Okay, everyone, welcome to the analyst briefing. You've heard the media poll and the presentation then, so we can go straight to Q&A. Without further ado, first question from Melissa from Goldman Sachs.
Question. I just have a few questions. Just back on the real estate.
Can you just start again? You were a bit soft.
Oh, okay. Can you hear me now? Is it better?
Yep. Yes. Yes.
Okay. So just the first question on the real estate. I just wanted to find out, I know you can't name the company, but can we give a little bit of clarity as to the size of which was put into the NPL? And also, is there just one this quarter, or was there a few other smaller ones maybe that you could let us know? That's the first question. Then on the second question, in the presentation for your NII guidance, you used a SORA of 1.25. Given where SORA is today, will there be caution in terms of where your guidance is? And perhaps can you refresh us in terms of your sensitivity? I think Sok Hui was saying it's a bit more sensitive, but can we have the numbers again for the sensitivity of the Singapore dollar and the US dollar book?
And then maybe just lastly, on the share buyback, I guess that has stopped for a while now, what are the thoughts there on the share buyback program, and if the money is not fully utilized, at what point will you share with us how the money is going to be returned to shareholders? Thank you.
Okay, Melissa. This is Su Shan. So I guess you can infer from our disclosures the size. We can't mention any names, but I need to reiterate that it is a subjective NPL because technically it has not defaulted, and exposure is less than SGD 0.5 billion. Are there other smaller exposures around there? No. Our China real estate exposure left is about SGD 10 billion, of which SGD 4 billion is to SOEs, SGD 4 billion is to strong foreign entities, like the Singapore-based Temasek-linked companies, and SGD 1 billion is to POEs, privately owned enterprises, of which the LTV is about 50%. So I think we're fairly comfortable. We've already taken quite a lot of GP as the Chinese market started to correct a few years back, so our GP buffer has been quite strong.
As I said, the GP overlay is SGD 2.4 billion in total, so I think we're quite comfortable. Anything you want to add, Sok Hui?
I think if you look at the disclosure, look for Hong Kong, right? You see Hong Kong's NPL ratio has gone up. That gives you an idea of the size of the NPL, the specific provisions that we've taken for this larger name. I think in Singapore, you see some creep up as well, but that's a smaller name. Yeah, so basically, I would say two big names. One is much larger in Hong Kong. Singapore is a smaller name.
Okay. Then Melissa, your second question around NII sensitivity. So we have a Singapore dollar net floating asset size of about SGD 103 billion. So the sensitivity there would be SGD 10 million per basis point. And then we have a net US dollar floating liability of $40 billion. So the sensitivity there would be $4 million per basis point in the reverse. Or your question was around SORA at 1.25%, right? And given that SORA I mean, I don't know whether you've noticed, but the intraday volatility can be 50%, 80%. It is incredibly volatile. It isn't the best gauge of the real cost of money in Singapore. Another guidance you can look at is to look at some of the MAS bills, which are more stable. And year to date, that's about 1.35%-1.45%. Today, it's about 1.28%. Then your third question was around share buybacks, right?
I think it's a question on the interest rate sensitivity. So you can make your own assumptions on where you think SORA is at. But in terms of the interest rate sensitivity, so we are not at SGD 10 million per basis point with a lot more deposits coming in, with some of the fixed-rate assets that will mature, and if they are not replaced, it will increase our sensitivity. Our estimate is that's probably SGD 14 million per basis point. But for the US dollar NII sensitivity, it remains minus $4 million per basis point. So that's net repricing liabilities remain at $4 million per basis point, and we stand to benefit if US dollar rates are cut. And if we think that we are bottom-out on Singapore dollar rates, then we stand to benefit when Singapore dollar SORA Singapore dollar rates go up.
All right. And then your third question, Melissa, was around the share buybacks. We've probably done about 12% so far, and we want to be opportunistic. I think who knows? If there's a crash later this year or so, maybe we will do more. The fact is, even though we did not buy at these levels, does not mean we never will. So we just want to be more opportunistic. But we are committed to returning the SGD 8 billion of excess capital. So we've utilized 12% of the SGD 3 billion, so about SGD 370 million. And we've done about SGD 1.3 billion of the capital returns. So net-net, we've done about 21% of the SGD 8 billion.
Okay. I think we can move on. Yong Hong, next question from Citi.
On opportunity. This is Yong Hong from Citi. So just three separate questions. So firstly, on the asset quality, I just wondered what drove the NPL downgrade because you mentioned that the borrowers are still current. Was it driven by the rating agency downgrade? And if that was the driver, any measures you are taking to ringfence potential borrowers who could still be paying but at the risk of rating downgrade? And secondly, on margins and deposits, how sustainable is that 9% deposits growth? And if we assume SORA to stabilize and U.S. rates to come off by 50 basis points, should we be thinking that margins should be quite stable from where we are? And a follow-up to that is, what is the net floating asset quantum, and what is the repricing difference?
And finally, on capital, when does the SGD 0.24 annual dividends lift off ? Also some update on where are we to address the concerns from the MAS on your digital outage that resulted in 50 basis points of capital withheld. These are my three questions.
Shan, are you okay? I can take some of the questions.
Yeah, yeah. Okay. I mean, I can talk about the NPL downgrade and the reasons behind it. I think we are being prudent. The signs were that there is really liquidity pressure around the company. And I do believe that I mean, if the restructuring happens, then okay, we could take a right back. But as we said, it is subjective. Are there any other issues around asset quality and all that? I honestly don't think so. We've been pretty conservative and pretty prudent. Your second question was around deposit growth, right? Honestly, what you mentioned, scenario you mentioned where U.S. rates go down and Singapore dollar rates go up, I mean, that for us is the best-case scenario. But we are not forecasting that best-case scenario. We are forecasting Singapore rates to remain low, Singapore dollar to remain strong.
We are looking at 2 rate cuts in the U.S. Deposit growth, we think will continue to be strong as long as Singapore remains a safe haven and Hong Kong remains a strong capital markets hub. Both structural trends look to be continuing. I don't think it will be as strong as last year because last year we had the added tailwinds of the Singapore dollar treasury bills maturing. That will abate this year. It won't be as much as last year. We don't think that the delta will be as strong as last year. Nonetheless, we still think we should see growth. It will be seasonal. You got growth in March. You get growth in the year-end, etc. It will be seasonal. There will be some transitional large chunks depending on deal flow, etc., from the large corporates.
You want to take the net floating asset repricing?
Yeah. So I think, Yong Hong, the deposit growth, you said 9%. I guess that's the reported currency. If you look at constant currency, we actually grew 12%. So like Su Shan says, we're unlikely to see another 12% growth this year, but we'll probably still see sort of strong inflows into Singapore, but probably not at the 12% level. We don't focus so much on NIM for the year because we have been trying to guide that actually, net interest income is what you should focus on. So for example, notwithstanding the sort of rate and NIM pressures, you find that with deposit growth and hedging our portfolio, we can actually show net interest income growth. And that's really what you want to focus on. And I think your last question was on the guidance for dividend.
I think when we gave the guidance previously, our 2023 investor day, we said we would start with the SGD 0.06. And we have already done it for three years, 2023, 2024, 2025. And that was before we came up with a plan to return excess capital. So we have got a plan to return SGD 8 billion. And that is already articulated on the capital return dividend. Going forward, I think it depends on how we perform because the ordinary dividend will come out of, I guess, our financial performance. We can continue to step up. We can slow down the pay. So very much will depend on the financial operating performance. And that's the guidance sort of at this point in time.
Yeah. I think those were all your questions, Yong Hong. The next question from Harsh from JP Morgan. Harsh, you can go ahead.
For the opportunity, I'll go one by one on the questions. First is to the point on capital return. 21% is done. This is a three-year commitment if I get it right. So is it fair to say that in 2026 and 2027, we should have a much higher base of capital return? And if you are unable to do buyback, how do we think about the distribution of that capital that you have earmarked for buyback in 2026 and 2027?
We still have quite a bit of time, Harsh, to end of 2027. So as far as the SGD 5 billion of capital return dividend, you know that's already committed. So we're talking about the share buyback of SGD 3 billion, where we have already done 12% of the share buyback. We'll look for opportunities. And if not, if we don't find the opportunities, we'll find other ways to give back the excess capital.
Right. So basically, if, let's say, in course of 2026, let's say share price stays strong, whatever be your preferred entry point, if it doesn't hit that, then there will be a large special dividend in 2027. That's how we should think about it.
That is one possible construct.
Okay. Okay.
Yeah. As we said, we were committed. So we will discuss with the board, and we'll arrive at a decision then. But we don't want to commit to anything right now because the markets are so volatile, Harsh, and you never know, right?
Yeah. Markets are volatile, but your stock is not. So it'll be good to, yeah, understand a bit more granularity on it. And again, as we discussed last time, if there is more systemic buyback, it'll be useful. Second question is on net new money growth, fantastic outcome in 2025. In 2026, should we expect similar net new money growth or higher? And also, which markets, geographies are driving that? And I have one question after that.
Okay. So I'll kick off, and then Shee Tse Koon, our head of consumer wealth, can supplement. So net new money growth, we now report it for all three segments, starting with Private Bank , Treasures Private Client , and then Treasures. And the reason we do this is we really believe in the continuum, right, sort of smooth transition of wealth across the three segments. And we also believe in starting the wealth journey earlier rather than when they are already very wealthy. So you start with the emerging affluent, and then you go through their own wealth journey with them. Then that creates sticky relationship. I also alluded to the fact that we're very focused on long-term growth, structural growth. That means we look at the customer holistically.
We look at if they're business families, we look at how we bank them from the business perspective, and then we offer solutions in their family office or their own personal financing based on our knowledge of their wealth creation process through their businesses. And the continuum also means that it's stickier, right? So you have family members sitting in different parts of the continuum. You have RMs also rising through the continuum as their clients also get richer. So that builds for sticky relationships. And then structurally, what we do is we plan for the long term. So that means whether it's setting up estate planning, whether it's life policies, whether it's insurance, whether it's hedging, etc.
W e create long-term sticky solutions so that the customer is really quite sticky with us, and we remain one of their key banks. In terms of the segment at net new money growth, PB is very chunky. You get one big client in. It can move by the SGD billions. And then when he moves out because you can't do any structures for him or whatever, then it is also chunky both ways, in and out. It's steadier for the TPC segment, and then it's growing for the treasures segment. I'll let Shee Tse Koon talk about give you more color and also about the where the country is.
Yeah. Thank you, Su Shan. I think Su Shan has covered, actually, the multifaceted approach for us in driving net new money because we bring real solutions to the clients. But just to answer your question as to kind of where it comes from and whether I expect it to be at least the same or grow. Now, obviously, we expect it to grow, at the very least, to repeat what we have, which we are quite confident about. And the reason for that is, as Su Shan alluded to, in the private banking space, they tend to be more chunky. But even within the private banking space, today, our clientele already comes from over 120 nationalities. So it's fairly broad-based.
And so even if there are customers who kind of have reasons to move some of their assets out, some of them actually do move them out because they might be acquiring a company, just for discussion's sake, right, and they're injecting capital. But we have a sufficiently robust engine to, I think, replace. So we have actually seen a pretty good track record of our net new money over the last few years. So there's no reason to believe or to doubt why we can repeat or even grow from there. Now, the other engine that's been growing very, very strongly is actually our Treasures space, as well as also, as Susan has alluded to, that tends to be perhaps at an individual basis, a smaller amount, smaller value, but that tends to be spread across a much larger group of customers.
Now, because our wealth continuum has been growing very strongly, we have been able to continuously have our customers resegmented, let's say, even from Singapore's case, within Singapore, to have our massive retail base of customers start to put more wealth with us because there is emerging growth of wealth in Asia, apart from the shift of wealth to Asia. So as Asia gets more and more affluent, actually, we are seeing that benefiting our entire wealth management franchise, not just in Singapore, but also in Hong Kong, in Taiwan, in Indonesia, etc., etc. So we are seeing quite strong growth in the Treasures space as well.
Over and above that, because Singapore and Hong Kong are natural international centers, not just within the private banking space, we are also seeing the affluent base of customers actually bringing their AUM into both Hong Kong and Singapore as international centers, so not just domestically, but internationally. So it's actually very, very broad-based .
Great. Thanks. And for the last question, India and Taiwan both have gone through consolidation. ROAs are still low in these markets. Do you see likelihood of step change in ROA for both India and Taiwan this year? How do we think about that? Thanks.
Harsh, well, we certainly expect both Taiwan and India to contribute more in terms of net profit this year. They already did very well last year, rising by high double digits, right? I mean, Taiwan was up some 40%. India was up some 35% or so. So for Taiwan, for example, the ROE meets the cost of equity already. India, not yet. But India, we are refreshing our consumer strategy. The IBG franchise is already strong. GIFT City is also performing well. And we are getting a lot more CASA from the SME and retail franchise. But we're pivoting to, on the consumer side, pivoting more to secured loan, sorry, secured gold loans, and reducing dramatically our unsecured loan book there. So I think both are moving in the right trajectory. And Taiwan is already above cost of equity.
Okay. Thank you.
Maybe one data point for you. Actually, on the NPAT basis, Taiwan grew 40%, and India grew 35%. So in fact, these are strong franchises for us. They are the two markets that actually delivered very high NPAT growth for 2025.
Got it. Thank you.
Great. Thanks, Harsh. Next question's from Jayden from Macquarie.
Thanks for taking my questions. I have two topics I'd like to ask on. The first is on the fixed rate or the hedging portfolio. Last quarter, you gave some very helpful color around the maturity of that portfolio, and it looks like it's moved a little bit higher. What are the maturities looking like for this year? Do you think that there's much impact on that sort of SGD 10 million Singapore dollar sensitivity that you outlined before? That's my first question. I'll ask my second one in a bit.
The maturity that will roll off this year is SGD 80 billion out of the 210. Then where we put them on depends on where rates go. As I said, rates are very volatile. But I think the maturing rate is now of the SGD 81 billion, about SGD 3.4 billion. So we estimate to replace half of this at about 2.9% or 50 basis points lower.
Okay. Thank you. That's already accounted for in the guidance for this year. Is that fair to assume?
Yes.
Yes.
Okay. Thank you. And then my next question is just on the comments you made on Indonesia during the media briefing. I think you talked quite a bit about how the current sort of changes are good for the long term and that the corporate portfolio remains strong. How about the wealth portfolio? Do you have any exposure to margin financing against Indonesian securities? Because there's been quite a bit of volatility in that space.
No, we don't have any exposures there in terms of single-stock lending. We tend not to do single-stock lending, precisely for reasons like this. The guy can't sell if he needs to margin call, and it's very volatile, and then it can be very liquid. So we don't do that. Anyway, our loan book, although it's to only large corporates and blue chips, is actually quite small in Indonesia compared to the rest of the loans elsewhere. So the impact to us is honestly very muted.
Just to check on this topic, Su Shan, does that mean that most of your exposure to, say, Indonesian wealth clients is actually booked in Singapore and you don't do much onshore, just to get a better understanding?
Oh, we're growing onshore, but the onshore business is very cash-based, right? So it's more your mass affluent, your Treasures, and Treasures Private Client. They come in with cash. They buy funds. They diversify. So actually, the wealth clients, the Indonesian wealth clients, have been exactly diversifying risks with us, investing globally, both onshore and offshore. Shee Tse Koon can add more color.
Yeah. That's correct. So onshore, we have a wealth management franchise, predominantly really in mutual funds, in local government bonds, in bancassurance, etc. And those are all kind of cash-funded, right? So no lending against them in that sense. The ultra-high net worth private banking and all that, a number of them would already have offshore wealth from decades ago. Now, these are predominantly booked in Singapore, and that would be managed just as with any other wealth portfolio at a portfolio basis, right? Meaning to say, if any of them have any wealth-related credit lines, they would operate it just as with any wealth customers in a very broad portfolio.
Okay. Great. Thank you both very much for the color. Appreciate it.
All right. Thanks, Jaden. Next question from Aakash from UBS. Aakash, you can go ahead.
Yeah. Can you hear me?
Yeah.
Okay. Great. Thank you. So I have four questions. The first one is just on the NII guidance, so the net interest income guidance that you have for the year. I'm trying to understand this a bit better. So if you think about the sequential trajectory of the NIM from here, your Jan NIM was 1.92. Fed cuts are positive. SORA, given it's at 0.9, it can only go higher towards your 1.25 expectation. So I would think that it's fair to assume that NIM has probably bottomed out, and it can only go up from here. And the loan growth, you're expecting around mid-single digits. But despite this, the NII guidance is still down in 2026. Is it mainly because of the hedging impact? Is that how we should think about it?
Okay. So yeah, I mean, you rightly pointed out SORA. It's currently at 0.9. Our expectations for the full year was 1.25. And as I earlier alluded to the first question, it moves so much in today, so it's very hard to use as a benchmark of the real cost of money in Singapore. So we guide people to look at the MAS bills as a more steadier gauge of the cost of money here. The fixed-rate asset repricing, we're assuming that it will be down by 50 bits or so. That's what I alluded to earlier to the earlier question. I don't know whether Sok Hui or Phil want to amplify anything.
Yeah. So Aakash, this is Phil, Corporate Treasurer. So the point about what you're saying is the drivers all seem to be fairly sideways. So why are we guiding NII downwards? I think that's the gist of your question. So the point to note is that actually, Sing rates were high for quite a while in 2025. So what you're seeing is the full-year effect of the low rates. I think that's the way to think about it. The second thing is you can't really look at NIM because as deposits grow and it's put to HQLA's, we said that's NII accretive but NIM dilutive. So that's the way to think about our book. I think the rest of the numbers we've answered elsewhere in the call.
But just to emphasize that the Sing rates were high for quite a few months last year, and now you're seeing the full 12-month effect of a low Sing rate.
No, no. So Phil, even if I take this into account, right, so I know your NIMs, let's say your full-year NIM last year was 2.01, this year is probably going to be 1.92-1.93. If we just keep the NIM flat from here, even then, it's very difficult to come up with NII negative. On your second point, NIM is down, but NII is up. Again, the same question, right? How come NII is down on the guidance? So what is driving it there? Thank you.
Yeah. Maybe I'll just add another data point for your consideration. So deposits grew 12% in 2025. In our assumption, we think it may actually grow like half the rate, and therefore, you don't have as much benefit this year because last year, we had the benefit of treasury bills all flowing back into the Sing dollar book. This year, we don't think that there's going to be so much of a flowback. So that also means that your NII from surplus deposits may not be as high as this year. So that's one factor. The other factor, when we give guidance on the group NII, is also the markets trading. So markets trading this year had a benefit of about SGD 0.6 billion to NII. That comes from two factors. One is really the lower funding cost, which we expect to repeat in 2026.
The other factor is the reduced accounting asymmetry, depending on the products that they do, like FX swaps, depending on what type of FX. So it caused some noise. So this year, there was a benefit of about SGD 0.3 billion. We don't know whether this will repeat in 2026. So these are the main reasons.
Okay. Understood. Thank you very much. The second question I have is, Su Shan, on the topic of AI that you were talking about earlier, I mean, it was reported DBS generated SGD 1 billion in economic value. I'm just wondering, where is the best place to look for this in the financials? Because when I look at the staff cost to assets, or if I look at staff cost to deposits, or just staff cost per employee, all these numbers have gone up quite a bit in the last, let's say, three, four years. And I'm sure LVB played a role there. Taiwan played a role there. The question is, are you starting to see any reduction in these numbers as DBS gets deeper and deeper into AI investments?
Over the next 2-3 years, how much of an impact can we expect to see on these, let's say, staff cost to assets or staff cost to deposits? Could they be down by 10 basis points, 5 basis points? Do you have any thoughts on that?
Okay. So you're right. I mean, our staff costs went up a lot in the last 3-5 years where costs went up by 8% in the last 3 years. Last 3 years, yeah. And then this year, or 2025, we brought it down to 4%. And we are exercising a lot of cost discipline to keep it at 4% or so growth. So where do you find the economic value of AI, right? So the way we have shown the SGD 1 billion, which is the economic value, that doesn't include things like the cost saves or the loss saves, which brings it up to about SGD 1.2 billion, is the A/B testing that we do around rules-based machine learning, right? So that's more deterministic and kind of what I would call classic AI. It is really harder to measure for generative and agentic AI.
But you will see it very clearly in things like technology, ops, and then the front end, RM, productivity, new-to-bank. So I think there are a few levers. I mean, there will be things like number of customers per segment, growth of new-to-bank customers, growth of new-to-product customers, and then the loading of customers per headcount, whether it's fully front and mid-office or it's customer per RM. It's turnaround time. And ultimately, it's going to lead to revenue, productivity, and cost-income ratio, right? But more importantly, I mean, we don't like to talk about sort of headcount, big headcount moves, for example. But you will see from the headcount numbers for 2025 that we were certainly very measured in taking out some of the synergies from the LVB and Citi Taiwan mergers in India and Taiwan, respectively.
And so you see quite a lot of the roll-offs of the duplicate roles coming off. You see the roll-offs of contract workers. So we are really minding our costs like a very fiend. I mean, I've been really tough on my teammates, and they've been tough on their teams as well. So in terms of the AI capacity, you'll see it, as I said, in tech and ops, obviously at first. Then you will see it in the businesses, whether it's in IBG or CBG Wealth, in enterprise KYC. So that's turnaround time. We still have a large backlog, right? Everyone complains about how long it takes to open an account these days. And it's good to have a backlog, but it's not good for turnaround time.
So we are hoping that the use of AI will just crunch through the turnaround time. It's already released capacity for us in the middle office, whether it's in ops and tech, to do growth stuff, right? So for tech, we really need to grow. We've got 5 big programs. And even though we have 5 big programs in the past, these programs each take 18 months or so to deliver. You've got a big tech that today, that can take weeks or just a couple of months or so. And so in doing so, you release a lot of the lower-level product engineers, the level 1 engineers, to then upskill and become more like a level 2 engineer or level 3 engineer where there's a lot more built. And where do we need to build?
We need to build for wealth. We need to build for GFM trading. We need to build for a stronger new core banking system. We need to build for automated credit memo writing. We need to build for risk management scores, automated, etc., KYC. So there's a lot of build to be done, and we want to build with the same sort of capacity that we have.
Okay. Understood. Thank you, Su Shan. The third question I have is just on the trading income. So you've said that January has gone back to a normalized sort of level. Is that roughly SGD 800 million per quarter level that you're thinking of, which is, I think, the average over the last, let's say, two, three years? And just on a related note, you said there was a lot of rebalancing that happened in Q4. Could you talk a little bit more about what was this rebalancing exactly, and what sort of views are you taking now? And was there any impact from the silver-gold crash on your books earlier?
So yeah, GFM had a good run. And honestly, the volatility, it's so hard to predict. What used to be weeks or months and now takes hours. And Q4 is always seasonal. So when we said we use it to rebalance the portfolio, it was really to position us for a good 2026. And January's momentum was very strong. Early Feb also not bad. So I'm constructive, but it's notoriously hard to predict for trading. So I don't really want to be shoehorned into giving you any guidance other than when the numbers come out, we can tell you what they were. But I mean, treasury sales is good. I think investment banking fees, from what I see in the pipeline, looks good and decent.
We've been winning market share in DCM and ECM, even in markets where we are traditionally not well known in. I mean, for example, last year, I was really pleased that in DCM, we went up to number 7 in the Middle East, where we didn't even have any presence the year before. So very strong showing that in terms of the fee growth. And ECM in Hong Kong and in Singapore, we've been really trying to beef up our equity coverage. I always tease my colleagues that we actually have a very big equity research team, but that's kind of like the best-kept secret. So we're no longer making it the best-kept secret. We're growing it. We're growing the coverage of the II business, the equity business.
We have a strong book. We have a strong axe where our private clients like to short vol. So we are long vol, and we can sell that vol out to people like you, to all the fund managers and entities who want to buy vols. So we can actually create more of an agency business than we've ever done so before. And that speaks well for GFM. You want to.
If I could clarify, Akash, just to clarify the SGD 800 million per quarter that you mentioned, that's for net trading income. When we talk about markets trading, you look at the P&L in the front. There's a line for markets trading income, which has net interest income and non-interest income under it. So.
Okay. Any impact from the huge volatility in the commodities that we saw a couple of weeks ago?
No, no. So I think if you talk about balancing the portfolio, if you look at our performance summary, if you look at the statement of comprehensive income, you'll see that there were some losses that were crystallized on the investment portfolio. And that's good for us. We bring it to P&L. And then this portfolio, which has got lower-yielding instruments, will then be free up to be reinvested at higher yield. So that's what we call a rebalancing of the portfolio.
Okay. Great. I think that's all my questions. Thank you.
Thanks, Akash. Actually, we don't have any more questions.
Okay.
So. Okay. Thanks, everyone.
Thank you.
Thank you.
Thank you.