Good morning, and welcome, everyone, to DBS's First Quarter Financial Results Briefing. This morning, we announced record profit before tax of SGD 3.44 billion in first quarter 2025, as total income reached a new high. Net profit was SGD 2.9 billion, with ROE at 17.3%. As per our norm, our CEO, Tan Su Shan, and CFO, Chng Sok Hui, will start by sharing more about the quarter. Both will be speaking to presentation slides that you will be able to see on screen. The slides can also be found on our Investor Relations website. Thereafter, we will take questions from the media. So without further ado, Sok Hui, please.
Thanks, Edna. Good morning, everyone. Highlights. We delivered a strong first quarter performance, with total income rising 6% year-on-year to a record SGD 5.91 billion from broad, broad-based business growth. The strong operating performance allowed us to set aside SGD 205 million of general allowances to further strengthen GP reserves in light of the recent escalation in macroeconomic and geopolitical uncertainty. Profits before tax was a record SGD 3.44 billion after the GP build. Net profit was 2% lower at SGD 2.90 billion, due to the impact of the 15% global minimum tax, with return on equity at 17.3%. Commercial book total income grew 4% to SGD 5.54 billion. Net interest income rose 2%, as balance sheet growth more than offset a nine basis points decline in net interest margin.
Net fee income and treasury customer sales were at record levels, driven by continued momentum in wealth management. Markets trading income was the highest in 12 quarters, benefiting from market volatility and lower funding costs. Compared to the previous quarter, net profit rose 10% as income grew 7% from broad-based business momentum in the commercial book, as well as in markets trading. Expenses declined 8%, partly due to non-recurring items in the previous quarter. Asset quality remained resilient. The NPL ratio was stable at 1.1%, and specific allowances were at 10 basis points of loans. The general allowances set aside increased our GP to SGD 4.2 billion. Allowance coverage rose to 137% and 230% after considering collateral. Capital remained strong.
The CET1 ratio was 17.4% on a transitional basis and 15.2% on a fully phased-in basis. The board declared a total dividend of SGD 0.75 per share for the first quarter, comprising a SGD 0.60 ordinary dividend and a SGD 0.15 capital return dividend. Slide 3. As you can see on this chart, first quarter 2025 had a number of new highs: total income, profits before allowances, and profits before tax. Subsequent slides will show that fee income is also a record, and within fee income, wealth management fee income, and loan-related fee income are also at record levels. As well, treasury customer sales are also at record. Year-on-year performance. Compared to a year ago, pre-tax profit was 1% higher, while net profit declined 2% due to higher tax expense from the Global Minimum Tax.
Commercial book net interest income grew 2%, or SGD 72 million- SGD 3.72 billion, as balance sheet growth more than offset a 9 basis points decline in net interest margin to 2.68%. Fee income grew 22%, or SGD 232 million- SGD 1.28 billion, as wealth management and loan-related fees reached new highs. Commercial book other non-interest income declined 12%, or SGD 73 million- SGD 548 million, due to non-recurring gains in first quarter 2024. Within this, treasury customer sales grew 11% to a record. Markets trading income rose 48%, or SGD 117 million- SGD 363 million, the highest in 12 quarters, partly reflecting lower funding costs.
Expenses rose 6%, or SGD 135 million- SGD 2.21 billion, from higher non-staff expenses. The cost-income ratio was stable at 37%. Specific allowances were SGD 120 million, or 10 basis points of loans, similar to a year ago. General allowances were higher, with SGD 205 million prudently taken this quarter to strengthen GP reserves. Slide 4. Quarter-on-quarter performance. Compared to the previous quarter, net profit was 10% higher. Commercial book net interest income fell 3% quarter-on-quarter, or 1% on a day-adjusted basis, as a nine basis points decline in net interest margin from lower interest rates was mitigated by balance sheet growth. Fee income grew 32%, or SGD 307 million, led by wealth management and loan-related fees.
Commercial book other non-interest income of SGD 548 million was stable compared to the previous quarter, which included property disposal gains. Treasury customer sales rose 32%. Markets trading more than double as interest rates, FX, and equity derivative activities benefited from market volatility and as funding costs fell. Expenses were 8%, or SGD 181 million lower, partly due to seasonality effects in the previous quarter. Specific allowances halved, while general allowances were taken compared to a write back in the previous quarter. Slide 5, Net Interest Income. Compared to the previous quarter, group Net Interest Income rose 1% on a day-adjusted basis to SGD 3.68 billion from strong loan and deposit volumes. Group Net Interest Margin fell 3 basis points to 2.12% due to a 9 basis point decline in commercial book NIM, reflecting lower interest rates.
This was partially offset by an improvement in markets trading NIM, partly due to lower funding costs. Commercial book net interest income fell 1% on a day-adjusted basis to SGD 3.72 billion, as the impact of lower rates was mitigated by balance sheet growth. Compared to a year ago, group net interest income rose 5%, as balance sheet growth more than offset a 2 basis points decline in net interest margin. Slide 6, Loans. Gross loans grew 2% or SGD 7 billion in constant currency terms during the quarter to SGD 442 billion. Non-trade corporate loans increased 3% or SGD 8 billion from broad-based growth across the region and a range of industries. Trade loans fell 1% or SGD 1 billion, while consumer loans were little changed. Slide 7, Deposits.
Deposits rose 3% or SGD 18 billion on a constant currency basis this quarter to SGD 576 billion, led by strong Sing Dollar and foreign currency CASA inflows. This compares with a deposit growth of SGD 20 billion for the full year of 2024. Sing Dollar CASA growth accelerated to SGD 9 billion, up from SGD 5 billion in the previous quarter, while foreign currency CASA rose by SGD 4 billion. The CASA ratio improved to 53%. Liquidity remained healthy, with the liquidity coverage ratio at 145% and the net stable funding ratio at 115%, both well above regulatory requirements. Slide 8, Fee Income. Compared to a year ago, first quarter gross fee income rose 18% to a record SGD 1.50 billion, led by new highs in wealth management and loan-related fees.
Wealth management fees grew 35% to SGD 724 million, driven by strong market sentiment and an increase in assets under management. Loan-related fees rose 23% to SGD 227 million on increased deal activity. Compared to the previous quarter, gross fee income rose 22%, led by double-digit growth in wealth management and loan-related fees. Slide 9, Wealth Management Segment Income. The strong momentum in wealth management from last year carried over into the first quarter. Wealth segment income rose to a record SGD 1.49 billion, driven by a 32% increase in non-interest income from a year ago. Fees were at a record, driven by higher sales of investment products and Banc assurance, while treasury customer sales to wealth clients also reached a new high.
Assets Under Management reached a new high of SGD 432 billion, with the proportion investments maintained at 56%. Slide 10, Commercial Book Non-Interest Income. This chart shows the breakdown of the group's non-interest income into three components: fee income, markets trading income, and the third component, commercial book, are the non-interest income. The third component largely comprises treasury customer sales for both the Wealth segment and the Institutional segment. Treasury customer sales are similar in nature to fee income, as they are driven by customer demand. In the first quarter of 2025, the entire SGD 548 million comprised treasury customer sales, while in comparative periods of first quarter 2024 and fourth quarter 2024, there were other items of around SGD 100 million each relating to FX gains and property disposal gains, respectively.
Excluding such non-recurring gains, treasury customer sales were up 11% year-on-year and 32% quarter-on-quarter, as you can see from this slide. Slide 11, Expenses. Compared to a year ago, expenses rose 6% to SGD 2.21 billion due to higher staff costs from salary increments, increased bonus accruals, and a larger headcount. The cost-to-income ratio was stable at 37%. Expenses fell 8% from the previous quarter, mainly in non-staff expenses, due partly to seasonality effects. Slide 12, Non-Performing Assets. Asset quality remained resilient. Non-performing assets fell 3% from the previous quarter to SGD 4.86 billion, driven by lower new NPA formation and higher upgrades. The NPL ratio was stable at 1.1%. Slide 13, Specific Allowances.
Specific Allowances amounted to SGD 111 million, or 10 basis points of loans, similar to a year ago. The entire Specific Allowance charge was from Consumer Banking, which had been stable over the last few quarters. Specific Allowance from Institutional Banking was largely flat, as additional Specific Provisions were offset by write-backs, which included an upgrade of a large case during the quarter. Specific Allowances were about half that of the previous quarter, which had lower than usual write-backs. Slide 14, General Allowances. This quarter, we added SGD 205 million to General Allowance reserves as a prudent measure, given the recent escalation in macroeconomic and geopolitical uncertainty. The increase in General Allowances is not driven by deterioration in the actual credit performance in our portfolio. As you can see, Specific Provision to loans was at 10 basis points this quarter.
In our methodology, as at end March, total general allowance reserves were SGD 4.16 billion, or 100 basis points of loans. General allowance reserves take into account base scenarios, which are then overlaid with stress scenarios. GP overlays for stress scenarios stood at SGD 2.6 billion as at 31 March 2025. Allowance coverage rose to 137%, an increase of 8 percentage points compared to December 2024. After considering collateral, allowance coverage rose to 230%. Slide 15, Capital. The reported CET1 ratio rose 0.4 percentage points from the previous quarter to 17.4%, mainly due to the implementation of revised market risk rules with effect from 1 January 2025.
These rules are known as Fundamental Review of the Trading Book, which are part of the final Basel III reforms to enhance risk sensitivity of the capital framework for market risk. Per our Pillar Three disclosure, DBS Market Risk risk-weighted assets declined by SGD 5.6 billion due to the rule change, contributing to the 0.4 percentage point improvement in CET1. The pro forma ratio on a fully phased-in basis increased 0.1 percentage points to 15.2%. The leverage ratio was 6.5%, more than twice the regulatory minimum of 3%. Slide 16. Dividend. The board declared a total dividend of SGD 0.75 per share for the first quarter, comprising an ordinary dividend of SGD 0.60 and a capital return dividend of SGD 0.15.
The capital return dividend is part of the three-year plan that we announced last quarter to return excess capital to shareholders. Based on yesterday's closing share price, and assuming total dividends are held at SGD 0.75 per quarter, the annualized dividend yield is 7.0%. In addition, we also commenced share buyback under the SGD 3 billion share buyback program during the quarter. So far, we have bought back about 260 million of shares, representing around 9% of the program. Slide 17. In summary, we had a strong start to the year. Total income and pre-tax profits were at new highs, driven by broad-based business growth. Our return on equity of 17.3% remained above our medium-term target, despite the impact of the global minimum tax. The recent escalation in trade tensions have heightened macroeconomic risks and market volatility.
In response, we have strengthened our GP reserves. We'll stay nimble to capture opportunities while prudently managing risks, and our strong capital and liquidity position provides us with a solid foundation to continue supporting our customers. Thank you for your attention. I'll now pass you over to Su Shan.
Thanks, Sok Hui. So, let me take my slides and give my CEO comments on our first quarter. As Sok Hui said, we had a strong start. I will say it was a solid quarter. We were firing on all cylinders. We saw record wealth management fees, record loan fees, record treasury sales, record operating profit, record NPBT. And so both our structural growth engines and the cyclical, you know, growth engines were working in the first quarter. With that, and ROE at 17.3%, we are well within our guidance of 15%-17%, in spite of the tax and the GP buildup, which I thought was just us being prudent. The GP buildup, we thought, given that we close our books after Liberation Day, we should exercise some prudence.
Given the good first quarter, we thought it was a wise thing to do. As far as the business side grew, you will see from our loan and deposit volumes that both grew very nicely. The first quarter loan volume was largely driven by the IBG large corporate non-trade loans. It was a solid, good quality, large corporate deal-driven loan book, and that's the kind of loans we wanna grow. It's franchise-driving, it's good ROE, and it deepens relationships long-term. Deposits growth as well was very strong, and that momentum continues. It looks like it's continuing anyway for now. And that's also driven both, you know, by, by consumers bringing back their, their cash, from treasury, SingDollar, T-bills, et cetera.
But also driven by the work that we've done to be cognizant of pricing elasticity and consumer flows, right? And also SME flows. So I think, again, the structural work we've done there seems to be paying off. We had record fees, and that was led by both wealth management and also by IBG hedging activity. We've seen very volatile, you know, markets in the last few months. First quarter was also volatile, April was also volatile. But in this volatility, the opportunities will come from customers potentially having to hedge both their interest rate and their FX volatility, but also by our traders also doing well because of the volatility, the long haul, as you know. So wealth management fees, as you can see, up 35%.
The first quarter, obviously, the markets were strong. Net new money also was running at the pace that we were expecting it to. It was about SGD 3 billion in the first quarter, because there was a lumpy outflow of about SGD 2 billion. But that—some of that will come back in April. In fact, April, we are seeing still strong net new money growth for the Wealth business. Market trading, as I said, because of the high volatility, is the highest in the year. I'm comfortable with the asset quality. I think our NPR ratios, as we have guided, remain stable. It's 1.1%, NPR ratio, and the NPA formation is lower than recent quarters.
We've, over the last few years, been pretty circumspect on the kind of assets that we bring onto our books. As I said, we focus on industries that we know, franchises that we are comfortable with, and we've gone deep. And that speaks to the high loan fees speaks to that sort of a structural change. We've been quite circumspect on SME loans. We've not taken too much risk there. If anything, in some of the emerging markets, we've been very risk aware. We've also been circumspect around the consumer unsecured loan book as well. So the GP reserves, I think, it speaks to our prudency, given the high uncertainty that we're seeing because of the tariff uncertainty.
But I'm comfortable, and I think the GP allowance that we took and the GP overlay that we have of about SGD 2.6 billion or about 60 basis points of our loan book is more than sufficient. So our total dividend, as Sok Hui said, SGD 0.75. Sixty cents comes from our current income stream. Capital returns of SGD 0.15 comes from our previous stock of capital that we want to return to shareholders. As long as our ROE stays within our range of 15%-17%, I'm comfortable that we can continue to deliver this dividend payout. Slide. So let me talk now about the outlook. First, the geopolitics and the markets.
So with Liberation Day, we all know this is the potential end of a rules-based world order and multilateralism as we used to know it. And so we need to learn to shift to work in a multipolar world. And for us, we looked at how we could crystallize our risks. As I said, we've basically stress tested for different risk scenarios. We need to stay resilient across these different risk scenarios. And so we figured the best way to crystallize our risks is look at first-order risk and second-order risks. The first-order risk, which countries will be affected, which sectors will be affected? The second-order risk is then the macroeconomic risk parameters that we have to stress test for.
That includes trade disruption, drop in GDP, drop in consumption, slowdown in trade, this intermediation of current trade flows, et cetera, leading to credit stresses and consumer confidence taking a drop. There's also been a lot of volatility, as I said, with interest rates and effects, and some clients and countries looking to diversify their trade currencies and reserve currency assets. The other trend is obviously shifting trade flows. In a multipolar world, some countries, you kind of prepare for trade with the U.S. or China. You might have to have China for China, U.S. for U.S.
The good news is the trade outside the U.S. still remains pretty robust, and you work towards that shift in focus from just selling to the U.S. or the West to really looking at trade flows outside the U.S.. Having said that, because of the uncertainty that we saw after April second, there has been a pause in some of the longer-term investments until there's clarity, and clients are now looking at the reconfiguration of both their trade flows and their payments and technology stack. Next slide. And so what is the impact on tariff on Our business?
As I said, we, you know, stress test for all scenarios, and other than a trade disruption and a global slowdown, we're testing for both a stagflationary environment, a recessionary environment, but knowing full well that we have to learn to work in a multipolar environment. Where we've been stress testing for interest rate uncertainty, interest rate volatility, and weaker sentiment all around. And based on the stress test that we have done, actually, the first-order stress tests, we are not so badly affected. There are some industries more affected than others, for example, the consumer goods, discretionary consumer goods, the auto sector, the electronic sector, and we're looking to see what announcements come out on semiconductor and healthcare pharmaceuticals.
The good news is our direct exposure between China and the U.S., in terms of flows to the U.S., is pretty muted, very limited, so I don't see a lot of impact there. The secondary impact or the second-order impact, we have been stress testing, and that's based on a slowdown in macro growth. For most countries, the slowdown delta is between 0.5%-0.9%. We're also stress testing for U.S. recession or a U.S. stagflation, and in those scenarios, a stagflationary scenario, whilst you don't have—you may not have any cuts, or you might have one cut, in a recessionary environment, you could have anything from 3-6 rate cuts, right?
In a multipolar world, actually looking at, you know, which corridors will be affected and which countries will be affected, but also the companies that are quite leveraged in the mid-cap and SME sector will also be affected. So what are the opportunities, though, in this multipolar world? Number one is if trade flows and trade supply chains shift, actually it's good for us because we are looking at, you know, new supply chain links, new sea logistic links, and helping to finance potentially more inventory financing, and alternative currencies and liquidity solutions. And that speaks to the strength because we have been investing in such payment solutions and alternative currencies, so payment flows as well. The new growth corridors and sectors. The structural growth that we're seeing in India continues.
There's been some geopolitical noise, but the first quarter, India did very well. We saw very strong, over 20% growth in India. Our investments in Lakshmi Vilas Bank has laid foundation for us to grow both our IBG and our large corporate SME business, but also to grow our CBG business, you know, making use of the growing middle-class population and trying to beef up also our Onshore Wealth business. We're also seeing good trade flows between Northeast Asia into India, and that speaks to the strength that we have that connectivity, and also the Western MNCs to India, be it, you know, for Apple or Boeing, Nokia, Ericsson, Samsung, LG, et cetera.
So again, as I said, those new growth corridors and sectors, are where, are where we are seeing structural growth. So as rates come down, and you've all seen the rates go down in the first quarter and in April, the good news is this is mitigated by CASA growth. Our CASA growth was very strong in the first quarter. It continues to be strong in April. And with the high volatility, comes more trading opportunities for our GFM colleagues, and also corporate client demand for hedging has increased. Okay, let's go to my last slide, which is the 2025 outlook. As I said before, I feel good that we have done a lot of work creating a strong, resilient business.
Our structural growth remains, and the structural growth is focusing on high ROE businesses like wealth management, like fee income, like payments, like GTS, and that should stay. The cyclicality and the volatility that comes with a slowdown with tariff uncertainty, we can deal with. So the business momentum has remained resilient in April. We have stress-tested for different negative scenarios, and our structural growth remains intact. The group net interest income, we think, will be slightly above last year's level, and that's based on what the market is forecasting, which is 3 rate cuts. As I said, we will see lower NIMs, but this will be offset by balance sheet growth, particularly in CASA volumes. Market trading also will benefit because of their lower funding costs.
If loan demand does drop in the second half, the second quarter looks okay, but if the second half loan demand drops, then there will be other assets that we have, other alternatives that we can deploy our deposits into, which will be interest-bearing and good ROE. So we continue to look for the commercial book non-interest income to grow, grow, grow at about the mid- to high-single digits. We have said that we are committed to keep our cost income ratio to the low 40% or so range, and that still looks okay. SPs, we should maintain 17%-20%. Whilst it's still too early to see impact, as I said, the first order impact not too big. Second order impact, we are stress tested, we are ready for it.
We've got our GP buffers, and we've got a high GP overlay. Net profits, while it will be below 2024 because of the global minimum tax of 15%, I still think the pre-tax profit could be around last year's level. With that, I end the CEO observations.
Thank you, Su Shan. We can now go to questions from the media. So for media who would like to ask a question, please raise your hand in the WebEx function, and then, when we call on you, please accept the invitation to unmute yourself before proceeding with your question. We have a question from Chanya. So, Chanya, please accept the invitation to unmute yourself, and please go ahead.
Hi. Hi, Su Shan and Sok Hui.
Hi,
Hi, Chanya.
Numbers. Happy for you. I have one follow-up with Sok Hui and a couple questions for Su Shan. The first one, when Sok Hui talked about spec, special provisions, did you say there's one large case that the bank provisioned for SP? Could you give colors on that one large case, if I heard you correctly? And for Su Shan, just want to check, you said net new money in the first quarter totaled about SGD 3 billion, correct? And you said there was an outflow of SGD 2 billion that could come back. Could you clarify or give colors a bit more? Second question to Su Shan: You talked about structural growth in India, despite geopolitical noise. Were you referring to tariffs, or were you talking about the Pakistan case that is ongoing? Thank you.
So Chanya, let me take your question. So you'll see from slide 13 of the presentation, that under the SP lines, there was a strong upgrade of SGD 119 million this quarter. You don't see it in previous quarters. Previous quarters had some settlements and recoveries. So this pertains to a large case where it was an NPL case. It's now been resolved. The business has been purchased by another owner, and we are comfortable with the credit, and we have upgraded from NPL to non-NPL. That is the reason why we are able to release the specific provision that we have set aside previously on this case.
Okay. Yeah, I think-
Shall I take the other two?
The other two, yeah.
Okay. So, Chanya, first, your question on net new money of SGD 3 billion, of which SGD 2 billion was somewhat transitory. The net new money we give out is the PB business. Whereas the Wealth business, obviously, as you know, has three different segments. The PB business is quite lumpy. And so, the two that went out, quite a bit of it was because there was a structured loan that we couldn't do, but some of it has come back. And actually, the April net new money growth was very strong. So as I said, you know, you can't judge net new money by the month because the business is quite lumpy at the PB level.
But the good news is the structural growth trend remains intact because we have more RMs, and we have more clients, and we continue to grow new clients and net new money. But do look at the wealth AUM, right, which is total for treasures, PB and TPC, which is SGD 432 billion. I mean, my message to analysts and the media is: There's a lot of focus on PB, but really, the Asia Wealth business is structural growth, and that's across all segments. And a bank that is able to bank all segments will do well structurally. And there's sometimes a lot of demand for structured loans that you may not be able to do because it's higher risk.
The lower end, especially the—you know, the priority banking, which is, again, it's more organic, it's more diversified, and in a way, it's more sticky if you have a good digital platform to complement your RMs. That's stickier and probably creates better ROE because you've also got a good mix of CASA, and you've got a good mix of fee type of income. Your other question around India, when I talked about the geopolitics, it was multifold. It was both the news over overnight, and it's also, you know, what we're seeing around the geopolitics because of the tariff war. But my comments was that the India structural growth story remains intact. We remain positive on India.
Our numbers suggest that the trend is good, because you do have a rising middle class, you have a very digitally engaged population. The India stack, the India tech stack, has enabled us to make both better digital journeys for our customers and also better decisions around credit. And so, you know, we remain optimistic about India's growth prospects.
I see. Thank you. Thank you, Su Shan. Thank you, Sok Hui.
Thank you.
Thanks, Chanya. We have another question from Ultra, from Reuters. So Ultra, please accept the invitation to unmute yourself. Ultra, please go ahead. Ultra, just yeah, we've unmuted you. You can go ahead with your question. Yeah, Ultra, go ahead. Okay, we might have to come back to you, Ultra, 'cause we can't hear you in the room. Let's see whether there's another question. Erica from Zaobao. Erica, please go ahead with your question. Okay, she's, she put it into chat. So let's read it out, yeah.
Her mic doesn't work.
Because her mic doesn't work. We'll read it out. So the first question-
The first one?
No, this is Zaobao.
Zaobao.
Yeah.
Okay.
So let me read it out. It says, "Net profit is expected to come in below 2024 levels. How much of that is due to the 15% global minimum tax, and how much is because of the broader macroeconomic impact?" So our guidance, our guidance was that we, we hope to be able to keep net profit before tax, close to last year's level. So the entire sort of impact you're seeing at the net profit after tax line would be due to, tax impact. It's, as I mentioned previously, it's close to SGD 400 million for the full year. Okay, let me read out the second question: "It is said that funding will be deployed into non-loan assets if loan demand weakens. Given the current tariff chaos, how much of a slowdown in loan demand are you expecting this second half year?
Okay, I'll take the loan demand, and then maybe, Phil, you can weigh in on the other assets. So the first quarter was very strong, and that will see us through in terms of the good non-trade loan demand. The pipeline actually is good. So second quarter will continue to be okay. It's the second half that, you know, if this trade war continues and we get to a pretty bad scenario, then don't be surprised that, you know, these non-trade loans and the deals that people want, that corporates wanted to do, will be paused, right? It's natural. That said, we want to continue to garner more deposits and then deploy them in other kinds of assets. Yeah. Phil will also opine on this.
Yeah. Hi, this is Philip Fernandes. I'm the corporate treasurer. So for the non-loan assets that Su Shan was referring to, there are a couple of categories there. Obviously, it's our deposit-based growth. We keep a liquidity buffer against that, and that's what we call the high-quality liquid assets, the HQLA portfolio, and that contributes to the LCR ratio and the SLR ratio that Sok Hui talked about earlier. So that's a natural outcome of growing the deposit base. So that's one. The second is, for any clients that tap the bond markets, we would have loan substitutes, and these come from a range of different borrowers, and we also invest in those. And thirdly, within our GFM business, we will do certain secure financing transactions, and those, again, very highly collateralized with high-quality collateral.
So the credit risk of all these instruments is actually lower than loans. But obviously, our focus will be on growing the customer franchise, and to the extent that the loan book happens to be lower than we topped up these different categories of assets.
Thanks, Phil. So just to remind everybody, that was Philip Fernandes. He's our corporate treasurer, also in the room with us. Okay, Ultra from Reuters, actually, he's also put his question on chat, so I will read it out. The first question: "How does DBS see the most recent strengthening of Asian currencies against the U.S. dollar, such as the Singapore dollar, to benefit the business of DBS, namely, say, Wealth business or the demand of FX services going forward?
Okay. Well, I can take that. The Asian currencies, I think we all saw the NT dollar had a very sharp appreciation on Monday, on Monday this week. A lot of the Northeast Asian currencies, like the NT dollar, the Korean won, these are non-deliverable forwards, and therefore not easy to hedge. I am told that both the lifers, these are life insurance companies in Taiwan, and also the large semiconductor supply chain, electronic supply chain, a lot of these guys, a lot of these companies have a lot of exposure to U.S. dollar, naturally. And so if there's some strength and there's a rush to hedge, that does cause volatility on the upside for their local currencies. That said, will these provide opportunities?
Yes, they will provide both, tailwinds and headwinds, right? The headwinds is, if the Sing Dollar appreciates, obviously, we also have some non-Sing, income. We hedge what we can, but whatever is not hedged, obviously, there will be some translation, impact. For the Asian currencies, yes, I think, you know, a stronger currency does affect their ability to export. It will affect, their cost curves as well. And so the impact, will depend on whether you're a net exporter or importer. But in terms of wealth, yes. I mean, obviously, if our-- most of our clients are Asian, so if their own currency is growing, that gives them, more purchasing power for, wealth management products.
There's a second question from Ultra: "How does DBS see any changes in demand for trade financing among your clients amid the U.S. trade tariffs?
Okay, so the Trade Financing business, it's very cyclical, and it's quite lumpy, and it's very seasonal. You've got high seasons, like, towards the end of the year and towards quarter end. And then it's whether, you know, you see. And then it's also based on pricing, right? So it's a competitive industry. We see a change in trade corridors. I think there will be more trade between, let's say, Asia and the Middle East, Asia and the GCC. If this trade outside the U.S., we call it TOTUS., right, TOTUS. If this TOTUS. focus becomes more pronounced in the second half, then I anticipate, hopefully, more trade within Asia. The intra-regional trade within Asia and ASEAN should pick up, as companies look for new markets to market to.
So intra-regional trade within Asia, between Asia and Europe and Asia and GCC, we should see some new pivots and new corridor growth. And also, we've gone from just in time to just in case, right? And so I think there has been stocking up of inventory. Inventory finance has picked up. OAT, open account trade, has picked up, but documentary trade will be lumpy and price dependent. So as I said, I think, you know, it, they will be opportunistic and will have to. This is the part of the book that will really be moving around with what we're seeing around the trade corridors and what we see on tariffs.
Okay, thank you. I think Chanya has a follow-up question. So, Chanya?
Yes, hi. So, for the first, second quarter, are you seeing more wealth flows given the strength of Singapore dollars?
In a word, yes.
Oh, wow!
I mean, we're not seeing. But, you know, it's not the strength or the Singapore, I mean, it's multifactor, right? As I said, the Wealth business is a Structural Growth business. And so we are seeing more flow. The flows continue. Right? It's not just because of a strong Sing. I mean, it's structural.
I'm asking from the wealth hub angle and the safe haven angle, because I mean, so much uncertainties, and then Singapore dollars, just similar to the Swiss franc, have strengthened significantly.
Oh, I see, Chanya.
Mm.
Yeah. I think you have a point. Singapore, both Singapore and Hong Kong actually are seeing very good wealth flows. Hong Kong, we see wealth flows from Greater China, from China particularly, and Singapore from probably South, Southeast Asia and west of the world. And it's a structural flow.
Thank you.
Thanks, Chanya. We have a question from Goola from The Edge. Goola, please go ahead.
Hello, hello. Hi there. Congratulations on your results. Can you hear me?
Yes, we can.
Okay, great, great, great. I just want to ask about, you know, the GP that you took in the first quarter, and what you said, what Su Shan said about the first order and second order risk impacts. Have you changed your MEV model to take into account these assumptions for the second order impact? And is that why the GP rose? And will you continue to set aside GP in the next three quarters?
Su Shan will take the question.
So, Goola, you know, our GP methodology, the entire stack, which you see on slide 14, SGD 4.2 billion. That's a baseline stack where we actually factor in a credit cycle index based on the sector, the country, so that will sort of the baseline will adjust as the macroeconomic variable adjusts. On top of that, we overlay with the stress scenarios. So the overlay component is the one that has grown by SGD 200 million. The stress scenario would be the SGD 2.6 billion that I mentioned, right? So we actually have a very high stock of overlay GP. And because these are stress MEVs, we don't expect them to manifest in the near term. It's just a prudent measure that we are taking.
Based on sort of the economist projections that have come in so far, I would say what we have set aside in the SGD 2.6 billion is actually sufficient. So unless things deteriorate a lot more, we have enough buffers to cushion it.
Okay. And then, sorry, could I just ask an additional point? So, do you have a NIM outlook for this year? Do you have a loan growth and NIM outlook for this year?
Okay. I mean, for loan growth, we are still looking at sort of, 5%-6%. It does depend on what happens in the second half. For NIM, we're around 2.0. Our exit NIM was 2.09. So it'll be ± a few basis points or minus a few basis points from that, depending on how many rate cuts we get. Because, as I said, right, we actually have hedged out about a third of our loan book, and
In fixed rates.
In fixed rates, so our impact won't be that great. Our income will also be mitigated by increase in deposits, particularly CASA.
Okay. Okay, which doesn't carry any cost, right? CASA doesn't carry any cost. So-
Yeah.
So, are you expecting more rate cuts? Or, because the Fed was very uncertain about. I mean, they didn't say they're gonna cut rates last night. They just said that they will check the figures for the next few months.
Yeah.
Are you expecting-
Yeah.
To have this rate cut assumption or not, or not?
We, you know, last year, we thought there will be two rate cuts. Now, it looks like it will be three. Whether it's two or three, the NIM wouldn't change by that much, because it will all be in the second half of the year. So it doesn't.
Okay
Really affect the full year NIM too much. But, we're ready for three.
Okay. Okay, thanks. Thanks. Thank you. Thanks again. That's about it. Thanks. Thanks. But well done.
Thank you.
Yeah. Yeah.
Thank you, Goola.
Thanks, Goola. Just a last call for any other questions. If you have one, please raise your hand. Just give it a few moments in case anyone has anything. Okay, Chanya.
Sorry, I just want to make sure I heard you correctly, Su Shan. You said that to Goola's last question on NIM for 2025, you said exit NIM stood at 2.09 at the end of first quarter, so the full year number could be ± a few basis points. Is that correct?
Yeah. Actually, the 8, the 2.09 was the April exit NIM.
Ah, April.
That's it.
Okay.
Yeah.
Got it. Yeah.
You know, so depending on how many rate cuts we get, it will be minus a few basis points from that.
Got it. Thank you.
Thank you. Anyone else have any other questions? Again, last call, for that. Please raise your hand if you do. Just gonna wait for a few more moments. Okay, Goola, back to you.
So, yeah, sorry, sorry. Just one last question. So will you change your, like, NIM sensitivity or anything like that from what was announced last year to the analysts?
We are not changing our guidance. I think at the end of last year, we said about 5 basis.
No.
Four million.
Four million.
4 million, sorry, SGD 4 million-
Per basis point.
Yeah, per basis point of sensitivity.
So be like SGD 4 million-SGD 5 million per basis point.
Same as the previous guidance.
Okay. Thanks. Thank you.
Okay, there doesn't look to be any other questions, so I think we will wrap up here. The analyst briefing will start at 11:30. 11:30. So thank you, everyone, for your time.
Thank you, everyone.
Thank you. Thank you. Bye bye.