might or you can increase your DPS payout to 60%. I just wondered in terms of your, you know, kind of, when you're doing the budgeting for 2022, would 1.44 bps be closer to the 60% payout, or is it still on the low side and there is upside in terms of the 1.44 bps for the year?
If you do the math, you'll figure that the 1.44 is closer to 50 than to 60.
Okay, great. Thank you very much. Thanks.
Thank you. Our next question, Harsh Modi from J.P. Morgan. Please go ahead.
Hi. Thanks for the question answer session. A few questions, Piyush. First, does it make sense to look at the sensitivity to near slope appreciation? Does it impact this SGD 18 million-SGD 20 million in any meaningful way?
Yeah. Harsh, that's a good question. I think there's one uncertainty around it. We've been conservative. There's one uncertainty around it, and that is, you know, what happens to SORA. In the past, SORA was directly linked to the exchange rate policy, and therefore, the slope of this thing made a material difference. The strengthening Sing dollar allowed less pass-through. A weakening Sing dollar allowed more pass-through. You could see that quite easily. In the SORA climate, it is not entirely clear how much SORA will be determined and driven by the exchange rate situation. That's something we're all going to have to sit, figure out and learn. In our projections, therefore, we actually model for different levels of pass-through.
We've taken a base case of a very conservative pass-through from the U.S. rates into the Sing rates. It is something which it's a good observation. Could we be wrong? Yes, we could. If the pass-through is materially lower, then that 18-20 actually in our tail events, it comes down to, you know, $16 million instead of $18 million, for example.
Okay. Okay, thanks for that. The second one on the non-interest income, I see the duration is quite low, above five years. It is about SGD 14 odd billion of the book. If we start expecting reasonably sharp parallel shift in curve, does a lot of it start impacting your non-interest income? And does that kind of offset meaningfully? As in what is the risk of a meaningfully offset from mark to market on the P&L and potentially on balance sheet as well?
Almost none because, you know, first of all, you said the bulk of the duration of our book is in the three-five-year range. More important, if you look at the underlying, a large part of our book is held in accrual portfolios and hold to collect portfolios. That doesn't mark to market and doesn't come through the P&L at all. That either goes on an accrual or if anything, goes to the OCI line. At this point in time, the yield curve is quite static. If anything, we got to think about at what time do we want to start, you know, building some more duration in the book. We don't have that right now, but the downside is very little.
Yeah. Thanks for that.
Harsh, see on our slide 24.
Mm-hmm.
Where you see the hold to collect portfolio is about SGD 50 billion, so that's not going to be impacted. We hold this portfolio for yield. Then on the fair value to other comprehensive income, it's SGD 35 billion with a bulk, concentrated.
For hikes or thereabouts this year. How have you already started repricing in terms of your time deposit rates? Are you locking in, let's say, fixed-rate mortgage? Like, how are you starting to tactically last, let's say, couple of months, changing your product strategy on both sides of the balance sheet?
If you look at our mortgage throughput in the last couple of quarters, we're now originating more than 60% floating rate, so as opposed to fixed rate. We changed our pricing in anticipation of rate hike to be more aggressive on the floating rate side than the side. Because in fact, we've taken the same strategy across the board. We've incentivized floating rate loans because we anticipate pickup in rates helping us. On the funding architecture side, as you know, we basically paid down $ billions of fixed deposit in the last couple of years, because, you know, for a CASA zero cost money.
Because right now we are so massively overfunded, we haven't, you know, really had to go out and raise, you know, long-term fixed money at this point in time. We've not done that.
Okay. Thanks. The last one on the operational risk. Is it fair to assume that whenever that 30-40 basis points comes off, that it will be available for distribution?
I guess it is, because, I mean, that's the whole intent of MAS. When they've got us to add SGD 1 billion of incremental capital, that is to set aside so much capital which you can't put to work. As and when that gets drifted off, then, you know, you can either use it to grow or to distribute. I've already said we've got too much capital for growth, so it will be available for distribution, yes.
Great. Thank you so much, Piyush.
Thank you. Our next question, Jayden from Macquarie. Please go ahead.
Okay. Thanks for taking my questions. The first couple are just follow-ups to the ones that Harsh had. On the MAS supervision, you may have said this on the media call, but what's the expected timeline of the independent review and what's your base case of when they may release this 50% loading?
I don't know. I mean, I can't put words in MAS' mouth. We've got you know, we did two reviews. One was from ForgeRock, who is the vendor who owns the software we bought. They sent, you know, an expert down from the U.S. who spent a month with us. The second was from Deloitte, who is actually a system integrator for that software. MAS asked us to, and so we appointed another third-party independent reviewer who started the work a couple of weeks ago. That will get done by May. It'll take about three months to do. We're not waiting for that. There's quite clearly some things we need to tighten up, and we're doing that in parallel.
My own sense is that, you know, by the third quarter of this year, we'll be able to demonstrate that we've got all of the areas that need to be fixed. Beyond that, it's up to MAS when they're satisfied, whether they want us to do more, whether they want to take some more time to come to a view or conclusion. The last time in 2010, the ATM outage took 14 months before they reversed the charge. If that gives you any frame of reference. I think we'll be ready in, you know, six-eight months, nine months. Whether MAS wants to extend it is up to MAS.
Okay, that's really helpful. The next question is just on the NIM. Just to come back to the Sing dollar slope. I guess MAS sounded quite hawkish lately and, you know, they're obviously seeing inflation come through as well. You said that your modeling is conservative. Does that mean that you have the +1% slope already embedded, or is it a different level?
No, the way we do it, we don't need to embed the slope from here. We need to take the thing at what swap point or forward points and what is the likely flow-through. We measure. If you look historically, the flow-through from the U.S. to Sing rate can range anything from 40% to 60% to 80%. We model at different levels of flow-through into the Sing rate. We also model. Actually, our book is very beneficial in this, the U.S. dollar book, where of course we model 100% flow-through. There's the Hong Kong, the HIBOR book. Today that's material because Hong Kong, by the way, CASA is at 82%, even higher than our group CASA.
We model the Hong Kong dollar flow-through, and that's generally more aggressive because Hong Kong dollar is a pegged rate currency. We model the Sing dollar flow-through at these various levels. That's, you know, 40, 60, 80, and we take a conservative baseline around that. That's how we do it.
Okay, that's helpful. And my last question, and this has just come up more in conversations with investors. I don't mean this in any negative way. It's just around succession. I mean, the stock's done so well. The bank's performing really well. You've made a couple of, I guess, really timely and opportunistic acquisitions. Is there any sort of latest thoughts around how DBSs succession at the, you know, at the management level, whether it's the CEO position or otherwise?
Well, as I maintained before, you know, we are very robust in our succession planning effort, and so we've had identified potential successors for me for years, and we keep sort of developing them and rotating them and giving them mobility, et cetera. If I get hit by a bus, we have enough bench strength. Also our team's been so, you know, stable over the years. It's a very solidly functioning team, so I don't expect discontinuity. Now, having said that, on the other side, in the last few months. Jamie Dimon has got this, never ending five years in the future forecast. Brian Moynihan has just declared he's going to work till 70. James Gorman just said he wants to work till 70. My board is in no hurry for me to leave.
You know, I've got enough runway ahead of me right now. I don't think there's anything imminent.
Okay. That's great to hear. Thanks, Piyush. I'll pass back to the moderator.
Thank you. Next question, Weldon from HSBC, please go ahead.
Hi. Thanks for taking my questions. Can I just understand the SGD 1.5 billion of GP in the base case assumption of, you said about SGD 0-SGD 100 million credit cards this year, how much is being written back from that? And then, you won't write back the whole thing, I guess, but you have the SGD 400 million above MES requirements. Is that sort of the range that we could see written back this year and the next year?
Yeah. I think, again, we've made the point, the total GP stack is actually SGD 3.9 billion. SGD 1.5 billion is an overlay. The balance is in the normal sort of methodology for setting aside GP. When we talk about the overlay, we have said we have not released any overlay since we've built it up in the COVID period. The SGD 1.5 billion has not been touched since we built it. That's point of clarification. Any release in GP that you see in the year is purely a function of the normal stack. As the loan portfolio quality improves, as weaker cases are migrated out, as tenures get shortened, as cases get resolved. The SGD 447 million that you see in the GP write back is purely from the normal stack.
Does that answer your question?
Yeah. I guess, let me add to that. First of all, you know, if you take our total 3.9, 1.5 is overlay, so 2.4 is more still lying in the normal stack. That normal stack reversal, I expect to continue to happen this year. That's because, we've been quite conservative and we continue to see improvement all around. People are repaying. We're seeing upgrades in our portfolio. We've got some, you know, for potential reasons and precautionary reasons, we downgraded some names there. Now they're beginning to perform, we're upgrading them. I do think that, we should be able to get some reversal from that 2.4 normal stack, this year. Then beyond that, depends on how the SP performs.
It is also possible that we might be able to reverse some from the overlay if we need to. Though, if I had to bet, I'm not sure we wind up having to release a lot from the overlay this year. Maybe, you know, $200 million-$300 million, potentially. If that is the case, we still have enough overlay that we could potentially look to releasing next year. On a going concern basis, I would like to keep some overlays. I don't intend to release the SGD 1.5 billion because we always make sure that we have some top up. I mean, we have some opportunities not just into this year, but next year.
Right. In the base case for this year, how much overlays are you planning to release in that guidance that you provided?
I don't have a base case view because it all depends on how much I can release from the SGD 2.4 billion stock.
Okay.
Our overlay, yeah, our overlay release is also guided by our thinking on, I guess, the cross-border opening up. I think we are monitoring sort of a number of indicators before we decide whether we are comfortable enough to release the overlay as well.
Okay.
We track agency index, we track airport arrivals, we track delinquencies after moratoriums are lifted, et cetera, et cetera.
Okay. Got it. Just another question on trading. I think just now, I guess in Sok Hui presentation, I think you said that structurally the treasury market has recurring income has improved. But in the net trading income in the income, how does that SGD 1.1 billion translate to the net trading income line in the income statement? Like, because this year.
There's some interest income and net trading income, and frankly, it's fungible. It depends on what the traders want to do. Sometimes they wind up actually taking positions that show up through the yield and the spread. Sometimes they wind up actually working through the derivatives line, so it doesn't show up in the interest income, it shows up in the trading income line. I don't bother about that too much because it's actually quite fungible, you know, how they want to treat it. I think what's more important is how robust is the quarterly performance. You know, as you know, we were now two years of SGD 1.5 billion. Last year was helped by the interest rate collapse, so they obviously made some money on the fixed income portfolio. This year has not been helped by that at all.
This year has been very active across the whole range of other desks. As we look at the underlying, therefore, we are relatively confident that you know, getting up to what Sok Hui said, 275 a quarter is $1.1 billion is possible. I think the $1.5 that we are just still on the high side, so I don't factor. I am assuming that $300-$400 million bucks of that might not repeat. At the $1.1 kind of range, I think looking at underlying desks, I think that's doable.
Right. To clarify, is the SGD 1.1 billion trading income that is in the income statement the one that is this year? I mean, 2021 is SGD 1.8 billion, and then 2020 was SGD 1.4 billion. So the SGD 1.1 billion, are you talking about that line that is the SGD 1.8, SGD 1.4 billion?
The 1.1 is the combined P&L income that is shown in the net interest income line as well as the non-interest income line. You can see that in the segmental report that we disclose. We have a segmental report that is on the performance summary, and that shows the breakdown of net interest income as well as non-interest income. For the full year 1.5, the trading income you see on page 11 of the performance summary, that 783 sits under net interest income and 726 sits under non-interest.
Right. Okay. Understood. Perhaps maybe I just wanna try to get if there's any guidance on the SGD 1.8 billion, you know, going forward. What would you think is the normalized rate for that number?
Well, I told you I don't think about it that way. I mean, it's hard to do because, I don't hold treasury to how much do you make on the trading line and how much you make on the interest income line. For me, it's quite fungible, and I leave them to do. I don't think of it that way at all.
Okay. Understood. Maybe just one small follow-up on this trading thing. Is there any difference in a rising rate cycle to the trading income versus in the past few years or past three years where we've seen lower rates?
Yes, of course. On a falling interest rate, all treasuries do well. That's why they benefited last year. This year there was no falling interest rates or they're flat. The 1.5% this year is quite different from last year. Last year we made money on that, and we made money on the sale of our investment securities, right? You can see that last year we benefited a lot from that. This year didn't have that. In a rising interest rate environment, treasury tend to be more challenged because they don't benefit from that. They've got to make it up as well.
A large part also depends on what happens to the other asset classes, how the equity markets are doing, because we have a very active equities and equity derivatives book, and so on. It's a balance.
Okay. Sure. Thanks very much.
Thank you.
Sorry, you didn't come through. Is that the operator or?
Yeah.
Operator, we can't. We're not getting you. Hello?
Next question is Neel from CLSA. Please go ahead.
Hi. Thanks for the call, and for the opportunity and congratulations on a good set of numbers. My CASA and inflation-related questions have already been answered. Piyush, I had, well, I don't know if this is a naive question on the November outage. On the cost front, are there any fallbacks or clawbacks from your infrastructure service providers for service parameter deliverables? That was the first question I had. The second is, in terms of sector stress, you mentioned, yes, you're waiting for the other shoe to drop on the SMEs, and it hasn't happened. But within the SMEs, like, are there, like, can you think of one or two areas which you think have a stress point, whether it's construction or property or...
Well, obviously, I think tourism-related might be one of those areas and how much exposure you'll have to those segments. The last question I had was actually nothing to do with the results. It's more to do with ESG and green loans. How do you see it in terms of your asset base in two to three years from now? I'd love to get your thoughts on how you see the environment evolving to a tipping point where the cost of capital for corporates actually start changing for corporates not really toeing the line on ESG parameters. Outside of the asset book on green and ESG loans, how does the bank look at its own carbon footprint and reduction and targets over the next two-three years? Thank you.
Okay. I think there's three questions. One on the infra providers. Actually, there is no clawback because it's all insourced. We don't use third-party providers for any of the stuff. We do buy the technology from people. You take the access control technology. There are two or three big providers in the world who produce this. You know, we've procured the technology from one of them, a company called ForgeRock. They've got some 1,500 clients around the world, U.S.-based company. But after that, we actually implement and install it ourselves. Our, you know, the first couple of reviews we've done, there's nothing wrong with the technology. The fault tolerance of the system, the replication methodology, the redundancy, it all stacks up.
No, we have no anticipation of doing any clawbacks on from anybody on that. Your second question on the SME. You know, the typical ones which we've all been worried about the last four, five years are construction, F&B, retail, tourism and tourism-related. These are sectors which are most likely to be under this thing. Like I said, last year, we've tightened our oversight of these sectors. We've got out of marginal names. We've improved our security positions. We've done everything that we needed to manage these portfolios quite well. We're not seeing any pain over the last couple of months. Even I thought after the moratoriums got over, you might start seeing some pain. Now, the moratoriums are pretty much done.
We had SGD 1 billion of loans under moratorium. That's down to some SGD 300-400 million now, down to under 10%. All the companies that have come off the moratorium, delinquencies have not moved up, so they are holding up at flat. Those are the sectors we will continue to look at, but it looks okay from what I can see right now. The last is on sustainability. We're obviously quite actively pushing the sustainability agenda. We grew SGD 20 billion in sustainability-linked loans in 2021. That's on top of SGD 10 billion the year before that. We're well on track to our target to get to SGD 50 billion of sustainability finance by 2024/2025, which is what our commitment on the total. In fact, I think we'll exceed that. We continue to do a lot of that.
By the way, outside of this, we're also doing a lot more capital markets. We did 50-plus odd deals on DCM, which are also sustainability or green deals, worth $23 billion. That's quite an active agenda for us. As we're growing our book, this is, you know, continue to be a disproportionately faster growing segment for us, the sustainable and green financing segment. If you look over the next two-three years, you know, as you know, we three months ago signed up for the Net-Zero Banking Alliance, so we have a commitment to net-zero 2050. I didn't do that for a year because I just wanted to make sure that this is not an idle 40 years from now, you know, somebody after me will worry about it promise.
We did a lot of work to make sure that we had milestones along the way, so we've got some fairly well marked out measurement processes. Today, we're measuring carbon emissions for about 3,000 of our companies. It's about a third of our book. We work with consultants to model the rest of it. That's on track. We've come up with a transition finance taxonomy so we know what we qualify and what we don't. We are currently actively working with our clients to be able to figure an acceptable set of transition pathways, and those obviously vary by sector. You know, we use the NGFS, we use IEA, we use IMO for different industries. What are acceptable pathways?
We have a pretty good line of sight for what we need to get done between now and 2030, and that's why we were able to sign up for the Net-Zero commitment. On our own footprint, by end of this year, we said we'll be zero carbon in our own operations. We've done a bunch of things for that. You know, we've got solar panels on our buildings in Changi. We try to use our own solar power. We've retrofitted some of our buildings, like in Newton, to be completely carbon neutral. We've changed the entire fleet from fossil fuel to electric vehicles for our cash in transit and for our ATM. You know, we've dialed down on our paper consumption. We did a bunch of things.
In fact, after doing all that, because we're in Singapore, we rely on the grid, and so because the grid is the grid, you can't actually make a material impact to your consumption of electricity, so you've got to rely on offsets. We have an active program of RECs and offsets to make up the difference, so we can get to net zero in our carbon footprint by the end of this year.
Okay. Great. Thank you, Piyush. Thanks very much.
Thank you. Our next question, Krishna from Jefferies. This is our last question. Please go ahead.
Yeah, hi. Thank you very much. All the questions have been answered. Just one housekeeping one. On the risk-weighted assets, I saw that the growth both year-on-year as well as half-on-half, they are almost twice that of the loan growth. I was just wondering what factors are leading to that, if there is any credit risk migration or are there mostly model changes and should not be paying too much of attention on to that?
It's mainly loan growth.
You're saying the RWA grew faster than the loan growth. Is that correct?
It is like RWA, typically the weighting is 50%, so I'm seeing an RWA growth of 9%, whereas loan growth is around 9%. I'm just wondering that if there is any change in terms of risk weighting itself.
Then.
Krishna, I think we'll have to get back to you. I didn't notice that. We'll take a look at what might have caused that. Chng Sok Hui will get back to you.
Yes.
Okay. Sure. No worry. Thank you very much.
Thank you. That comes to the end of our Q&A session. I shall hand over for closing to Michael.
Thank you for joining us. We'll see you next quarter.
Bye.
Okay, thanks all. Bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.