Good morning, everyone, and welcome to DBS' 2nd quarter financial results briefing. This morning, DBS announced solid second quarter earnings, which took our first half net profit to record CNY 3,700,000,000.
Return on equity was 14%, significantly higher than a year ago. To tell us more, we have with us our CEO, Piyush Gupta and our CFO, Chung Sook Hui. And without further ado, Sook
Hui, please. Good morning.
We achieved our first half performance as performance as net profit rose 54% from a year ago to RMB 3,700,000,000. Return on equity rose from 9.5% a year ago to 14.0%. 1st and second quarter net profit were the 2 highest on record. Business momentum accelerated in the first half, mitigating the impact of lower interest rates. Loans grew 6%, deposits 3% and fee income rose 20% with the 1st and second quarters the 2 highest on record.
Both treasury customer flows and treasury markets income also reached new highs. Underlying expenses were stable and the cost to income ratio was 42%. Asset quality was resilient with the NPL rate at 1.5%. New NPA formation fell to pre pandemic levels and was significantly offset by repayments. Specifically, the home has the recording feature on.
There was a general allowance write back of $275,000,000 while overlays were maintained. General provision reserves remain prudent at $4,050,000,000
They were
$800,000,000 above MES minimum requirements and $1,200,000,000 above Basel Tier 2 eligibility. Total allowance coverage was 109% or 199% after taking collateral into account. Liquidity was ample, with CASA accounting for all the deposit growth over the last year. The CASA ratio rose 10 percentage points to 76%. The liquidity coverage ratio and the net stable funding ratio were at 136% and 127%, respectively.
Capital was healthy with the CET1 ratio rising to 14.5%, well above the group's target operating range. The leverage ratio of 6.8% was more than twice the regulatory requirement of 3%. With the full lifting of regulatory restrictions imposed a year ago, the Board declared a 2nd quarter dividend of CNY 0.33 per share. The scrip dividend scheme has been suspended. First half net profit rose 54% from a year ago to a record CNY 3.71 billion.
Total income was 4% lower at RMB 7,440,000,000, a strong growth in business volume was more than offset by the impact of lower interest rates and lower gains from investments. Asset quality was resilient and total allowances declined by RMB 1,850,000,000 from the RMB 1,940,000,000 set aside in first half twenty twenty to RMB 89,000,000 this half year. Net interest income fell 12% or RMB589,000,000 to RMB 4,200,000,000 as 7% loan growth was more than offset by 27 basis points fall in net interest margin due to low interest rates. Fee income rose 20% or RMB308 million to a new high of RMB1.82 billion. All activities delivered strong performances with Wealth Management and Transaction Services rising to a record.
Other income declined 2% or RMB 28,000,000 to RMB 1,430,000,000 as record trading income offset lower investment gains due to favorable market conditions a year ago. Expenses were 3% or RMB 91,000,000 higher at RMB 3,130,000,000 due to the Euftwale Luxe Mini Villas Bank. Underlying expenses were stable. Asset quality was resilient. There was a general allowance write back of RMB 275,000,000 from repayments of weaker exposures and credit upgrades.
This compared to the $1,260,000,000 set aside a year ago. Specific provisions were $308,000,000 lower at $364,000,000 2nd quarter net profit declined 15 percent to RMB 1,700,000,000 from the previous quarter's record. Total income was 7% lower at RMB 3,590,000,000 as both fee income and trading income declined from their 1st quarter highs. Profit before allowances fell 10% to RMB 2,050,000,000. Net interest income was 1% or RMB 18,000,000 lower at 2.09 billion as the 3 percentage loans growth was offset by a 4 basis point decline in net interest margin to 1.45%.
Fee income was $868,000,000 9 percent or $85,000,000 lower than the previous quarter's record. The decline was due to a moderation in wealth management fees from exceptional levels a quarter ago. Other income declined 20 percent to RMB 162,000,000 to RMB 632,000,000 as trading income fell from the previous quarter's high. Expenses were 3% or RMB 44,000,000 lower at RMB 1,540,000,000. There was a smaller write back of GP this quarter of RMB 85,000,000 compared with RMB 190,000,000 in the previous quarter.
Specific provisions were RMB 36,000,000 lower at RMB 164 $1,000,000 Next slide. First half net interest income was 12% lower than a year ago at RMB 4,200,000,000 Strong loan and deposit growth mitigated a 27 basis point decline in net interest margin to 1.47 percent. The fall in net interest margin was due to interest rates that remained low following steep cuts by central banks post the onset of COVID in March 2020. 2nd quarter net interest income was 1% below the previous quarter at RMB 2,090,000,000. Higher loan and deposit volumes offset the impact of lower net interest margin.
Net interest margin fell 4 basis points to 1.45 percent due to an increased deployment of surplus deposits at lower yields as well as lower market interest rates. Next slide. Gross loans amounted to RMB4.3 billion. Growth accelerated from 1% in the previous half to 6% in first half, with a 3% increase in each of the first and second quarters. Non trade corporate loans were RMB 7,000,000,000 higher in first half, led by drawdowns in Singapore and Greater China.
Trade loans increased RMB 6,000,000,000 with a rebound in regional trade. Housing loans rose RMB 2,000,000,000 as bookings continued to be strong, while wealth management loans were also higher on buoyant investor sentiment. 2nd quarter growth was led by trade and non trade corporate loans. Housing loan and wealth management loan growth was sustained at the previous quarter's level. Deposits.
Deposits rose 9% in constant currency terms from a year ago to RMB483,000,000,000. 3 percentage points or RMB 14,000,000,000 of the growth was over the first half. The growth continued to be led by CASA, which enabled more expensive fixed deposits to be released. CASA rose RMB 26,000,000,000 in the first half, while fixed deposits fell RMB 13,000,000,000. The CASA ratio was 76%, up 3 percentage points from M20T and 10 percentage points from
a year
ago. Faster than loan growth and deposit growth resulted in a loan to deposit ratio of 82%, up 2 percentage points from end 2020. Fee income. First half gross fees rose 19% from a year ago to a new high of CNY2.08 billion. Both the first and second quarters were the highest on record.
Wealth management fees in the 1st 6 months grew 27 percent to a new high of RMB 945,000,000. While market conditions continue to be the major driver of wealth management, the business has also grown structurally due to 3 factors. 1st, we have expanded our reach to the retail segment. Secondly, our digital platforms enable us to capture more customer flows. 3rd, we have grown annuity income streams by focusing on a range of core investment products.
Insurance fees were also higher as they recovered to pre pandemic levels. Card fees rose 10% to RMB334 1,000,000 as consumer spending recovered from a year ago with growth led by online transactions. Travel spending continued to remain low. Investment banking fees increased 81% to RMB114,000,000 from a recovery in equity transactions and record fixed income fees. Transaction services fees grew 10% to RMB454,000,000 from higher trade and cash management activities.
Loan related fees rose 2% to $230,000,000 2nd quarter gross fee income grew 25 26% from the previous year. All activities rose by double digit percentages as financial market activity and consumer spending recovered from the trough a year ago. The growth was led by a 31% rise in wealth management fees, a more than doubling in investment banking fees and a 6% increase in card fees. Gross fee income was 9% lower than the previous quarter as in wealth management fees moderated from the Q1's exceptional levels. Investment banking fees were higher, while transaction service fees and cut fees were little changed.
Loan related fees declined modestly. Expenses. 1st half expenses were 3% higher than a year ago at 3,130,000,000. Excluding the U. S.
To our Halakhshmi Villas Bank, underlying expenses were stable. Staff costs increased as the business environment improved but were offset by lower occupancy and computerization costs. The cost to income ratio was 42%. Consumer Banking and Wealth Management performance. 1st Half Consumer Banking and Wealth Management income declined 12% from a year ago to RMB 2,710,000,000.
Income from loans and deposits fell 35 percent to RMB 1,130,000,000 as the impact of a lower net interest margin was moderated by higher volumes. The decline in income from loans and deposits was partially offset by a 20% rise in investment product income to RMB 1,160,000,000 and an 8% increase in cut income to RMB 378,000,000. Assets under management increased 13% to RMB285 1,000,000,000. We maintained our domestic market share for savings deposits and housing loans at 52% and 31%, respectively. Institutional Banking.
Full year Institutional Banking income was stable from a year ago at CNY 3,000,000,000. Cash management fell 42% to CNY 424,000,000 as the impact of low interest rates was moderated by volume growth. The decline was offset by increases in other products led by double digit growth in loans and Investment Banking. GTS deposits grew 12% to RMB177 1,000,000,000. Treasury and Markets.
First half Treasury Markets income and Treasury customer income were both at record levels. Treasury Markets income increased 31% to RMB 934,000,000 from strong performances in equity and credit trading. Customer income was 13% higher at $913,000,000 with Consumer Banking and Institutional Banking each accounting for half the amount. 2nd quarter treasury markets income was RMB360 1,000,000. It was 28% lower than a year ago and down 37% from the previous quarter, which were the 2 strongest quarters on record.
Customer income was 10% higher than a year ago and 13% lower than the previous record quarter. Hong Kong. Hong Kong's first half net profit rose 8% in constant currency terms to RMB 617,000,000. Total income declined 5% to RMB 1,260,000,000 as the impact of low interest rates was moderated by higher fee income and loan growth. Asset quality was resilient with allowances falling 82 percent or RMB 130,000,000 to RMB 27,000,000 due to lower general allowances.
Net interest income declined 19 percent to RMB 690,000,000. Net interest margin fell 44 basis points to 1.30 percent due to low interest rates, but was moderated by 4%
loan growth. Fee income
grew 28% to RMB 3.90 Fee income grew 28% to RMB395 1,000,000. All activities grew by double digit percentages led by investment products, bank assurance and cash management. Other non interest income rose 12% to RMB171 1,000,000 from treasury customer sales. Expenses were a little changed at RMB491 1,000,000 and the cost to income ratio was 39%. There was a general allowance write back of RMB 18,000,000 compared to the RMB 124,000,000 that was set aside a year ago.
Specific allowances were RMB 12,000,000 higher at RMB 45,000,000. Asset quality. Asset quality was resilient as the economic environment improved. There has been no change in loans under moratorium and delinquencies since March. First half new non performing asset formation declined to pre pandemic levels and was significantly offset by repayments.
As a result, the NPL rate improved from 1.6% 6 months ago to 1.5%. Specific allowances. The resilient asset quality resulted in first half specific allowances declining 46% from a year ago to pre pandemic levels. Specific provision charges amounted to 3 63,000,000 or 18 basis points of loans. 2nd quarter specific allowances were RMB 164,000,000 or 14 basis points of loans.
They were 18% lower than the 1st quarter and 43% lower than a year ago. General allowances. General allowances reserves of RMB4.05 billion remain highly prudent. They included general provision overlays built up in prior periods, which were maintained. The write back in the first half of for general allowances was from repayment of weaker credits as well as credit upgrades.
The general provision results were RMB800 1,000,000,000 above MES' minimum requirement and RMB1 200,000,000 above Basel Tier 2 eligibility. Allowance coverage was at 109% or 199% when collateral was considered. Capital ratios. Capital continued to be healthy. The common equity Tier 1 ratio rose 0.6 percentage points from end 2020 to 14.5%.
Profit accretion and the methodology refinement for market risk rated assets were partially offset by the increase in credit risk weighted assets. The CET1 ratio was above the group's target operating range of between 12.5% 13.5%. The leverage ratio of 6.8% was more than twice the regulatory requirement of 3%. Dividends. The Board declared a dividend of $0.33 per share for the Q2 and the scrip dividend scheme has been suspended.
With the full lifting of regulatory restrictions imposed a year ago, the dividend has reverted to its pre pandemic level. Based on yesterday's closing share price and assuming that dividends are held at $0.33 per quarter, the annualized dividend yield is 4.3 percent. In summary, we achieved an exceptional first half comprising the 2 highest quarters on record. Strong business momentum was sustained in the 2nd quarter and the pipeline remains healthy. Asset quality has been better than expected.
New NPA formation was at pre pandemic levels and was significantly offset by repayments. Specific allowances were also at pre pandemic levels having almost halved from the previous year. The balance sheet remains prudently fortified with RMB 4,000,000,000 of general allowance reserves well in excess of requirements. Our capital and liquidity are also strong. While risk remain, we expect business momentum to be sustained in the coming quarters.
We are well positioned to support customers and deliver shareholder returns. Thank you.
Thank you, Sakkui. And again, welcome everybody to our quarterly half yearly results. As usual, I think I'll take a few minutes and just touch recap some of the things Sakhi mentioned and maybe give you some sense of the outlook going forward. So first, just to underline what Sakhi said, the business momentum for actually the full half year has actually been extraordinarily strong. 2nd quarter continued to be as strong as the Q1.
Loan growth of 3% in each quarter was actually far in excess of what we anticipated. And the good news, it was very diversified. So we saw increase in the property sector. We saw increase in TMT. There were increases in the energy sector, particularly renewables and sustainability related loans.
And the loan growth was from Greater China. It was from Singapore, Southeast Asia. So very diversified loan growth continues to be very robust. What was particularly pleasing though was the fee income, the noninterest income. The fee income has been just quite very broad based.
So wealth management was very strong. Q1 was strong, Q2 was also very strong. And I think that reflects not just the underlying growth in the business, but also some of the digitization that we've been able to do in that range of products. Transaction banking was strong. Again, reflects some of the digitization that we've been able to do in both trade and the API linkages we have.
Cards has been picked up. It's about at the gross level, it's about 10% where we used to be pre pandemic. So the rest of it will come with the travel opening up, I would imagine. And Investment Banking was very strong, both ECM and DCM. DCM on the back of just a large amount of issuance being done around the region because of the low interest rate environment.
And ECM, a lot of it is still REIT and property related, but in general, strong investment banking activity as well. So very diversified fee income growth and extraordinarily strong treasury markets growth. And as Sakhi pointed out, that was not just trading. Trading continued to be robust in both quarters. But as I please, that also reflects underlying customer flow activity.
And by the way, for the 3rd time, I think that also reflects the digital activity runway. A lot of electronic origination from the customers today that we did not have a year or 2 ago. And obviously, our trading was good. 1st quarter was off the task, 2nd quarter was slower. But as I compare our overall trading performance relative to the global majors, I think we've done pretty well through the half year.
So, 2nd quarter was as strong as first quarter. Overall, first half, quite pleased. I think the other part of the story is as we're looking forward, we continue to see really good business momentum all around. The pipelines are very robust. Now we're guiding full year loan growth to high single digit.
Sort of we grew 6% in the half of the year. We might grow about 3% in the second half. The reason for slowdown really is a chunk of the growth in the first half was the trade book. We put on $6,000,000,000 of trade assets. Some of that reflected increase in commodity prices.
It's unclear to me what's going to happen in the second half. And we might be able to hold that. We might have to give some of that up. So trade is an uncertainty. But the non trade activity is as robust as it was in the first half of the year.
So looking that to be good. Mortgages are also in Singapore. The bulk order is also looking decent. We grew $2,000,000,000 in the first half. I think it will slow down.
We're expecting only $1,000,000,000 more in the second half, even though bookings in the first and second quarter were well over $4,000,000,000 very strong bookings. So it remains to be seen how that plays out. The fee income, we're now guiding mid teens fee income growth because again, a procedure of the product categories we spoke about, we continue to see good momentum. We got into the Q3 with continuing the momentum across each of the categories, wealth management, transaction services, payment, etcetera, everything stays strong as we went into the Q3. So feeling relatively okay with that.
And expenses continue to be stable. As Sakhi pointed out, if you back out the Lakshmi Vilas acquisition, the rest of the expenses are quite flat. So fairly well controlled. Again, I think all the digitization that we've done over the years is helping in that regard as well. If we take a look at the credit outlook, there is the other big upside we've seen.
Talked about NPA formation. It's actually gone back to pre pandemic level. And they're all onesies and twosies. There's no other thing. In the first half of the day, we saw a couple of names, not large, but in the auto related sector, auto components in the Southern China bed and auto distributor in Indonesia.
We saw something in the textile garment sector has got impacted because of the lockdowns. We saw a little bit to do with building and construction in Singapore, but nothing systemic. And like I said, 1sies and 2sies. The good news is that for whatever NPA formation is happening, we're getting repayment. So we pretty much the entire NPA formation in the first half, almost 80%, 90% of that got set up because we got repayment.
Those repayments are also leading to some recoveries on the provision line as the repayments come back. So it's generally looking quite resilient. Our guidance for the rest of the year, I'm saying and we are saying
it's going to be short of a $1,000,000,000 now we're saying
it's going to to be short of $1,000,000,000 Now we're saying it's going to be less than $500,000,000 pretty sure. We were less than $100,000,000 in the first half. And so you can see in the second half, we're still hedging our bets a little bit. And that's mostly because we're not sure what the impact of delta and the moratoriums might be. Though other than the macro, unease, if you look under the hood a little bit, the portfolio is actually quite solid.
We're not seeing any signs of weakness across board. And even the loans under moratorium, they're all down to about 10% of the levels they were when we started. So the mortgage book in Singapore, we had €5,000,000,000 is now only €500,000,000 The SME book in Singapore was €5,000,000,000 and now it's down to about €400,000,000 dollars The Hong Kong book is down to about $1,000,000,000 in change. And some of these books also the extensions have been pushed into year end or even into next year. So it seems to me it's unlikely you're going to see a lot of pain from that in the back end of the year.
The good news is that 90% that's come off moratorium, the delinquencies are looking fairly decent. We're not seeing a big pickup in people's inability to pay once they come off moratorium. So actually that's looking okay. There are little uncertainties in the consumer book. By and large, delinquencies are okay.
Taiwan's gone up a bit on the Cars portfolio. It's the only country where I'm seeing a pick and consumer delinquencies. Indonesia is holding, but I think Indonesia might weaken in the back end of the year. But net net, we could see some upside. We certainly don't think we'll exceed $500,000,000 on the provision line, if you will.
And finally, a last comment on this various new initiatives we've launched. As we talked about last quarter. In the middle of last year, we took a view that the interest rate environment is going to be a headwind for the next 2, 3 years, close to 0 interest rate. So in addition to dialing up a large part of the fee income and non interest income activity that we've been doing in our core business, it would be sensible to start looking for alternate and incremental sources of revenue growth. And we've sort of shown some of the things that we got.
We've got a couple of inorganic deals done. We've launched a few businesses which are digital in nature. We launched a couple of new funds activities and investment banking franchise in China. If you ignore the BAU stuff like the retail wealth and supply chain, but add the rest of the stuff, I think we'll probably wind up with an incremental $350,000,000 $400,000,000 of income from these activities next year, which should be $200,000,000 $250,000,000 more than this year. So this should be able to start helping us cover some of the interest rate shortfalls that we've seen over the last 12 to 18 months.
Again, it's early to say if we do continue to get meaningful traction, then we could see more upside in these numbers. But I think that will happen more in the following year than in next year. But net debt, when you look at where we are overall, we are really pleased. It was a strong first half of the year and we go into the back end of the year with a very high degree of confidence. So I think we're happy to take questions.
Thank you, Piyush. We'll now open the floor to questions from our media friends on the line.
Diana, we can take the first question please.
We will now begin the question and answer session. Kindly announce your name and company when posing your question. Please also be reminded to mute your laptop audio to avoid audio interruptions in the background. Our first question is from Rebecca Aswara from S&P Global Marketing Intelligence. Please go ahead.
Hi, good morning. Thank you so much for presenting today. I was just I have two questions. First is, could you elaborate a little bit more on the decline in performance over the Q2? You mentioned a bit earlier on.
And second, do you expect net interest income or NIM to and NIM to stabilize? Or do you expect these two metrics to keep trending lower? Thank you.
Rebecca, I missed the first part of your question. Something you said about we couldn't follow.
Yes, about the decline in performance over the second quarter. And could you explain a little bit more about that?
The decline in performance over the second quarter. Well, I think the point is the Q1 was an extraordinarily strong quarter. It was just off the chart. We made $2,000,000,000 of bottom line in the Q1. And as you know, that's a global phenomenon.
The trading was very, very strong and wealth management was very, very strong. You've seen from most banks around the world that trading was hard to replicate. In fact, we did much better than most global banks. So our Q2 trading results are not that far off. I mean, they're down from 1st half.
And simply, wealth management. If you look at the total income line, we are trading down about $200,000,000 quarter on quarter and wealth management is down about $100,000,000 But the 2nd quarter trading and wealth management results are still significantly higher than any averages that we have or any other comparable period. So that explains, Dery, the bulk of the fall. The other thing as you alluded to is NIM is still down. NIM is down by 4 basis points between the first and second quarter.
And the pace of NIM erosion is dropping off. And if you look at our total NIM in the last 18 months, we've done about 40 basis points. Of that, the biggest erosion happened in the first half and second half of last year, some 1723 basis points each. So the first half of this year only eroded 4 basis points. So it's pretty much leveling off.
I think there's still some scope for NIM to continue coming down through the back end of the year. And this is partly driven by the fact that we continue to get surplus deposits. We now have about $30,000,000,000 that we're placing with central banks and the yield on that varies a bit. The yield on that was somewhat lower in the Q2 than the Q1, for example. So that's a big bag of NIM.
But at the same time, it's a very good use of money because it's ROE accretive since there's no risk weighting on these assets pretty much zero risk weighted. And at the same time, it's P and L accretive. And so as I mentioned in the last quarter, for this kind of money, I'm not managing to the name. I'd rather manage to the P and L and manage to the returns.
Thank you, Diana.
Thank you. Our next question, Jenny Pon from Mandarin. Please go ahead. Sajaneporn from Jandharan, please go ahead.
The first one, when do you see the bank's business travel to start picking up? 2nd, the projected SGD350 million revenue plus that will come from new initiatives next year, which business or unit will be the biggest contributor? And the third question, are you close to any transactions regarding Citi's consumer asset sale? And what be your budget for such transactions? Thank you.
First question is on travel?
When is it starting?
The question of when does travel open up? I mean, I'm not an epidemiologist or a policy wonk. But from everything that we can see, they're opening up for travel in several countries around the world. In the West, the U. S.
Has opened up, the U. K. Has opened up. I think there's a high likelihood that as vaccination rates get up, you're starting opening up around the region. So you might see some opening up in the Q4.
I think the bulk of it will only happen next year, however. But again, I'm not a soothsayer, so I'm not sure I can give you too much more insight on that one. On the incremental revenue, the chunk of it next year really comes from the 2 M and ADs because they're both bringing revenues from day 1. But some of the other activities are also quite useful. We expect to start seeing significant or meaningful numbers now from the funds activities, from the digital activity, digital exchange, etcetera.
Some of the others like a participation in Partior or Climate Impact X and so on, we have the early days. We're going to start seeing some transactions start happening only at the end of the year. And so that's not an issue up in our numbers in a meaningful way anytime soon. On your third question, which is on the Citi transaction, frankly, the process is underway. And there's very little more we can say at that time.
We indicated earlier that we'd take a look at some of the assets. We are in the process of doing that right now. When we say what is our budget, we've always said we are not price chasers. So we're very mindful of making sure that we do transactions that we can get to be accretive in a reasonable period of time. But from a different plant, as you can see, we're sitting on surplus capital.
We have 14.5% capital adequacy. And that's reasonably in excess of our operating range. We like to long term be close to 13%. So that does give us some cushion without having to go and raise new capital.
Thank you, Piyush. Sorry, I just want to be sure, you say that on the long term your CET1 ratio should be closer towards 13%. So the surplus would be the budget, right?
Well, the surplus is available. Budget, it all depends. We could always go and raise more capital if there's really attractive deals came our way. But at this point in time, I just want to point out that we could do a deal of up to that amount without having to go back into the market.
But could you say that in dollar's term, like is it going because you have been talking about bolt on acquisitions, which would mean like a few of $400,000,000 something. But I think the surplus currently is in terms of more than $1,000,000,000 if I'm not mistaken.
Akhir, surplus is even more than that. But we can do we paid $1,000,000,000 for the Shenzhen Rural Commercial deal. For me, it's still a bolt on and that was accretive immediately because the way the accounting works that so that's a $1,000,000,000 asset or capital we put to work, but it was accretive immediately. So if the deal is good and the capital accretion is good, we have the ability to do more than $300,000,000 $400,000,000 size deals.
I see. And when you say it earlier that the process is underway, you were referring to the general process at Citi rather than any transaction that BBS is engaging with the bank or?
Yes, the general process at Citi, yes.
I see. Thank you, Biyush.
Thank you. Our next question, Chris Roy from Euromene. Please go ahead.
Hi, good morning, everyone. Thanks very much for taking my question today. I hope you're all well. Two questions from me. The first one, your results as it relates to asset quality is very much
in line with what we've been seeing, not just in Asia but around the world and the earnings results over
the last 2 weeks. It's a pattern of returning provisions,
a strong outlook for credit losses, NPLs, which are, aren't budging or
in a couple of cases, are even coming down, all of which looks great. And yet, here in Southeast Asia, we look around and we see Indonesia in the absolute worst condition of the pandemic than it has been to date. Malaysia, we're in trouble. Vietnam, for the first time, experiencing lockdowns. India, of course, has been through terrible suffering.
And one find oneself thinking how can both positions be simultaneously correct? On what basis can we assume such resilience of the customer base in the markets to which you're exposed outside of places that are clearly doing well like Singapore? Secondly, just following up on Shania's question about Citi. Obviously, Citi has 13 disparate businesses on the block and some seem to make more sense for you than others do. Are you able to give any indication as to which geographies you have engaged discussions with Citi about potential acquisitions there?
Thank you very much.
Chris, the answer to your first question is obvious. That is that the impact of the pandemic on health systems and on consumer demand is evident in some small sectors. And those sectors are really actually not large in the scheme of the global macro economies. So if you look at the PMI data, you look at the GDP growth data, you look at the retail spend data, you look at every macroeconomic data around this thing, it's all north of 50%, in some cases getting up to 60%. So the fact that you're seeing a more spread of the pandemic and more cases happening is really not translating into 90% of economic activity around the region.
So what happens is, yes, the F and B sector, to some extent, the tourism sector, the isolated sectors tend to suffer. But certainly, if you look at the nature of our book, our actual exposure to those sectors is very small. So it's not a large part of our business. And the bulk of our exposures, which are in manufacturing, exports, PMT, property. Think about property.
Property prices are on a fire around the world. It should have been thought that the pandemic should be equated to property. Property prices should be down, or property prices are up 10%, 20% in the 1st 6 months across the world. So a large part of the macro economy is dealing from the sectors that are really coming under pressure at this time. The other thing I would my personal submission is we focus a lot on the number of cases of the COVID.
We start focusing more on the actual medical outcomes and how many people are going to hospitals or how many deaths there are. It's actually not consistent and it's not as bad as people were worried a year ago. And so even in countries like India and Indonesia, we're talking about 30,000, 40000 cases, we would translate that to the actual number of actual deaths, etcetera. It's much smaller than people originally anticipated. But net debt, the more important thing is this, that the macroeconomic data and indicators continue to be very robust.
And that's where the bulk of banking sector portfolios tend to be concentrated. On your second question, we had indicated earlier that the countries that have some interest to us are countries that we have 3 markets that we said we would take a closer look at.
Thank you. Our next question Anshooman from Reuters. Please go ahead.
Hi, everyone. Thanks to see the numbers today.
Great show as always. Dheesh, I want to check with you on in terms of you talked about this is more of a I mean the impact of the corporate sector is not seen a lot in Southeast Asia in terms of business exposure. But you've seen other banks I mean is DBS benefiting because it has less exposure to the likes of Malaysia, Thailand, other places versus Hong Kong and China compared to other banks? And we are seeing a little bit of outperformance in the results there. And the second question is, how do you anticipate the with interest rates remaining low, do you see any changes at all in the environment?
And do you expect any changes in the mix of your business on the interest side? Will there be a recovery next year? Do you expect interest income to improve? Thanks.
So on the first question, obviously, the profile and nature of your business makes a difference. I think it's a little bit more driven, Anshooman, by the business mix as opposed to the geography mix. Geography mix matters. And I think we're fortunate that we don't have some of the Southeast Asian countries. I can see in my own book, for example, Indonesia is a little bit weaker than Singapore or Hong Kong.
So I can extrapolate this probably too for other Southeast Asian markets as well. But the bigger question is, how much is your consumer and SME portfolio compared to your large corporate portfolio, particularly if you have unsecured consumer and SME. And to that extent, it's quite helpful to us that we have a disproportionately large part of our portfolio in the large corporate and secured business segment. Our actual exposure in the SME and the consumer segment ex the mortgage book in Singapore, which is fine, is really not very large. So I think you see differences based on business sector concentration perhaps more than the country piece.
If you look at some of the other banks in the region, they do have larger exposures in Malaysia and Thailand, Southeast Asia, but also they have larger SME books in some of those countries. So that might have some bearing. Your other question on the interest rate outlook, it's hard to call. I mean, you saw the pronouncements from some of the Fed governors even yesterday. My own take was that you won't start seeing rate hikes into the Fag end of 'twenty three, but now there clearly seems to be the possibility that you might start seeing it much earlier.
In fact, you look at the dot plot, some people are even beginning to forecast that you might start seeing rate hikes at the fag end of 2022, 2023. You're seeing some tightening actions in some central banks around the region. But it's hard to say. I mean, really, again, can't get my mind around what is the inflationary impact or the transient nature of the inflationary impact. Is it going to disappear?
Is it going to be around? And therefore, how quickly the central banks need to start acting? I do think the taper will begin sooner. You might start seeing the taper come in quicker and that will obviously have some bearing on this as well. In the meantime, for us, it's business issue.
We're seeing a lot of liquidity. If there is a change in monetary policy, I think some of the liquidity might start disappearing. And as the liquidity starts we're staying very flush. But if the liquidity starts disappearing, then that's generally helpful from interstate environment, but it's hard to call.
Also, Piyush, if I can ask just one
more question. We are seeing the record fundraisings in Southeast Asia, either it's IPO markets or we're seeing M and A or we're seeing sort of there seems to be a lot and it's happening in Philippines, Indonesia, other markets. How do you what when you talk to hotplates, when you look at talk to executives, is there a feeling that this is here to stay? The capital markets are really broadening out ex Singapore and Southeast Asia? Or do you expect more activity in this sector?
I think the capital markets are definitely getting more robust across the region. We're seeing a lot more issuers. So we're also being able to do deals from outside of our traditional Singapore centric customer base that is too. I think some of that is driven by just record low interest rates. So people are funding up opportunistically.
Some are actually using it even for working capital and not just for investment. But I think there's an investment cycle coming back. And therefore, some of the fundraisings that you're seeing are not just replacement of bank borrowings or working capital. We are seeing some of the new fundraisings beginning to go into pure investment activity. So I do think that the capital markets activity is going to be fairly solid.
With all of the tension between China and U. S, I do think you'll start seeing a lot more listings in Hong Kong and in China. So I think that will help the overall sentiment general sentiment as well.
Thank you. The question and answer session is still open. Please be reminded to mute your laptop audio. As there are no further questions, yes. I will now hand the session back over to Edna.
Please go ahead.
Okay. Thank you, everyone. Then if there are
no further questions, we'll just bring this time to
a close. Just appreciate everyone's time this morning, and we'll see you next quarter. Thank you.