Good morning, everyone, and thank you for joining us for this Q1 2020 financial results media call. In this call, our CEO, Mr. Piyush Gupta, and CFO, Chng Sok Hui, will share about the Q1, both how it's been navigating COVID-19 as well as key financial updates. They'll also be sharing about what we see as happening going forward. Do note that the slides that we'll be speaking to are available on the investor relations website, which we would like to refer to. Without further ado.
All right. Good morning, everybody, and thanks for calling in. These are challenging times. The way we're gonna do this is I will speak for a few minutes on the COVID-19 crisis and how we're navigating it. I will then pass on to Chng Sok Hui to take you through her deck, which is a look back at the Q1. Then we will come back to my comments on the business outlook, credit outlook and dividend. You have to unfortunately flip across two decks from our side. The first four, five slides of my deck first refer to our COVID-19 situation. Let me start first by acknowledging this immense crisis. In a sense, it's a human tragedy. Our hearts go out to all the impacted people.
As I will cover briefly here, we at DBS are trying to do our bit, whether it is for our customers, our employees, the community at large. I think it's incumbent on us and all large corporations to do these in these difficult times. Perhaps I'll start off by recognizing first most of all our own employees who've been truly heroic over the last six to eight weeks. If I can take you to my first Slide 3, that really underlines why I think our staff has been just extraordinary. The growth in our business volumes has been very strong. You know, this is contrary to a lot of other industries, services sector, et cetera, which has got impacted.
In our case, our corporate banking volumes are up 10% year-on-year. That reflects our custody volume, cash management and payment volume, even parts of trade finance, open account trading volumes have been up. On top of that, of course, all the relief measures that we have to process. Those volumes are up. The consumer volumes are a little bit down, principally reflecting cash and branch closures. Even in the consumer space, there are other areas where volumes are holding up. Once more, because of all the relief measures we're doing, we need to be able to process that as well. On the trading side, volumes have been strongly up. They're up 20%-25% for the quarter. Overall, the volumes for us in this quarter have actually been up.
Frankly, even though working from home is now a byword, we've had zero loss of productivity. What that means is we're handling the higher volumes with no backlog, which obviously suggests that productivity is keeping up. I'm really pleased about that. Like everybody else, we're essentially working from home to a large extent. Our banker relationship managers are pretty much all at home, over 90%. Our traders, about 70%-75% at home. Some need to come in. But everybody else based from home, they're recording their, you know, orders and remote recording and so on. As most of these are technology staff, 99% of our developers are now being working from home development activities. Some production support activity in Singapore, people come in, but that's been extremely well organized.
A lot of our people who still need to come into work are the operations staff. That's because there's still a lot of people handling in areas like mortgages or like I said, the branches, you have to be in the branch to open a branch, for example. Net-net, the remote working has been extremely smooth. We haven't missed a beat. Also our digital banking capabilities have served us very well. Even in the first few days of the crisis, our team was able to come up with some fairly nifty applications which have proved to be very beneficial. For example, contact tracing.
Immediately after we had our first case of virus, within 24 hours, we had developed our own contact tracing application using artificial intelligence, using cell site data, using door data, using Wi-Fi data. We can at any point identify degree of separation, two degree of separation, three degree of separation, quarantine the right people and so on. Similarly, we've created apps using sensors to be able to track floor loading at any point in time. We know exactly what is the capacity and utilization of any floor that can facilitate the social distancing and so on. A lot of our capabilities are helping. Finally, we're doing all this while dialing up the cybersecurity frameworks. Obviously, when you put more people working from home, you create a higher level of risk.
We've been able to handle exponential increases in work from home volume, VPN, VDI, Citrix capability, layered defense capabilities. We've also dialed up manual controls. We have a review process from the day after. We have a tightened network command center, which has beefed up its capabilities and so on. Bottom line, the key challenge for us is like everybody is right now more a psychological challenge than a real challenge. We've been able to operate quite reasonably. If I can take you to Slide 4. I also tell you that in addition to getting the staff done, we are also being able to work through large bodies of people and keep the rest of the engagement activities going. We've done over 50 town halls. Normally, we do town halls in person.
We've been doing virtual town halls. We've engaged over 20,000 staff in these town halls. That's working really well. Like every other company, we're doing virtual meetings. We did 1.2 million virtual meetings in April. That's over a nine times increase. The bottom left-hand corner that we are also our projects are continuing apace, so we haven't had to slow down. We ran over 30 virtual workshops. These are half-day, full-day workshops, with large numbers of staff, and a lot of that is to support project activity. Finally, all of our learning and development is also continuing apace. We moved over 100 training courses online and conducted them in the last month to over 15,000 people.
In addition to being defensive by getting the job done, we're also being able to actually keep the normal bank running quite well. If I take you to the next slide. In addition to what we're doing for our own resiliency, we've been very focused on trying to make things easier for our customer base. Because, you know, we already have a whole slew of digital capabilities out. In this last two-month period, we have really accelerated several rollouts we planned for the course of this year, and in some cases, we've created shortcuts to add some more that weren't even on the agenda. These include the capacity to open accounts at scale, so particularly equity accounts, migrant worker accounts. You see at the bottom, we opened 24,000 equity accounts in less than a month.
This is more than 1.5 years normal quota. We also opened 35,000 accounts for migrant workers in less than two weeks when the migrant worker problem hit this thing. That's obviously because of our capacity to be able to launch a digital account opening. We've also increased our capability to accept documentation through things like secure mail. Now, earlier, you know, interaction used to be on fixed formats. Now we've got secure mail, which take people instructions off. We enabled tele-advisory, so all of our financial planning is now happening online in a virtual tele-advisory space. We've created guided chatbot for being able to handle all of the questions around corporate relief measures from the government and from our own selves.
In fact, we've also made sure that all of the relief measures applications can all be made online, real time. We rolled out a whole slew of activity. If you go to the next slide, Page 6, it'll just tell you the impact of this is actually quite visible. If you look at equity trading, between the Q4 of last year, the Q1 of this year, our total volume have more than doubled. In fact, you know, our fee income between the Q4 last year and this year has gone up from SGD 15 million to SGD 35 million. Just reflects the amount of online activity that people are doing and all of the new accounts we opened and so on.
If you look at the next one on the right, on foreign exchange, our volumes are up 50% year-on-year. If you look at the bottom two domestic payments in Singapore, both PayLah! and PayNow, our volumes are up quite significantly. In the last column on the right, corporate PayNow is actually up six times as more and more SMEs and companies are willing to accept online payments. In all of these categories, our volumes are up, and by and large, from what we can tell, our market shares are up as well. It's been quite helpful to our customers, but also continue to buttress our own business volume. If you go to Page 7, just a quick rollout thing on, you know, we've been trying to do stuff across the board.
Column one for our own people, we went public announcing that we would not retrench anybody in the course of this pandemic through the year. In fact, we're not going to cut salaries. We're in fact actually judiciously hiring. We think it's helpful for the communities to continue hiring and we're hiring graduates, interns, trainees and so on, albeit in a measured way. We think the kids coming out of school at this point in time need some support as well. We've created medical teleconsultation capabilities for all our staff, so they don't need to step out of the house to get ordinary consultations. We launched this whole wellness program together to keep people's spirits up while working from home.
That is a whole bunch of different things like monthly challenges, games, deep learning and so on. In terms of the government packages, so far on the consumer front, we've done over almost close to 8,000 principal and interest deferrals for mortgages. The difference is almost SGD 5 billion, SGD 4.7 billion of outstanding loans. We launched free insurance for COVID with our partner Chubb till the end of April. So far, we've been able to insure 1.2 million customers and families. On the corporate side, again, we've implemented loan moratorium. We've done over 1,800 loan moratorium, representing at this stage about SGD 3.4 billion in total loan outstanding. We've also been able to avail of the new government backed in Singapore, the ESG loan.
So far, we've availed SGD 3.2 billion loans under the government relief program. Finally, a couple of weeks ago, we launched a new fund. We've allocated SGD 10.5 million for what we call the DBS Stronger Together Fund. It's across the region in our six main markets, helping wonderful communities like the charity, like the migrant labor, helping with test kits, helping with medical facilities in each one of those markets, as well. I just wanted to start with this, that it is a big crisis. It is a tragedy for many people. We do believe we have a role to play, and we have been very focused on trying to do that.
At the same time, we've been trying to make sure that we can continue to run a resilient business and be there for our customers at this critical time. With that, let me pass on to Chng Sok Hui, she will take you through the results for the quarter.
Good morning, everyone. The group achieved a strong Q1 performance as total income rose 13% or SGD 475 million from a year ago to cross SGD 4 billion for the first time. Net interest income, fee income, and other non-interest income all recorded increases year-on-year, growing by 7%, 14%, and 39% respectively. Net interest margin was stable quarter-on-quarter at 1.86%. Expenses were well managed, declining by 3% from the previous quarter. Cost-to-income ratio improved to 39%. Operating profit before allowances rose 20% from a year ago to a new high of SGD 2.5 billion, which allowed us to preemptively set aside SGD 700 million of general allowances to fortify our balance sheet against risks arising from the ongoing COVID-19 pandemic.
The charge increased the amount of general allowance reserve by 29% to SGD 3.23 billion or 1.08% of assets under regulatory definition. With the buildup of general allowances, Q1 net profit declined 29% to SGD 1.17 billion. The NPL rates rose to 1.6% from 1.5% the previous quarter. Allowance coverage of non-performing assets was at 92%, and allowance coverage of unsecured non-performing assets was at 173%. Liquidity is healthy. Deposits recorded their highest quarterly increase of SGD 30 billion, rising 7%. The loan-to-deposit ratio declined from 89% in the previous quarter to 83%. Both the liquidity coverage ratio of 133% and the net stable funding ratio of 112% were well above regulatory requirements.
The Common Equity Tier 1 ratio of 13.9% was above the group's target operating range of 12.5%-13.5%. Well above the regulatory requirements of 9.5%. On slide three. DBS delivered solid franchise growth in the Q1, as you can see from this chart. Total income grew 13% from a year ago to cross SGD 4 billion for the first time. Business momentum was healthy. Net interest income rose 7%, or SGD 172 million from a year ago to SGD 2.48 billion on the back of broad-based growth in non-trade corporate loans and stable margin. Fee income rose 14%, or SGD 102 million from a year ago, to a new high of SGD 832 million.
The growth was led by a 28% growth in wealth management fees, a 17% rise in loan-related fees, and a 64% increase in investment banking fees as clients have tapped debt issuance. Other non-interest income rose 39% from gains on investment securities and from strong treasury and market activity as customers put on more hedges and structured trades. Expenses were well managed, rising 4% from a year ago. Profit before allowances grew 20% from a year ago to SGD 2.47 billion. Total allowances of SGD 1.09 billion were taken to accelerate the buildup of reserves and add resilience to the balance sheet. Two-thirds of the amount or SGD 700 million were for general allowances. The remaining SGD 383 million were for specific allowances.
More than half of the specific allowance charge for the quarter was for renewed non-performing loans. Net interest income increased 7% from a year ago and 2% from the previous quarter to SGD 2.48 billion. Loans grew 1% in constant currency terms from the previous quarter. Net interest margin was stable from the previous quarter to 1.86%. Although the U.S. Federal Reserve cut policy rates to near zero in March, LIBOR interbank rates were resilient due to stressed funding market conditions. This served to buffer net interest margin. We expect net interest margin to come under some pressure in subsequent quarters as rates decline in line with globally accommodative monetary policy and improved funding conditions. Slide 5. Loans grew 1% or SGD 3 billion in constant currency terms from the previous quarter to SGD 375 billion.
Non-trade corporate loans grew 5% or SGD 10 billion. Growth was led by drawdown in Singapore and Hong Kong for CapEx and acquisition financing as well as for liquidity management. Trade loans and wealth management customer loans declined from the previous quarter. Loans pipeline remains healthy, and we expect further drawdown of non-trade corporate loans in the next quarter. Slide 6. Liquidity remains healthy. Deposits recorded the highest quarterly increase, rising 7% or SGD 30 billion in constant currency terms to SGD 445 billion. The majority of the growth was from corporate customers. We benefited from a flight to quality, and our strong deposit franchise enabled us to weather the stressed market conditions in the second half of March, when wholesale markets were not functioning well. As you can see from this chart, wholesale funding declined SGD 6 billion during the quarter.
We also hold high-quality liquid assets of SGD 92 billion and that's from Basel definition, which further strengthens our liquidity position. The loan-to-deposit ratio declined from 89% in the previous quarter to 83%. Both the liquidity coverage ratio of 133% and net stable funding ratio of 112% are well above regulatory requirements. Slide 7 . Expenses rose 4% from a year ago to SGD 1.56 billion. Compared to the previous quarter, expenses fell 3% from lower general expenses and lower staff costs. There was a positive jaw of nine percentage points compared to a year ago and 19 percentage points compared to the previous quarter. The cost-to-income ratio improved to 39%. We'll continue to exercise strong discipline in our cost management. Slide 8. Non-performing assets rose 14% from the previous quarter to SGD 6.6 billion.
Two percentage points of the increase was due to currency effect. An oil trader accounted for a large portion of the new non-performing assets. The NPL rates rose from 1.5% in the previous quarter to 1.6%. Slide 9. Specific allowances amounted to SGD 383 million. More than half of the specific provision charge was due to a single name, the same oil trader which became non-performing during this quarter. Credit costs were 35 basis points of loans for the quarter. This was 15 basis points higher than the 20 basis points recorded for 2019. Slide 10. SGD 700 million of general allowances were taken in anticipation of the deeper and more prolonged economic impact from the pandemic.
The charge increased general allowance reserve by 29% to SGD 3.23 billion, or 1.08% of total assets under regulatory definition. As this exceeded the MAS minimum 1% regulatory requirement, regulatory loss allowance reserves are no longer needed. A portion of the general allowance reserve was also not committed to Tier 2 capital, pointing to a conservative and prudent level of general provision reserve as we enter uncertain times. The total allowance charge of SGD 1.1 billion in the Q1 was 6.2x the quarterly average for 2019. Including specific allowance reserve, total allowance reserve increased 21% to SGD 6.08 billion, and allowance coverage of non-performing assets was at 92%. Allowance coverage on unsecured non-performing assets was 173% after taking collateral valued at SGD 3.08 billion into account.
Slide 11. The Common Equity Tier 1 ratio was at 13.9%, little change from the previous quarter. The ratio was above the group's target operating range and well above regulatory requirement. The leverage ratio of 6.9% was more than twice the regulatory minimum of 3%. Slide 12. The board declared a quarterly dividend of SGD 0.33 per share, unchanged from the previous quarter. Based on yesterday's closing share price, the annualized dividend yield is 6.9%. The Q1 interim dividend of SGD 0.33 will be paid together with the Q4's final dividend of SGD 0.33. In total, SGD 0.66 will be paid to shareholders on 26th of May, 2020. Slide 13, my concluding slide. Our record operating performance in the Q1 reflects resilience of our franchise and disciplined cost management.
Allowances have been preemptively set aside to cater for risks arising from the uncertain pandemic outlook. We start from a position of considerable strength. Our digital investments over the past decade have strengthened the resilience of our franchise. Our capital funding and liquidity remains strong. We are well positioned to support our customers in uncertain markets. I hand you now back to Piyush for the next section.
All right. Thanks, Chng Sok Hui. If I can take you to Slide 8 of my deck. Let me give you a couple of seconds to switch back to my deck. Slide 8, it says, "Business Outlook." I think the first thing is quite clearly the strong Q1 has given us a head start for the year. Our income is up about SGD 500 million from Q1 last year. That's quite helpful. At this point in time, we think that our overall income from the year could come in to about flat to last year's levels. Which means that the next three quarters, you'll probably see a decline of SGD 500 million, which will make up for the SGD 500 million increase in the Q1.
We do think that there will be therefore slowdown over the next two, three quarters, not as robust as the Q1, but that's not unexpected because Q1 included a very strong Jan and Feb, and we started seeing some slowdown from March thereafter. We're guiding for full year profit before allowances also to be flat to 2019 levels. Which therefore means that we think we can hold expenses flat as well to last year's levels. I'm going to come back and talk a little bit more about that. What are the pressure points? Obviously pressure point is interesting. The Q1 NIM, which as you can see has been surprisingly resilient, that does not really reflect the impact of the rate cuts of March.
The Fed dropped 150 basis points between the third of March and the fifteenth of March. A, it was only the last three, four weeks. B, as Sok Hui pointed out, because of the funding conditions through the end of March, LIBOR stayed very strong. The LIBOR-OIS spread went up to as much as 140 basis points through the end of March. On top of that, we actually have been able to hold credit spreads. In fact, credit spreads have also gone up in this period, because of uncertainty. NIM heads up. However, the exit NIM through the end of March was already in the 1.78s, and therefore there's no question that you will see some challenges on interest income.
We think NIM is going to be slightly volatile, partly because we have these government programs which are low yield programs, even though they are good on returns because they're extensively guaranteed by the government. There's also going to be uncertainty around LIBOR levels and IBOR and HIBOR levels. So it's hard to give specific NIM guidance. On the other hand, we think that the total impact of interest income is likely to be in the region of SGD 500 million-SGD 600 million for us in the rest of the year. If you go to the next slide. While interest income and high NIM will be a challenge, the interesting thing is the business volumes have been holding up. Q1 was particularly strong for non-trade loans.
As Sok Hui pointed out, we grew $10 billion. Some of that was obviously people drawing down on revolvers and committed facilities for liquidity purposes, but that was not the majority of it. It was actually the minority of it. A large part of it continues to reflect business needs of our customers. We still don't have an idea how much of this is, you know, Q1 was a last hurrah. As we look at our pipeline through the Q2, those also look quite resilient. I still have better visibility for the year. The loan volume looks relatively okay. Some of it is coming from real estate. There's still a lot of property transactions, both acquisitions and frankly some development financing as well continues to happen. The TMT sector, parts of it are very robust.
Companies which have switched to desktop, anything to do with support work from home kind of activity is strong. Data center activity is strong. Even in ECI, storage, anybody in the storage business is actually doing quite well. In a regional context, Taiwan is not missing a beat. China business volumes are holding up, come back in the last few weeks. We further helped a little bit because of the relief programs. As I said, we think we're going to do about SGD 3 billion of incremental relief programs to support SMEs, et cetera, in the region. That's obviously helped the loan book. Finally, there is restructuring activity. As [audio distortion] said, we are part of helping put a restructuring package for example for Singapore Airlines backed by Temasek and the government.
Now that obviously winds up with some assets for us on our book. The loans, non-trade loans, pipeline looks like it might hold up. The trade loans are being impacted. I think the total trade volumes are down 10%, which shows up in our trade loans in the Q1. I think that will continue. If you look at overall projections of WTO, they're looking at trade between 13%-30% down. We are not seeing 30%. We are seeing about 10% down around the region, but that's likely to continue. As you know, however, that the net interest impact of that is not that large because the margins on the trade loans are oftentimes quite tiny. On the housing and consumer loans, I'm expecting a little change.
The housing loans in the Q1 actually grew. We are up by about SGD 300 million in terms of asset levels. Q1 was actually one of our strongest new booking quarters in a long time. We did SGD 3.5 billion of new bookings. The bookings have crashed. Obviously in April with the circuit breaker in Singapore, the bookings are down by about half. We expect the loan volume to be flattish. On the non-mortgage side, we saw some shrinkage in the margin financing, wealth financing loans, a couple of billion in the Q1, even though activity was robust. As we go into April, we think that level will probably hold.
On the asset side, like I said, you put all of that together, it is resilient is the word we've chosen to use. On the deposit side, Sok Hui pointed out to you that we just had a massive inflow of deposits in the Q1. Frankly, that's continuing into the Q2. That reflects not only people drawing down and leaving money with us, I think, digital activity and operating accounts activity. Also reflects some on the consumer wealth side, people trading out of investments and putting money into deposits and so on. That's likely to be strong. Our fee income I think might be somewhat lower because the Q1 was really benefited by a very stellar wealth management performance.
We had over SGD 100 million of incremental fees in wealth management. Loan fees also heads up. Bond fees heads up. I don't see the wealth fee income staying at these levels, so that will be a headwind. On the other hand, we do have diversified fee income sources. The investment banking, I think the markets are beginning to open. We've done a slew of new issuances. In fact, investment-grade issuances globally through April, at least are 50% higher than last year, and we have already shared our league table positions actually have improved quite nicely in this 4-month period. We think the diversification of some of our fee income sources should help.
The big upside is obviously in the non-interest income category that shows up in the Q1 as well, and that comes in three parts. One is our customers are all being a lot more active in risk management, hedging exposure management, both on the corporate and the consumer side. That's helping our treasury and markets sales activity. Second, the markets business itself has been able to do well in these volatile environments. That's been a positive. Third, we obviously, like a lot of other banks, have a large portfolio of investment securities. With the collapse in rates and the yield curve, a lot of those investments are well in the money. We have been able to take the opportunity to monetize some of that. That opportunity continues to exist as we go through the year.
When you look at all of this, I think our assumption that we might be able to hold income flat this year is tenable. As you look into 2021, it's a little challenging because you're going to see even further impact of the interest rate environment. On the other hand, the outlook for 2021 is quite unclear. If we do see a sharp pickup in economic activity from low levels this year, a recovery into 2021, that will obviously be helpful. It's harder to call than the rest of this year. If I turn to Slide 10. On expenses, as we indicated before, we've been careful and flexible with expenses, and we've tried to be quite deliberate and thoughtful in expense management already.
We don't want to retrench anybody or cut people's salaries in these difficult times. We think it would be the wrong thing to do in particular with the workforce, which has been, like I said, making such a heroic effort. However, we have become a lot more judicious about our hiring. To the extent that we do have some turnover, which by the way is very small in this environment, we'll be careful about, you know, replacements and incremental hiring. We've been able to cut back on a lot of discretionary non-staff expenses. Travel is an obvious one. Nobody's traveling, so we don't have to do too much to get that.
The other expenses as well, around marketing, around consulting, around a whole bunch of discretionary things, we're tightening the belt on some of those. We have prioritized some of our investment spend, and we will do that. It's not a huge cost, but we do have some capacity, as we indicated before, to prioritize that. We're doing some of that. Finally, while we now reach the impact on fees and salary, obviously variable comp will be aligned to earnings, and that will show through in the course of the year. In light of all this, we do think that we should be able to hold expenses relatively flat, as well.
If I move to the next section away from business outlook, some words on the credit outlook, because that obviously is the big driver of the bottom line over the next couple of years. Let me just first start by refreshing you what the nature of our loan book is. This is our actual loan outstanding. This is not our total credit outstanding because this does not capture, for example, contingent liabilities. Our total outstanding would be some 10%-15% higher than this. This puts into perspective the loans we see in the performance summary in our balance sheet. It's a good way to understand where we think our portfolio exposures might be.
If you look at the overall loan book, and you can see our consumer loans of SGD 114 billion, about 50% of the book. SME at SGD 39 billion is 10% of the book. I've called those out because generally speaking, in these kind of macroeconomic crisis, these two segments tend to be more vulnerable. I will take you through those in a bit. The rest of our loan book is large corporate. Out of the large corporate, we've identified eight or 10 industries which I'll talk to, which we see as more vulnerable or more likely to be impacted. The total loan outstanding for those industries is SGD 47 billion, out of which about SGD 5 billion is Singapore Inc effectively. We think that's actually relatively okay in that sector.
If I take you to the next Slide 12. Overall, there's no question that we expect credit costs to rise. Already the damage that's been done to the global economy is large. The Q1 GDP numbers from China, -6.8%, U.S. 4.8%, those are very material. We do think there's going to be a pickup in credit costs, without a doubt. We think this pickup in credit costs will be, again, actually we try to dimension it over two years. Now, the reason we take two years is that because of all the relief packages, it is kind of unclear what you're going to see in 2020. Because we're not asking people to do principal or interest servicing on mortgages this year, then obviously nothing goes into delinquency into NPL.
Similarly, we're doing principal deferment for large part of secured and SME loans, so that doesn't go into NPL, either. Therefore, we think the right way to think about what is the potential cost of credit is to factor in a two-year view, which means once the moratoriums and relief packages get over, you will expect to see some of these loans turn bad. We try to take a longer term view, looking through the moratorium. When you look at the longer term view, we have estimated that we could see cost of credit in the SGD 3 billion-SGD 5 billion range, which is somewhere between 80 and 130 basis points. We use actually various methodologies to come up with a number.
We did a top-down view, leveraging our models and top-down portfolio migration analysis, macroeconomic variables and so on. We did a bottom-up, which is actually name by name, each sector, vulnerable sector doing stress test and et cetera. We really looked at two scenarios. One which we call the base scenario, which is that all lockdowns basically continue in all major economies most of the world through till the end of June. Then you start progressively seeing opening up. You will see a gradual recovery towards the second half of the year, and muted growth next year. A good way to think about this scenario, we assume that there's a 20% correction in stock price levels around the world in this scenario. Now, it's not that relevant, but that's a good way to think about it.
In the second scenario, we assume the more severe scenario. We assume that lockdowns continue well into the Q3. We see a recovery only at the end of the year, and economic activity next year is still materially lower than last year's levels. A good way to think about the scenario is to assume basically that the stock markets are running at about 50% of last year's levels, which would be very severe. Now, one thing to point out is that in our scenarios, the third scenario in particular, the ECLs are comparable to both SARS and to 2008, 2009. We spent some time trying to think about why that would be because intuitively we think that the magnitude of this crisis is likely to be more than 2008, 2009 or SARS.
First, it's quite clear that even in our third scenario, there could be tail risks beyond that, and I will point them out as we go along. It is possible that we've not factored in all the tail risks; it could get much worse. Let me acknowledge that first. The second reason for a difference from 2008, 2009, if we went back and looked at the nature of our problems, a large part of that came from our mid-tier exposure, chunky mid-tier exposure, where we participated in large syndicate loans. Actually, if we didn't have that, then the nature of our problems would have been far shallower. It's not really comparable from that standpoint. If you look at 2003, 2004, we actually were hammered a lot by the Hong Kong bankruptcies in that period.
There were very large bankruptcies in Hong Kong. Our consumer portfolios were a lot more vulnerable. Our mortgage lending that time went more than 100% loan to value, 103%. The credit bureaus were not that well developed. Again, it's hard for me to say whether it is or may not be severe enough. The situation could get worse in the tail risk event. It could be, as pointed out. I think there's good reason to figure that the actual overall nature of the stress might be similar to those two periods in our overall business and our portfolio. If I take you to Page 13 for a good look at the consumer portfolio, our loan side is, you know, SGD 75 billion. Actually in our stress, we are still expecting minimal losses.
expecting our losses to be not more than the 2008-2009 crisis. Let me point out just the first statement. The reason we think our losses are going to be quite muted is the next three bullet points. One is that the regulations on loan to value and debt servicing have been very prudent. The central bank has been very, very tight and has kept it tight the amount of financing you can provide. Our LTVs on new-to-bank originations are generally 70% or less. I have a few cases that go up beyond 70%. The TDSR, the protective origination requirements of 50% means you just cannot give loans to people who are overly indebted. As a consequence, we think that the actual ability of people to service and pay is actually quite good.
Our loan to values are very, very conservative. In Singapore, the portfolio, I told you TDSR is 70%, the portfolio is at 65%. The loan to value in Hong Kong is even more conservative. It's at 32%. You could take a sizable collapse in property prices and you would still not have negative equity on your collateral. Finally, as we pointed out before, the vast majority of our loans, 85%+ are for owner-occupied premises. They're not investment kind of properties. That also creates a degree of resilience in our housing loan portfolio. As a consequence, if you look at the last seven to eight years from 2012, our losses on mortgages have been zero, right? Zero.
As we project forward, we're obviously projecting some pickup in basis points, but the net total of it is not very material. On the unsecured credit, I think the main thing that we're benefited by is that our unsecured credit book is very tiny. It's 3% of our total loan book, SGD 11 billion. I was looking at the results of the American banks, for example, JP and Citi. Their credit card portfolios alone are over $150 billion. It's up to 40x our credit card portfolio. Because our unsecured book's very tiny, this segment which is normally the segment that you worry about. In fact, a large part of the provisions created by the U.S. banks are in support of this book.
Now, for us, this book is so tiny that it doesn't move the needle very much. In addition, again, in Singapore the MAS has been tightening the borrowing conditions for unsecured credit actively over the last two years. Our debt-to-income has progressively been reduced from what used to be unlimited then to 24x, then to 18x, then to now 12x. All our debt-to-income has been brought to 12x for the whole industry. That means that the riskier segments of the market don't exist in our books anymore. On top of that, Hong Kong origination has already been under stress for the last 12-18 months and been through a little bit of a wringer, and we've been able to see the impact on our Hong Kong book. It's obviously smaller.
Singapore is more than half of this book. Next slide. Nevertheless, we are projecting a pre-tax provision of between three to four times our normal levels in this book. When you add all of that together, the entire consumer portfolio does not create total provisions of more than between half a billion SGD and 1 billion SGD, depending on which scenario you look at. It's relatively manageable. If you go to the next slide on the SME book, as I pointed before, it's a SGD 39 billion book. 90% of that is in Singapore and Hong Kong, and it is predominantly secure against property. Now that is. I pointed on the first case, the tail risk is that assumptions on mortgages go wrong and there's a massive collapse in property prices of more than 50%.
That is the same tail risk in the SME sector. If there's a massive collapse in property prices and property prices collapse by 30%-40%, shop houses, et cetera, then our loss given default assumptions on this portfolio could come under some pressure. However, even for this sector, we've been tightening our lending in the last couple of years. Only 10% of our exposure is in what I call the troubled sectors, hotels, F&B, retail. We've been tightening that down and we've brought that down quite actively in the last couple of years. The Hong Kong portfolio, again, in this sector, has gone through prolonged stress. It's been under stress conditions for the last 12-18 months.
When we do our name by name and portfolio analysis of this sector again, we see provisions went up by three to four times. Even in the stress case, they are tagged under $1 billion of provisions as well. If you go to the next section, the large corporate. I told you we identified industries we think are more vulnerable. That includes obviously oil and gas with oil prices, aviation, nobody's flying. Hotels, the gaming and cruise ship industry, tourism, retail, F&B, and shipping. Total loans is $46 billion. Of it, the biggest half of that is in oil and gas. That's $23 billion. I'm gonna take you through that in some more detail. For this sector, we did an even more thorough name by name analysis review based on stress assumptions.
We chose stress assumptions for every industry. In oil and gas, we've taken $20 oil prices over the course of this year. In aviation, we've assumed that there's zero revenues for the next 12 months, and so on. We've taken some very stressed conditions which are specific to each industry. In every case, we've tried to assume that they have zero flexibility in expenses, that they have a fixed cost structure, so we've kept expenses where they are. Then we've tried to identify what is their net impact on their liquidity, the EBITDA, cash flows. Who's likely to get vulnerable and go under. On doing that, basically, we've identified about 20% of these names need to be stuck and closely monitored.
If I take you to the next Slide 16. I give you a peek for the oil and gas portfolio. This is a similar chart that we used to show you in 2016 and 2017 when we had the offshore marine crisis. We have about $7 billion to what we call the producer segment. Now, these are mostly oil majors and state-owned companies. Those are people like CNOOC, ONGC, Sinopec. These are the bulk of that exposure. In the processor category, there are two big guys, the refiners, and then there are storage companies doing storage. Obviously, anybody who does transport and storage is benefiting dramatically from the glut in oil and the exponential increase in the storage prices and costs, so they're doing fine.
In the refining sector, refining margins are under some pressure. Our exposure tends to be to the oil majors or to integrated operators with large diversified income. This would be people like the Reliance of the world and et cetera, BP. It's like we think they're relatively strong. If I take you to Slide 17. On these traders we have a total of $5 billion. 50% of these are against bank letters of credit. The export letters, the export biz, which is done against bank letters of credit. Of the balance, we already recognize one loan as NPA. Everybody knows what that is. In point of fact, that's actually bit of an aberration in our book. It's obviously a large oil trader.
From what we can see that there's been an extended accounting fraud with this loan for like several years. The balance of the loans in the traders are to global traders, or to state-owned companies, and they're very tightly, generally tightly structured. Finally the last category is support services. As you know, our exposure in support services, through the Singapore offshore marine sector used to be about SGD 8 billion. This has now come down to about SGD 4 billion. Out of the SGD 4 billion, SGD 3 billion is in non-performing. SGD 1 billion is not. This sector we think will still come under more pressure as regards oil prices.
We think we will, e ven though we were conservative in our recognition of losses in 2017, we think we might still have to take more provisions against some of those names. Then the residual portfolio might also come under some stress. But that's something, still the most stressful part of our sector, but the component of that is not fun and is performing likely quite poorly these days. If you go to the next Slide 18. On the aviation sector, we have total loans of about SGD 6 billion. 15% of those are to Singapore Airlines. It's not just the airline, it's also the airport and so on we include in this category. Another 35% are to national airlines. Now, this is our third tail risk event.
Our assumption right now is wherever the governments are providing support packages to the national flag carriers and whether it's, you know, KLM or Lufthansa or Etihad, that they will come through. But that is a tail risk and that could, you know, something that depends on how the airline industry does. We'd have to wait and watch. We have got a little bit of exposure to bank-related and international leasing companies. A lot of these are bank-owned companies, the Chinese banks in particular. Finally, 15% of exposure to the aircraft manufacturers, which is obviously Boeing, Airbus, et cetera, and so on. Now, on the aviation sector, we have made assumptions on the degree of government support in each category.
We've also relied heavily on the liquidity and cash on the balance sheet available for each of these companies. If you take a look at the manufacturers, for example, they have enough liquidity and cash to last them one to two years. We've taken that into account. Obviously the tail risk event, which could you know come to pass differently. When you put all of that together, between the consumer, the SME and the corporate, we come up with a bigger estimate which we think is realistic. It could be anywhere in the SGD 5 billion-odd range over the next two years. Moving on to Slide 19. Just a quick thinking on resilience. Now we obviously come to this crisis with a very strong balance sheet.
Somebody pointed out that our you know equity core capital is still very strong at 13.9%. We do have general provisions of SGD 3.2 billion. Of that amount, a couple of billion represents our models. They've come up with specific ECL and so on. Over a billion of that is just management overlay. It's just a cushion we've built up and continue to build up to buffer us for uncertain times. Our liquidity positions are also very strong. The balance sheet we approach it from a position of strength.
On Page 20, in reflection of all of this, you know, taking into account our current projection on earnings capacity, our projections on, you know, what our stress situations could be, and the strong nature of our balance sheet, the board decided to hold the dividend for this quarter at SGD 0.23. We do think if our projections are in the range that we think about, our capital ratios will not dip significantly below our operating base. Now, as I said, however, there are tail risks. The tail risks could come to pass. Therefore, we will continue to keep a watchful eye on our financial performance or the likelihood of stress losses, as well as our income. We do that every quarter.
Now, fortunately, since we pay dividends quarterly, it gives us the capacity to keep reviewing our situation as we go along. Because there's uncertainty around how long the pandemic would last, there's uncertainty around what consumer behavior could be after the pandemic, there's uncertainty around the impact of the government measures and, you know, what that winds up with. We will keep a watchful eye and keep examining our position every quarter, as we go forward. This was the end of my prepared comments. We are open for questions.
Now we can take questions from the media. Please let us know if there are any.
Thank you. We will now begin the question and answer session. Participants with question to pose, please press zero one on your telephone keypad and you'll be placed in the queue. To cancel the queue, please press zero two. Once again, zero one on your telephone keypad now. Our first question, Jamie from Business Times, please go ahead.
Hi to you, sure. Thanks very much and frankly as well for a very comprehensive breakdown of the numbers. Just a couple of questions. First of all, the large corporate, is it, you know, when you look at the large corporate and the stress that we have, does it take into account sort of the, I suppose, the domino effect, let's say, for landlords that are under stress because they are told to pass down certain rebate and are under pressure to ensure that they provide some relief for their tenants. How do you sort of assess the sort of domino effect that might have on the larger corporate in itself in this time of stress? The second thing has to do with the oil and gas portfolio.
I mean, in the previous time in 2017, the write down, in some cases were down to sort of scrap value. Can we get a sense of sort of the collateral values that you're looking at this point, and how much further mark-downs are we looking at? Thank you.
Jamie, the first question is, actually how we do our stress test, and that actually captures the domino effect. For every industry, we come up with stress conditions. You take the example of property. I don't have the numbers with me, but as an example, they would have made an assumption that property sector revenues fall by 30%. Now that 30% assumes that they have rent relief problems, they can't rent out their property, et cetera, et cetera. That's already factored into the assumption on what, this thing. In every industry, they make an assumption on how bad the revenue situation could be. That captures the domino effect that you're talking about. Like I said, this is importantly an art and not a science. You do it for every name.
You figure how much revenue loss there'll be. You look at what the expenses are. You look at what the liquidity and cash in the balance sheet is. You look at their refinancing which are due in the next year or two, et cetera. Then based on that, you make an assumption on are they likely to go into a default situation? Are they likely to get very stressed and so on, and work on that basis. On your second question on the oil and gas. We actually in the last thing, we used a couple of variables. Where we thought there was no hope for the company, we actually went down to scrap value.
Where we thought that the company could restructure or that there was a liquidation prospect, there was a buyer for the company, then we took liquidation value as well. We had a range of different things we used. In the current situation there, some of the companies who they were either restructuring their way forward or they were buyers for, we might have to take those to scrap value. The difference between companies and liquidation value and those scrap value might be another 10% or 15% of what the levels are. But like I said, we could take some more hits over there, but it's not going to be importantly bad.
Thank you.
Thank you. Our next question, Annabelle, please go ahead.
Hi, Piyush. Thank you for your presentation this morning. My question is specific to the wealth management business. I was hoping you would share some observations of client behavior in the Q1, and in particular, are they, like, gravitating towards particular products? Thank you.
Actually, the quiet client behavior in the Q1, inflows are very strong. I think that is because of, among a few reasons. One is a lot of people were trying to sell and get out before the market was sinking and trying to move to cash. We saw that, people moving out into cash. Second, interestingly, a lot of people were also using the opportunity to reposition their portfolios. People have actually taken views on long-term winners, including in our discretionary managed books. They've given us money for what we call our model portfolio and so on. People have actually tried to reposition into a range of different kinds of products. Equity in some sectors, not across the board.
Similarly, people have continued to go into some retail structured products in some cases. The third thing that I think their activity was strong is that people were all locked down at home, and so they're all sitting on their computer and figured they could do a lot more. Activity has slowed down in April. To be fair, I think some of this was the thing. I think people have got a little bit more worried and a little bit more cautious than risk-averse in the month of April. I do think you'll see some decrease slow down before people are willing to continue repositioning or going back into the market.
Thank you. Thanks so much.
Thank you. Our next question, Jenny from Bloomberg, please go ahead.
Hi, Piyush. This is Jenny. Congratulations on the group numbers. I have two questions. From your gut feelings, when do you see a return to normalcy, at least in Singapore? Second question is on oil and gas exposure. At SGD 23 billion, how does that compare to the level, say, in the past two years? Have you been trimming exposure to this sector, and what level do you see that going forward? Thanks.
Okay. Question, frankly, your guess is as good as mine. You need to, you know, be a scientist and epidemiologist to call what's going to happen with the virus. I do take some encouragement from the fact that North Asia is opening up. In Taiwan, we have. In fact, Taiwan's been spectacular. We're running at more than 100%, nothing's changed. China is, you know, 95% of our people are back at work. We are seeing business volumes at the 80%-90% range. Korea's opened up. Hong Kong as well. You know, the golf courses are opening and the restaurants are opening and so on.
Because North Asia is opening up, as long as we can get and we don't have a second wave in Singapore, and we get the dormitory situation under control, I think there's reason to believe that you might start seeing an opening up in the Q3, which is what we said in our business case. I'll hasten to add that, you know, I'm no expert. If you do see a big pickup, the pandemic, the resurgence, there's a winter pandemic, who knows what could come on the back of that. On your second question on the gas exposures overall have actually gone up in the last three to four years. The nature of exposure has shifted.
As I told you, our exposure earlier, we had a much bigger exposure from the support services sector, and the offshore marine space, and we brought that down quite sharply. On the other hand, the exposure to the majors, whether state-owned or the oil majors, has continued to go up. Our loan book in 2016 or 2017 was about $17 billion-$18 billion compared to the $23 billion now. We've actually taken that book up. That's been good because, you know, these are high quality corporate clients, and we do a whole range of businesses with them. As I told you, we're not particularly concerned about the corporate book that we have. Your question, how do you think it goes forward, is a function of what happens to the industry itself.
If you project $15 or $20 oil price into the future, I think a lot of capacity in this industry will start shrinking. Therefore, obviously, opportunity to do more possible pure financing oil and gas refining et cetera might come up. We'll stage that higher depending on where the industry winds up at. The good news is at the same time, we've been increasing our exposure to the renewable sector. Last year we did almost $2.5-$3 billion of renewable financing, and we continue to build that up. We think that might be a good replacement opportunity.
Thank you, Piyush. Thanks.
You can take the next question, Eric.
Thank you. Our next question, Stephanie from Financial Times. Please go ahead.
Okay. Hi. Hello, Piyush. Thanks for your presentation. Pardon me if maybe part of my question has already been asked. I was speaking to customer services on the call, so there might be a risk that I'm doubling up. I wanted to ask you about the oil and gas exposure at DBS. Obviously, as a result of the price fall and the oil trader who must not be named, is the bank essentially planning on cutting back exposure to the industry in the next few months? In the process of sort of managing those exposures, are you looking to start requiring more collateral from the borrowers in the sector, or for instance, adjusting risk pricing? Also, is the bank starting to or looking to start prioritizing stronger and sort of larger oil and gas borrowers and move away from sort of smaller players?
Well, first of all, you know, the part of my exposure which with trade finance and things that obviously starts shrinking because it's the value of the commodity comes off. When the value comes off, obviously the total amount that we need to finance comes off because there's also capital requirements and things. You will see some of that. Having said that, the bulk of my exposure in the category of producers, processors, users, buyers, traders is very high-end. As a parting card to my previous question, the difference in the nature of our book in the last four years is that we've actually gone much higher end than we were before.
Because the book is very high-end, it includes the global oil majors, it includes the state-owned companies, et cetera. We're actually not cutting back on our exposure to any of these names. In fact, as a general rule, we're quite happy to support high-end customers who we think are going to be survivors through this crisis. What we are doing is we're getting a lot more focused on making sure that documentation around trade finance, the document payments, et cetera, we are being a lot more disciplined around that, and trying to make sure that the level of due diligence around that is indeed tightened up.
Thank you very much.
Sure. Thank you very much. Our last question, Takeshi from Nikkei, please go ahead.
Hello. Another question on dividend policy. Are you considering lowering the payout ratio? Now some global banks put more importance on accumulating capital than paying out dividends. How do you think of the importance of maintaining that dividend?
As we've always said, our dividend policy has been to try and hold dividends stable and grow them in line with earnings. As you know, over the last couple of years, oftentimes we're asked why we don't increase dividends a lot more dramatically, and we've always said we want to be cautious so that it gives us enough headroom that we don't have to cut if we don't need to. We're also conscious that a number of our shareholders are retail shareholders in Singapore, and similar to the HSBC Hong Kong situation, many of these people do rely on us for their pensions and monthly payments and so on. We're conscious of that as well. Nevertheless, like everybody else, we watch inflows, and therefore, we will continue to study the situation.
If at the end of the next quarter, middle of the year, we think that the situation is going to be a lot worse than our current assumptions, then we might have to go back and revisit the dividend, in that case. We will keep an open mind to it.
Okay. Thank you, Takeshi . I think that's all the time we have today. Thank you everyone for joining us once again, and we'll talk to you again. Take care. Bye-bye.