Morning, and a very warm welcome to DBS's fourth quarter and full year 2020 financial results briefing. This morning we announced full year 2020 net profit of SGD 4.72 billion, 26% lower than the previous year's record. We quadruple allowances to SGD 3.07 billion as we conservatively set aside allowances of SGD 1.7 billion for potential risks arising from the pandemic. Our operating performance was strong, with profit before allowances rising to a record high of SGD 8.43 billion. To take us through the numbers we have with us our CEO, Piyush Gupta, and our CFO, Chng Sok Hui. I'll now hand the time to Sok Hui. Sok Hui, please.
Thank you. Good morning, everyone, and Happy Lunar New Year in advance. Thank you for joining us for our full year 2020 results briefing. Full year net profit was 26% lower at SGD 4.72 billion as the bank navigated the COVID pandemic. Operating profit before allowances rose 2% to a record of SGD 8.43 billion as total income was stable at SGD 14.6 billion and expenses were tightly managed. Net interest income declined 6% to SGD 9.08 billion as a 27 basis point fall in net interest margin was partly offset by loan growth of 4% to SGD 371 billion. The impact of lower interest rates was offset by a tripling of gains on investment securities as profits were realized on bond portfolios hedging the impact of lower interest rates.
Fees were stable at SGD 3.06 billion. Expenses declined 2% to SGD 6.16 billion, and the positive jaw improved the cost-income ratio by one percentage point to 42%. Total allowances quadrupled from the previous year to SGD 3.07 billion. General allowances of SGD 1.71 billion were conservatively set aside against potential risk arising from the pandemic. General provision reserves increased 72% to SGD 4.31 billion, exceeding MAS minimum requirements by 42%. The NPL ratio was 0.1 percentage point higher at 1.6%, and non-performing assets rose 16% over the year. Allowance coverage was 110% or 206% after taking collateral into account.
Liquidity remained ample as deposits grew 15% to SGD 465 billion, with current and savings accounts growing by a record SGD 99 billion. The CASA ratio improved 14 percentage points to 73%. The Liquidity Coverage Ratio and Net Stable Funding Ratio were comfortably above regulatory requirements at 137% and 125% respectively. DBS India amalgamated the business of Lakshmi Vilas Bank with effect from 27th November, broadening our presence in a key emerging market. The provisional goodwill was determined at SGD 153 million. The fourth quarter results included amalgamation expenses of SGD 33 million and additional general allowances of SGD 87 million. I will speak about India franchise in a subsequent slide.
The CET1 ratio was 13.9%, well above regulatory requirements and above the group's target operating range of between 12.5%-13.5%. The leverage ratio of 6.8% was more than twice the regulatory requirement of 3%. The board declared a fourth quarter dividend of SGD 0.18 per share in line with MAS's guidance. Full year net profit was SGD 4.72 billion, a 26% decline from the record set the year before. Total income was stable at SGD 14.6 billion as lower net interest income was offset by gains on investment securities. Net interest income declined 6% or SGD 549 million to SGD 9.08 billion. Net interest margin fell 27 basis points to 1.62% due to sharply lower interest rates.
This more than offset the impact of a 4% constant currency loan growth to SGD 371 billion. Fees were stable at SGD 3.06 billion despite the challenging economic environment. Wealth Management fees and brokerage commissions increased, but were offset by lower cards and investment banking fees. Other income increased 32% or SGD 591 million to SGD 2.46 billion, mainly due to a tripling of gains from investment securities. This increase offset the decline in net interest income. Expenses were 2% or SGD 100 million lower at SGD 6.16 billion as costs were tightly managed. Profit before allowances increased 2% to a record SGD 8.43 billion. Total allowances quadrupled to SGD 3.07 billion.
General allowances of SGD 1.71 billion were set aside for potential risk arising from the pandemic compared to small write-backs the year before. Specific allowances were higher at SGD 1.35 billion. Taxes were lower due to deductions for allowances and a higher proportion of income that incurred a lower tax rate. Next slide. Fourth quarter net profit declined 22% from the previous quarter to SGD 1.01 billion as total income declined 9% to SGD 3.26 billion. Net interest income was 2% or SGD 51 million lower at SGD 2.12 billion due to a four basis point decline in net interest margin to 1.49%. The decline was lower than in previous quarters as interest rates stabilized. Fee income declined 6% or SGD 51 million - SGD 747 million.
Seasonally, lower Wealth Management fees and lower loan-related fees were partly mitigated by higher card fees from festive spending. Other income declined 35% or SGD 212 million - SGD 396 million due to lower gains taken on investment securities. Expenses increased 3% or SGD 41 million to SGD 1.58 billion after incorporating expenses from the amalgamation of LVB. Specific allowances were SGD 45 million higher at SGD 363 million. Underlying new NPA formation was in line with the quarterly run rate for the first nine months. General allowances were SGD 22 million lower at SGD 214 million. Excluding the SGD 87 million additional GP taken for Lakshmi Vilas portfolio, the general allowances set aside this quarter was half the amount taken in the third quarter. Total allowances crossed the SGD 3 billion mark for the full year.
Taxes were lower, mainly due to approval of the derivatives market incentive in the fourth quarter and effective 1 January 2020. Fourth quarter net interest income was 2% lower than the previous quarter at SGD 2.12 billion. Net interest margin declined at a slower pace of 4 basis points to 1.49% as interest rates stabilized. Full year net interest income declined 6% from a year ago to SGD 9.08 billion as the impact of lower interest rates more than offset the impact of the 4% loan growth to SGD 371 billion. Net interest margin fell 27 basis points to 1.62%, with most of the decline occurring in the second and third quarters as central banks slashed interest rates at the end of the first quarter.
The large part of net interest margin decline is now behind us. A considerably more flush balance sheet contributed 6 basis points to the decline in net interest margin of 27 basis points for the year as excess deposits were deployed into low-risk liquid assets. The margin from deployment of surplus funds were tighter than customer loans, but was accretive to net interest income and return on equity. Net interest margin is expected to stabilize between 1.45% and 1.50% in 2021. In constant currency terms, gross loans grew 1% or SGD 5 billion during the quarter to SGD 378 billion. Lakshmi Vilas Bank contributed SGD 2 billion of loans when it was amalgamated with effect from 27th of November.
Non-trade corporate loans grew SGD 2 billion - SGD 221 billion due to healthy business momentum as well as reduced pace of repayments of short-term facilities made in the first half. Mortgage loans grew SGD 1 billion - SGD 74 billion. New bookings were strong in the third quarter and the momentum continued through the fourth quarter. Wealth management loans were also higher. Trade loans were SGD 2 billion lower at SGD 38 billion. Loans grew 4% or SGD 16 billion over the course of the year to SGD 371 billion. Non-trade corporate loans grew SGD 19 billion, led by drawdowns in Singapore and Hong Kong. Trade loans fell SGD 6 billion as tighter pricing made them less attractive to roll over and as transaction values fell from lower oil prices. Consumer loans were stable.
Housing loans were a little changed as declines in the second and third quarters, due partly to the circuit breaker, were offset by a recovery in the fourth quarter. SGD 5 billion of non-trade corporate loan growth was associated with Singapore's credit relief programs, where the government provided a 90% risk share. Deposits grew a record 15% from the previous year to SGD 465 billion in constant currency terms. The amalgamation of Lakshmi Vilas Bank contributed SGD 3 billion of deposits. Current accounts and savings accounts grew a record 42% or SGD 99 billion, reflecting the bank's leading savings deposit and cash management franchises enhanced by digitalization capabilities. Consumer banking and wealth management contributed 3/5 of the CASA increase. The CASA growth allowed more expensive fixed deposits to be released. This improved the CASA ratio to a record 73% of total deposits.
The loan deposit ratio fell 9 percentage points to 80% as deposit growth outstripped loan growth. Surplus deposits were placed into high-quality liquid assets. As mentioned earlier, this was accretive to net interest income and return on equity but was a headwind to net interest margin. The liquidity coverage ratio of 137% and the net stable funding ratio of 125% were both comfortably above their respective regulatory requirements of 100%. Fourth quarter gross fees were SGD 872 million. They were 4% lower than the quarter before due to seasonal effects and unchanged from a year ago. Compared to the previous year, wealth management fees increased 21% to SGD 345 million. Demand for investment products continued to be robust with healthy customer risk appetite amidst a low yield environment.
Brokerage commissions increased 48% to SGD 37 million as market sentiment remained strong. Card fees were 12% lower at SGD 177 million, having progressively recovered from the trough during the second quarter towards pre-COVID levels. Investment banking fees declined 45% from a year ago to SGD 44 million. Fee income was stable in the second half compared to the previous year as the economy rebounded from the second quarter circuit breaker. Full year fee income declined 1% to SGD 3.53 billion, despite headwinds from the pandemic. Wealth Management fee income rose 11% to SGD 1.43 billion, with the first and third quarters the highest on record. Brokerage commissions increased 31% to SGD 149 million, with higher stock market volumes and increased new digital account openings.
Card fees fell 19% to SGD 641 million as spending on travel remained low. Investment banking fees were 31% lower at SGD 148 million, as record fixed income fees were more than offset by a fall in equity capital market activity. Full-year expenses were 2% lower than a year ago at SGD 6.16 billion as costs were tightly managed. General expenses such as on travel, advertising and promotions were lower. Staff costs were little changed with an increase in base salaries from a higher staff count and higher leave accruals, offset by lower bonus and by government grants. The cost-income ratio improved 1 percentage point to 42%. Fourth quarter expenses were little changed from a year ago at SGD 1.58 billion after incorporating expenses from Lakshmi Vilas Bank.
Full-year consumer bank and wealth management income declined 8% from a year ago to SGD 5.77 billion. Loans and deposits income declined 19% to SGD 3.02 billion due to lower interest rates. Card fees were 8% lower at SGD 730 million on lower spending from lockdowns across the region and a general decline in travel. Income from investment products rose 13% to SGD 1.94 billion as customers look to improve returns amidst a low interest rate environment. It is worth noting that income for investment products are largely reflected in the fee income line, but some SGD 600 million of in-house investment products are reflected in the other income line. Income was evenly split between the retail and wealth management segments. Assets under management increased 7% to SGD 264 billion.
We maintain our domestic market share for savings, deposits and housing loans at 52% and 31% respectively. Institutional banking. Full year institutional banking income declined 5% from a year ago to SGD 5.75 billion. Cash management income fell 39% to SGD 1.20 billion due to lower interest rates, while investment banking income declined 30% to SGD 122 million. The declines more than offset 13% higher income from loans at SGD 3.03 billion, 13% higher income from treasury products at SGD 677 million and 8% higher income from trade at SGD 719 million. 70% of income was from large corporates and 30% from the SME base. Global transaction services deposits grew 19% to SGD 166 billion. Treasury and markets.
Treasury & Markets full-year income increased 54% to SGD 1.44 billion as market volatility created opportunities for trading. The performance was broad-based across interest rates, equities, foreign exchange and credit trading. Treasury customer income increased 18% to a new high of SGD 1.51 billion, with similar contributions from consumer banking and institutional banking. Consumer banking demand increased for equity, FX and interest rate products. Institutional banking demand increased largely for interest rate products. Hong Kong. In constant currency terms, Hong Kong full-year net profit fell 34% from a year ago to HKD 963 million. Total income declined 15% to HKD 2.53 billion, primarily from lower interest rates. Profit before allowances was 21% lower at HKD 1.48 billion. Total allowances tripled to HKD 332 million, mainly from higher general allowances.
Net interest income declined 22% to SGD 1.61 billion. Loans grew 3% in constant currency terms, mainly from large corporates. This was offset by a 52 basis point fall in net interest margin to 1.55%. Fee income declined 3% as an increase in sales of investment products was offset by lower bank, bancassurance, cash management and loan-related activities. Other non-interest income increased 4%, mainly from gains in investment securities. Expenses declined 6% to SGD 1.06 billion as a result of proactive cost management. The cost-income ratio increased 4 percentage points to 42%. Profit before allowances declined 21% to SGD 1.48 billion. Total allowances rose to SGD 332 million, including SGD 177 million of general allowances conservatively taken for potential risks arising from the pandemic.
Specific allowances doubled to SGD 155 million from two major corporate cases. In India, Lakshmi Vilas Bank or LVB was amalgamated with DBS India with effect from 27 November 2020. This occurred under special powers of the Government of India and the Reserve Bank of India under Section 45 of the Banking Regulation Act. The amalgamation expanded a business that had delivered a strong performance in 2020. DBS India's total income had grown 40% from the previous year to a record SGD 376 million, and pre-tax profit had quadrupled to SGD 89 million. LVB complemented digibank strategy with an expanded network of some 600 branches and 1,000 ATMs, an additional two million retail and 125,000 non-retail customers, as well as strengthen the deposit franchise.
Under the amalgamation, DBS provisionally booked SGD 153 million of goodwill. Lakshmi Vilas Bank had NPA, non-performing assets of SGD 881 million, and specific provisions amounting to 76% had been set aside in the goodwill computation. The net non-performing assets of SGD 212 million, which is fully secured, was transferred to DBS India. Asset quality was dealt with decisively as general allowances of SGD 183 million were conservatively set aside, amounting to 9.5% of Lakshmi Vilas Bank's performing loans. Of the total performing loans of SGD 1.9 billion, the corporate and SME book amounted to SGD 1.1 billion, while the retail portfolio, comprising mainly secured gold loans, amounted to SGD 0.8 billion.
As a percentage of corporate and SME book amounting to SGD 1.1 billion, the general provision reserve of SGD 183 million represent 16% coverage. We also set aside amalgamation expenses of SGD 33 million in the fourth quarter. With the additional amalgamation expenses and allowances set aside, we expect Lakshmi Vilas Bank to be profitable within 12-24 months. The impact on group capital was minimal, with the CET1 1.3 percentage points lower as a result of the amalgamation. Non-performing assets for the group increased 16% to SGD 6.69 billion over the year. Higher new NPA formation was moderated by write-offs and recoveries. The NPL rate rose slightly to 1.6%, still within the range of recent years.
Fourth quarter new NPA formation was little change from the previous quarter at SGD 541 million and in line with the quarterly run rate of 2020. The amalgamation of LVB, with effect from 27 November, contributed an additional SGD 212 million stock of non-performing assets. Full year specific allowances were higher at SGD 1.35 billion or 31 basis points of loans. Fourth quarter specific provisions were SGD 362 million or 34 basis points of loans. NPL were transferred from Lakshmi Vilas Bank, net of specific provisions and no additional specific provisions were taken in the fourth quarter after the transfer. General provision reserves rose 72% from a year ago to SGD 4.31 billion. The reserves exceed the regulator's minimum requirement by 42%.
General provision reserves are also SGD 1.5 billion higher than the amount eligible as Tier 2 capital. The surplus acts as a buffer for the total capital adequacy ratio. While we have set aside substantial general allowances in 2020, asset quality trends are encouraging post the expiry of the initial government support programs. Significantly fewer SME and housing loans remain under moratorium compared to their respective peaks, and delinquencies have also been low. Allowance coverage was 110%. When collateral value at SGD 3.12 billion was considered, allowance coverage was at 206%. Capital continued to be healthy. The common equity Tier 1 ratio was 13.9% at the end of 2020, up 0.2 percentage points from the end of the first half and unchanged from the previous quarter.
The amalgamation of Lakshmi Vilas Bank caused a 0.3 percentage point dip in the ratio that was offset as profits accreted during the quarter. The CET1 ratio was above the group's target operating range as well as regulatory requirements. The leverage ratio of 6.8% was more than twice the regulatory minimum of 3%. The board declared a dividend of SGD 0.18 per share for the fourth quarter, bringing the total dividend for the 2020 financial year to SGD 0.87 per share. This was in line with MAS call for local banks to moderate dividends for the 2020 financial year. The scrip dividend scheme will be applicable to the fourth quarter dividend. Scrip dividends will be issued at the average of the closing prices of the 7th and 8th of April 2021.
Based on yesterday's closing share price and assuming dividends are held at SGD 0.18 per share per quarter, the annualized dividend yield is 2.8%. My concluding slide. We achieved record profit before allowances despite the economic disruption which attests to the quality of our franchise. Our balance sheet is strong. The general allowance reserves that build up are significantly in excess of MAS requirements and Tier 2 qualification. Our business pipeline for loans and fee income streams are healthy. We have also taken proactive steps to build platform for growth. Lakshmi Vilas Bank and our China securities joint venture will enhance our footprint in key growth markets. Initiatives such as the Digital Exchange, which began operations in December 2020. Supply chain digitalization and efforts to digitally broaden wealth management to the mass market reinforce our leadership in digital finance.
Our enhanced franchise and strong balance sheet strengthen our ability to continue supporting customers and delivering shareholders' returns. Thank you for your attention. I'll now hand you over to Piyush.
Right. Thanks, Sok Hui. Again, let me echo Sok Hui's greetings. Gong Xi Fa Cai, everybody, day in advance, or couple. I want to make three or four quick observations, then we'll do the Q&A. First is this, that fourth quarter business momentum was actually quite strong. People are debating whether you call it a recovery or a rebound, but certainly the rebound has been very visible in all of our markets. Loan growth has been quite broad-based. In the fourth quarter, we saw it. In the third quarter, we saw some payback from people who'd drawn down liquidity loans in the first half of the year. That slowed down. And property lending, TMT, ECA energy, just quite broad-based loan growth. Housing came back.
Because of the large bookings in the third quarter, we had over SGD 1 billion of growth in the loan book in the fourth. In fact, actually the fourth quarter allowed us to cover the negatives in the previous two quarters. We wound up the year with marginally positive on the housing loan book. Wealth management lending continued strong because people were doing margin financing. The balance sheet grew well. Deposits continued to come in with solid growth in deposits. The balance sheet side of the business in the fourth quarter was quite robust. The fee income side also actually was very strong. Wealth management was up some 20% year-on-year. That's obviously great. Brokerage is obviously great.
To me, the best thing was that both cards and bancassurance are pretty much clawed back. Cards are still down 12% year- on- year. Remember, third quarter was down 20%, second quarter was down 34%. It's heading back. If you look at card sales, spend in November and December, they were pretty flat to pre-COVID levels. The spends have already come back. If you don't look at fees, but the overall revenue on cards, it was pretty flattish now, fourth quarter to fourth quarter. The drag from cards, to a large extent, I think is behind us. Similarly, the drag from bancassurance, I think, is also behind us. I'm gonna talk about it. The January trends continue to show that.
The fee income categories were quite broad-based and strong. Obviously, trading continued to be very robust. We actually, if you look at other income line, it looks soft, and that's principally because we chose not to sell investment securities in the fourth quarter. About $200 million less in the fourth quarter than we had sold in the third quarter. If you exclude that, the underlying trading income is actually quite robust. The investment security is obviously the function of our view on rates and whether we want to sell or not want to sell.
The other thing in the fourth quarter is that, you know, if you look at some of the banks, especially the global, the U.S. banks, they chose to take the improved conditions in the fourth quarter to start writing back reserves, where we opted not to do that. Our view was that if we can use the fourth quarter to continue to fortify our balance sheet, so that any potential vulnerabilities for 2021 are, proactively dealt with in 2020, we are probably better off. That's what we did. We increased our allowances. We continued to add to the GP reserve. As Sok Hui said, it's now up to SGD 1.7 billion for the year. The total stock of reserves is now some SGD 4.3 billion. That gives us a sufficient degree of cushion.
For the whole year, we wound up taking SGD 3.1 billion in allowances. Now, if you remember, our guidance has been somewhere between SGD 3 billion and SGD 5 billion. If it's at the lower end of the three and five, we've already taken it in 2020 already. We were conservative. We also topped up some SPs for existing NPAs. You know, so we went back and looked at our book, and anything we thought might have some more vulnerability, we just topped it up and took care of that as well. As Sok Hui said, we dealt with the LVB issue quite assertively. You know, when RBI has been reviewing LVB now for two years, and so they'd already bumped up all the non-performing assets quite conservatively. When we took it up, we bumped up the NPA by 20%.
We went and looked for anything else which we thought could be wrong. On top of that, we provided for that incremental NPA. The overall provisions on the NPA thing are now very secure. Of the residual good book, there's about $2 billion of good book. It's not a big book. Of that, $800 million is gold loans and secured lending. That's very secure. The LVB has seen one credit default on the gold portfolio in 30 years or something. The non-gold book and non-SME book is about $1.1-$1.2 billion. It's not big. Against that book, we've kept general provisions of about 16%. Which means if that good book, 30% of it becomes non-performing and half of it then it gets written down, I've already provided for it.
Our overall this thing on LVB, therefore, we've been quite conservative in dealing with that in the fourth quarter. Slide. Second thing I want to talk about was the start of this year. Normally, I don't give you guidance for the current quarter, but I just wanted to recap. You know, if you remember in the third quarter, we said guidance for this year was I thought things would be much better. We said you'd probably see mid-single-digit loan growth for this year. We said we'd probably be able to get double-digit fee income growth. Despite that, because of the NIM contraction, which we said would come in between 1.45% and 1.50%, we'll probably see a decline in total income.
We also said our expenses will hold flat to 2019 levels, which means a couple of percentage points higher than last year. Net-net we'd probably have a negative jaws, but we'll make it up, more than make it up on the cost of credit. We won't have to take allowances or the sort. By and large, the guidance is on track. But that's supported by the economic data. I mean, quite clearly look at GDP, fourth quarter GDPs are stronger across the board. PMIs are up in the 50-60 range for everybody. Trade is holding up quite nicely, export and import. Retail sales are doing okay. That's what we are seeing in our business across the region. It's actually looking relatively okay. All of that actually borne out by January.
Our January performance has been quite strong. In fact, our January income was up year- on- year to January 2020. Given the sharp drop in rates between the beginning of last year and this year, that obviously is saying a lot that we were able to actually make up in income. Markets was very strong in January, but fee income was very strong in January. Going back to what I said about fourth quarter, those trends are continuing. Wealth Management was strong, brokerage was strong, trade income moved up was strong. Cards and bancassurance back to flat, so I'm not seeing a drag from that. Investment Banking is coming back. Last year, Fixed Income was strong, but equity market, ECM was weak. Now ECM is coming back as well.
Overall, the fee income for January gives me confidence that the guidance that we can do double-digit growth in the fee income. I continue to be quite confident. Loan growth, actually, we said about mid-single digits. Our loan growth for the first quarter right now looks like it'll come in closer to 2% than to the 1%, 1.5%. I don't know whether this is going to continue through the year, but it gives me confidence that the mid-single-digit loan growth is quite assured. I'm pretty sure we can get that. Deposit momentum continues. It's not continuing at the same rate as it was in the peak of last year. It's continuing at about half that level.
It's still, I mean, we've got more money coming at us than we know what to do with, as Sok pointed out earlier. Slide. The third thing I thought I'd make a quick observation on is our overall asset quality trends. So if you look at three pieces to this, one, the loans and the moratorium. The moratoriums are coming to an end, and we're seeing encouraging signs. Somebody asked me this in the last quarter, and I said we didn't have data because, you know, Malaysia ended before the other countries we are in. Obviously in Singapore housing, for example, we had, you know, SGD 4.5 billion or SGD 5 billion in moratorium.
As the moratorium has come to an end, only about 10% of that, of those people have signed up for the extended scheme. Remember, the extended scheme, they have to start paying 60% or something of the principal, right? Only 10%. The people who have not extended, delinquencies are very low, so they're all being able to service. In the SME book, of the total moratorium we had, which is SGD 4.6 billion, about 25% of them have extended into the new scheme. Which means the other 75% are paying, and again, delinquencies are very low on the people who are paying. The people who have extended into the new scheme also have to start making part payments.
So far it's only a month, but they're making those part payments, so things are looking slightly better. Hong Kong, the extension of the moratorium is the highest, it's 50%. At our peak we had SGD 6.4 billion in moratoriums in the Hong Kong SME. Remember, Hong Kong, the moratoriums are only also for the large corporates and SMEs. That's where the scheme is. At its peak it was SGD 6.5 billion. What is flipped over into the extended moratorium from January and so in December is about half that, SGD 3.2 billion. But a chunk of that is large corporate, and large corporate is generally okay. I think they're taking the moratorium only because it gives them cheaper money.
Overall the extension of moratoriums is being contained as well as the delinquencies on the people who didn't take the moratorium are quite low. I'm somewhat positive about that. Second, on the consumer book, again, delinquencies and overdues came down quite sharply. They peaked again in the second quarter, particularly the unsecured book in Indonesia, Taiwan, Singapore. They came down in the third quarter and by the fourth quarter they're down even more sharply. As the economy is coming back, our capacity to collect has improved as well as people have continued to pay. Some of the delinquency in the consumer space I think is still shrouded by the government schemes, so you're not 100% sure.
Overall, the delinquencies in the consumer book are also looking a lot better. If these trends continue and if you look at you know, the totality of our corporate book, we're not seeing a lot more weakness in our corporate names. We recognize most of the names that we need to top up, like I said, SPs for some previous names. I think there's a good chance that we will come in at the lower end of the SGD 3 billion-SGD 5 billion range, certainly, you know, SGD 4 billion or south of that. I think that's quite possible. Now the reason why I'm not being more definitive is the extended moratoriums will expire in March, April and June, so we'll really get a better sense of it when those moratoriums expire.
I'm certainly feeling more optimistic about the overall quality of the portfolio and the asset conditions now than I was able to tell you three months or six months ago. Slide. All right. The last thing, and again, Sok Hui pointed out, you know, they always say, don't waste a good crisis. I think what we've tried to do is make sure we've been proactive through this crisis. I think the Lakshmi Vilas deal will be extremely positive for us. At $150 million of goodwill, which is what we're holding, that's not a large amount to pay for a franchise that fundamentally changes the texture of what we have in India. I've got a couple of slides on that I'm going to come back to.
The China securities joint venture, we expect to get final approval to go live in a couple of months. You know, it's going through the final audit from the regulators. I think our timing is perfect because the opening up of the China capital markets, and the opening up of both the Stock Connects, the Bond Connects, and the internationalization of the trade means that that volume of business is growing rapidly. We're seeing it already. We're seeing it in our investor business, we're seeing it in our custody business, we're seeing it in our INE exchange business. We're seeing it in the flow of deals we're being able to refer and bring to the market, both cross-border and all these things onshore.
My own view is that opening up of China on the capital account, that's how I term this, is going to be an even bigger impact story for the next 10 years than China's ascension to WTO in 2002. China's participation in capital markets is tiny compared to its overall size of GDP and the overall weight it has in global economic affairs, and this is definitely on the cusp of changing. For us, building out the securities joint venture and the capability now, I think is going to be a big driver of economic activity and growth. Our Digital Exchange went live in December. So far it's early days, and we've been cautious for a good reason, but we're doing about 300-400 trades a day right now.
We are dealing in all four cryptos, we're dealing in four fiats. We've only started onboarding the private bank and the private wealth people slowly. I think I was client number one to go in, but we're doing it slowly because we're trying to make sure the KYC, et cetera, protocols are good. We're also using this time to test and make sure that our coin purity checks to make sure that things are okay, you know, that all of that work well. So far it's looking good, but I think we have the opportunity to scale this up. Given the amount of interest and energy around tokenized assets, I think this is going to be a reasonable contributor.
Our retail wealth management, we, you know, spoke about driving this aggressively last year, and then with the open banking platform, the SGFinDex that further powered that. This has again been extremely good. It's not just GameStop, but a lot of other people are actively participating in the equity markets. We're trying to do it sensibly. We're making sure there's content, there's education, there's financial literacy. But on the back of all that, we've also made it convenient for people to be able to actually do retail wealth management. That's seeing a big pickup for us. We're quite positive about that. The last thing that has really been helpful through last year, especially second half of last year, you know, this whole thing about the world became digital post-COVID. One big area where we've seen that is in supply chains.
Everybody is trying to focus on every large company and industry is focusing on digital supply chains. Because of our API platform, RAPID platform, we've been able to score actually hundreds of these participating in digitizing supply chains over the last couple of quarters. Some of the volume growth we are seeing in our payments and our collections and our trade finance is very strong on the back of the supply chain digitization effort. I do think that as we come out of the crisis, some of the changes and the trends that we are seeing, we're extremely well positioned to be able to capitalize on as we go forward. Slide. Just a quick comment on Lakshmi Vilas that might be useful for you to understand exactly what Lakshmi Vilas gives us. It's an old bank.
It's been around since 1920, and actually till 2017 it was actually a good performing bank. It's got a well-known brand in India. It performed well. It's a dominant South Indian bank. 86%, 88% of the bank is in these five Southern Indian states. That's good news because these five Southern Indian states are better GDP per capita. By and large, they're better managed. There's large amount of corporate activity. The Korean, ex-Koreans, the Japanese, the auto industry, TMT, it's all in Hyderabad, Bangalore, Chennai, this is where the bank is. The large corporate business is actually also better in this space. For us, it's obviously better because a large amount of the traffic from Singapore and ASEAN into India is all South India dominated, the Tamils and the Malayalis from Kerala, et cetera.
We think we can leverage on that. Now, Lakshmi Vilas gives us two million retail customers, so that improves our customer footprint. It gives us another 125,000 SME customers. That's a really good customer base to be able to take and build off. It allows us to take what we built digitally, our whole digibank, and then overlay that on this. Now, you know when we started our organic expansion with the wholesale subsidiary, that's proven to be quite helpful. That whole wholesale subsidiary, the WS has been profitable in year one, and profitable because it's quite clear that when we have branch presence, then the SME business, digital activity, you can do a lot better for the last mile fulfillment.
I'm quietly confident that this expansion of our phygital strategy through the Lakshmi Vilas will allow us to take that digital capability and grow it faster than we've been able to grow it so far. One of the good things about this deal, of course, was the Section 45 deal. Typically, it's very hard to actually acquire and get hold of an entire bank because the minority interest and there's equity, et cetera. The Section 45 arrangements permits the central bank and the government to actually do this, take a bank and amalgamate it fully with a local bank. Now, we classify as a local bank because it's subsidiarized. No other foreign bank has, well at least one Mauritius bank has, but nobody has subsidiarized, so they don't qualify as local banks.
The reason that we have the opportunity to do this is because we classify as a local bank because we have a local subsidiary. We're actually quite positive about what this franchise gives us. Slide please. If you just take a look at a couple of dimensions, those are interesting. It gives us a retail deposit base, which becomes quite substantial. If you just look at the bars on the right, DBS India, our retail deposit base was 23%. We were 77% wholesale funded. With Lakshmi Vilas, we become half and half. Having a texture which is 50% retail in our funding base makes a big difference to your capacity to be able to grow that business. That's the change in the texture of our deposit base that's interesting.
At the bottom, you can see what I said before. The customer footprint improves, the MSME footprint improves the SME base. As you know, we're trying to grow that aggressively. Now, this gives us another 125,000 SMEs we can pour that digital capability into. Actually, there's this niche business, which is a gold business, which is very interesting. It's a great business. It's a high return business, so that's quite helpful as well. We're quite optimistic. As Sok Hui said, we're fairly confident that this will be profitable within 12 months, max, 24 months. I think it'll be ROE accretive well within our normal timeframe of two to three years. It'll be ROE accretive as well. Why don't I stop there and take some questions?
Thanks, Piyush. We'll now take Q&As, but because this is a virtual and physical briefing, we will first take Q&As from the reporters in the room and then move to the media who've dialed in. Each of you would have your own mic, so please use that and state your name and publication before asking your question. Chanya?
Hi, Sok Hui. Hi, Piyush. Could you share the amount of investments you are expecting to make in the Indian bank and also in the Chinese venture, over the next three to five years? Like, how much you are going to spend in terms of investments in these two businesses? Second question, which region do you see as the next largest contributor to your revenue after Singapore and Hong Kong?
On the first question, we really don't have to make large capital investments because we've already taken care of those. I think the bulk of the investments are going to keep pace as business grows. They're not very material. In both cases, they're not going to be very material. We'll put money in the securities joint venture. We've hired. We have about 70 people in the team. We've got a full team, CEO, local hires. We've got 20 bankers. We've got originators. They're all in place. We've invested in the technology platform. Everything's in place. Now the only incremental will be as business volumes pick up, we'll hire more people.
Who's the partner? Who's the Chinese partner?
We already announced that. We've got, 50% is ours, 50% is the Shanghai government through two different agencies.
Okay.
That's actually in the public domain. Then on the India raising, we've actually upfront, Sok Hui said, we've taken $30 million of amalgamation expenses up front. That should take care of the branch upgrade, the cleaning up, the acquisition of branches, some of the technology shifts we need to make. The bulk of the expenses from now are only going to be as we grow the business and grow the digital capabilities, we might have to add people and add some. Again, we've hired people already. They're already in our numbers. We've hired some incremental people to manage the shop, et cetera. There's not a lot of incremental capital investment of that nature. Now, as the book grows, obviously we have to keep putting more capital to fund the book, but that would happen whether it was the DBS book or the new venture.
We'd have to capitalize the book as a book. Your other question on relative to this, we actually already said that. For us, you know, all the three countries, China, India and Indonesia, are large opportunities. We will continue to invest in all three markets. The relative pace of investment varies. It depends on the cycle the country is going through, when the opportunity shows up. The LVB showed up in India, the security joint venture is pretty organic, but we are always happy to look for bolt-on opportunities to do more. It's very opportunistic. It's not a planned agenda in terms of which is more important than the other. It's safe to say China is 5x bigger than India. If you have to assume that, you know, you'll get a lot more opportunity in China over time.
You haven't given up a bolt-on opportunity for Indonesia going forward?
Well, we're open to bolt-on opportunities anywhere. Our criteria are the same, that it's got to be something that we can, you know, doesn't distract us from a big digital agenda. Big deals, we're not that keen on. It's got to be aligned to our businesses. If it's the businesses we're focused on, we look at something. We have to have the bandwidth to do it. Sometimes we say, you know, our culture doesn't say we don't have the bandwidth, we pass, but otherwise we look at things, yeah.
Okay, next question, Goola.
The credit you want to look at the news, it's actually second of September in different time. The headline-
Thank you, Sok Hui.
To set up a new securities company. You can read more on this. A second system.
Hi. Yeah, thanks. Thanks. I've got a few questions.
Yeah.
Oh, sorry. I've got a few questions. I think about four. Can I start? Okay. So how much of the forbearance loans are left, and when could you start writing back? Because you've, I think you've. Your GP etcetera is could be, if it's more than those forbearance loans and etcetera, when would you start writing? I mean, when could you start writing back? Because, you know, you've got all that SGD 4 billion, SGD 3 billion or SGD 4 billion that you could. Would it be this year or next year? And then is there any clarity on the dividends, of course? And then okay. And then for the digital exchange, you said you have about SGD 300 million of trade a day. What a commission-
No, 300 daily.
300? Oh, sorry. $300 million? No.
No.
Oh. Oh, I see. Okay. I thought that was a boost, but okay, forget it then. No. I mean, what's the income? What do you think your revenue could be like based on the commissions you're getting? Okay, you may have an idea, up or down. Okay. Then for India, yeah, because when I saw that chart on the retail and the wholesale funding, etcetera, so, how does that work out? I mean, not for the past couple of, but in the future for your NIM in India versus those of the other Indian banks? Yeah. I just wondered. Is that it? Yeah.
Okay. On the first question, I think, I'm not sure I get the digital question. The forbearance, which is the moratorium.
Moratorium. Yeah.
Those are not directly linked to write-backs of reserves. What happens in the forbearance is that we allow the customer not to pay us either principal and interest or to not pay us interest, right? Or to service in the SME sector and to not pay principal. It's a different scheme. Now, when you do that, everything goes into standstill. We're not actually building provisions around that, though we keep looking at the individual names. If particular names are weak, we move the rating down and so on. That really doesn't have immediate bearing on write-backs. When I said that, you asked how much is still in forbearance, that's the number I gave, right? 10% of the mortgage book is still in forbearance. 25% of the Singapore SME book is in forbearance.
50% of the Hong Kong book is in forbearance. Now, of the ones which have come off forbearance, that's where you got to look at. That once forbearance ends, are they still servicing or are they beginning to deteriorate? Because if they're beginning to deteriorate, you've got to start providing for those. The good news is the ones who've come off forbearance, the delinquencies are very low. So they're all actually servicing their loans and interest, and that's the good news. Of the balance, the ones which are in forbearance, we will only find out in March, April and May how those perform, right? If that far, my own guess is that those people will perform slightly worse than the people who came out of forbearance already.
Because if they, the ones who came out of forbearance had the cash flow, they said, okay, I don't need the forbearance. The ones who still need the forbearance are probably still struggling for cash flow. It is possible that in that total, the same, you will still see there's $1 billion of mortgage still in forbearance. Mortgage, I'm quite comfortable that, you know, I think it's even if they can't service, which I think they can, but if they can't, it's completely secure. Out of the SME book, we have, again, $1 billion in Singapore, and about $2.5 billion in Hong Kong. About $3.5 billion of the SME book is still in forbearance, right?
Mm-hmm.
That is the one we'll have to see how much actual cost of credit you might wind up with on that $3 billion book. Because the actual number has now come down so much, $3-$3.5 billion, my own guess is I'm not going to need as much credit provision as I'd originally anticipated, even for that book. The question of when can you start writing back, you know, the same, is a two-step question as well. One, the way the GP and SP works now, ECL, is if anything goes into SP, then the GP automatically gets it back. Today, roughly, you know, Sok Hui has the right number, but I think if anything goes into SP, 60%-70% of that comes from our GP now. Yeah, because it automatically reverses. Is that correct, Sok Hui?
I think it depends on how proactive we've been. If it's not a surprise, we already have set aside at least half of it in Expected Credit Loss GP.
Yeah.
Automatically it will be reversed as the case hits a specific provision.
Yeah. That's the residual thing. We have actually provided a lot of general allowances and, you know, we'll reverse that. I don't know if we'll actually wind up reversing a lot of that, though there is a lot of management overlay in that. There were SGD 1 billion of management overlay in that. If the overall macro environment improves in the course of the year, we might have to take a look at that as well. On dividends, I have no further insight. We have had no further conversation with MAS. It is premature because as you know, in our case, we were asked to hold dividends at this level for four quarters, including the end of first quarter this year. We only start talking to the MAS and see what they have in mind.
As you know, in several other jurisdictions, regulators have started easing up on the capacity to return capital to shareholders. It is possible that the MAS might take that view as well. It is equally possible that the MAS could say that other regulators were much tighter in the beginning and so they're having to be more lenient, and we don't. Too early to say. We've always maintained that we think we have the capacity to pay more dividend already. It is a regulatory view on what they want to do. The last thing on India.
In India, I think the Lakshmi Vilas without a doubt improves our NIMs because the funding cost reduces because of the retail deposit base and our lending cost improves because the yields on things like the retail gold loans and the yields on the SME loans are much higher than the normal yields that we normally run in the country. This will improve on it.
Maybe Channel NewsAsia first.
Hi, I'm Lydia from Channel NewsAsia Television. I have a few questions. The first is on how much bad loans, personal and corporate, were incurred in 2020.
How much?
Bad loans.
Bad loans.
Yeah, they were incurred in 2020, both personal and corporate. Did the SGD 3.07 billion allowances cover these loans or are they expected for bad loans in this year? If you expect higher or lower allowances this year after increasing the SGD 3.07 billion. My second question is, as I understand that there's been a strong start in January. Can I get a soundbite on the economic outlook for this year in the first quarter and for the full year? Also a follow-up question, what does this mean for the lending business outlook, overseas business outlook and profits? Which markets are expected to recover the fastest? My third question, can I get an update on Myanmar operations? Thank you.
The first question was how much did we take in bad loans in the year? NPA, non-performing assets in the year went up by $1.9 billion, if that's what you're asking. One point nine billion dollars of loans turned non-performing. That's higher than normal 'cause the previous year, I think it was about $1.3 billion.
Mm-hmm.
This year is about SGD 1.9 billion. The allowances we've taken of SGD 3.1 are substantially higher than the entire increase in NPA in the course of this year, if that's what you were looking for. The reason for that is that of the allowances, as I said, we've preemptively taken SGD 1.7 billion in general allowances to guard against potential downside risks in the future. The allowances are high because it's not related to 2020 bad loans. It is a precautionary provision for potential bad loans in 2021 or 2022, and that's why the allowances are much higher. Your second question was on economic outlook. I think, you know, one caveat.
The uncertainty around the virus and the pandemic is hard to control because you can see that if the pandemic gets out of control, you start seeing a slowdown right away. Hong Kong, when phase IV kicked in in December, people again started going into lockdown. That impacts our card business and some of our wealth business. Cannot make a statement on what happens with the pandemic. Excluding that, it's quite clear that business is coming back quite strongly. China has been very strong. Fourth quarter was already positive. As we're looking at our businesses, by and large, they're all back at pre-COVID levels, so very strong. Taiwan has been strong also.
Taiwan was positive through the year, and that's because Taiwan benefited from TMT, technology, media, telecoms. They all benefited from the tech companies who are making all the work from home equipment, et cetera. That's been very strong. India, IMF have projected India growth rates for the next fiscal year to be 11.5%. If that happens, that'd be the fastest growing economy in the world. They were down 7.5% for this 2020 year. At 11.5%, they're still back to net positive, and we are seeing that. Animal spirits are back. We're seeing a high degree of vibrancy. I was in conversations with some of our large corporate clients. People are beginning to invest back in productive capacity, in cement, in aluminum.
If you look at the latest budget of last week, it's that they've dialed up deficit financing to 9.5%. A large chunk of it is going into capital expenditure. About 60% of it is going to capital expenditure. That'll be very positive in terms of growth. The countries outside. Indonesia is the one I'm still a little uncertain about. Our business is doing okay, but the pandemic situation in Indonesia is still not entirely in control. The outlook there is a little less certain. On the other hand, I'm quite bullish on commodities. Commodity prices are looking up across the board, and Indonesia always benefits from a positive commodity cycle. Hopefully that should put some wind in the sails over there.
From a top-line standpoint, our biggest challenge is actually Hong Kong because Hong Kong still relies heavily on China traffic. So far, the cross-border traffic flow between the mainland and Hong Kong has not been reopened. Hong Kong continues to struggle because of that. I mean, things are generally okay. HIBOR has been somewhat soft. The rest of our corporate businesses in Hong Kong are doing well. In fact, our loan growth is coming from Hong Kong. The second thing helping Hong Kong is the capital markets. People are moving to list in Hong Kong, and the Chinese are investing, money is coming from mainland China into Hong Kong. That engine is working well. It's the cross-border traffic of people that's still somewhat slow.
Myanmar, we really don't have a Myanmar operation. Unlike, you know, other banks, we have a rep office with two people. It's, you know, we don't get too impacted by the Myanmar situation. Total, we have some exposure. It's not big. You know, $100-odd million. We're mostly to the Myanmarese banks and to Singapore companies who work there. It's not very material for us.
I'm sorry, can I confirm again? What's the Myanmar business exposure percentage?
Sorry?
What's the Myanmar business exposure percentage?
I think that's worth about $100 million.
Thank you.
Okay, last. Very conscious of time because we still have people online. Last question goes to Chris, and then we'll take Boon Ping's offline.
Oh.
Great. Thank you very much. Thanks for having us here today. A few from me. Firstly, the digital exchange. Now, the crypto side of it got all of the headlines, but, I think one very interesting part of it is actually the idea of, tokenization and the prospect of access to private markets that you can't normally get. Now, I'm wondering if you're operational with that yet, or if not, what the likely timeframe for that is likely to be. Secondly, your expenses line, lower year-on-year, your cost-income ratio lower as well. I'm not looking for a precise number here, but roughly how much of that is down to the fact that we don't get on planes and stay in hotels anymore?
Logically, if it's a meaningful amount, when all of this is over, do we really need to be getting back on planes all the time and staying in hotels, or is there a meaningful shift happening there? Finally, on India, I never imagined I'd hear that the digital strategy would be enhanced by the acquisition of a bank with a 600 branch network. Logically, does that mean that Indonesia's digibank strategy might also be enhanced by the sort of brick-and-mortar operation which we had traditionally been moving away from? Thank you.
On the digital exchange, actually there are two parts to the non-crypto. One is the securities token offerings, the STOs for capital markets primary. That we're already working on. We hope, that's obviously got to originate with customers. We have a couple of deals in the pipeline, couple of deals we're working on. We're fairly hopeful that both on the equity and the debt side, we should be able to bring a couple of deals to the market in the first half of the year. The other part of that is the Series A, B, C, the illiquid stuff that we are trying to monetize. That is still work in process because, trying to get a tokenized equivalence around that is a little tricky.
We're working with lawyers and with existing companies, so that I can't guarantee will happen in the next quarter or two. It might take a little bit longer. The primary side will happen. The monetization of the illiquid private listing might take two, three quarters to come through. On the travel, hotel, I think the total savings we have from travel, hotel, advertising, et cetera, is about $ 100 million and
$9 2 million.
Yeah. About $100 million, right? Travel may be $50-$60 million with that. I know. It's hockey scale.
Yes.
Mm-hmm.
It is about that.
It's about that, right. As we look into this year, when we budgeted, I told everybody to budget only 50% of what you used to travel before, which means it's a pickup on 2020, but I think there has to be a structural change. Now, in the past, everybody got on a plane for everything. Today, with you know, learning to work with Webex and Zoom and Teams, you know, most of the places you don't need to get on a plane at all. I think we'll dial up some travel, but I don't think it's going to go anywhere near where it used to be. Second, I also think that the cross-border circumstances are not changing very soon. First of all, I think it'll be the second half of the year before travel comes back.
Half a year you won't change very much. The second half of the year you'll start changing, but you'll still be much, much lower than you used to be. On the India thing, here's, I think as if you go back actually inside that, physical phygital, I started calling it, physical presence that came from Indonesia. When I've reflected before, Indonesia digibank started doing better than the India digibank. The difference with that was Indonesia we had the ANZ footprint. When we acquired ANZ, we got this 40-50 branch footprint, and we realized that the people who are close to our branches, they see the brand presence, they see the branding. We can do last mile, the SMEs can push.
You get much better digital take-up and digital transacting around the vicinity of their branch footprint, right? That's why we started opening up the subsidiaries in India. We got to 34. In those 34 subsidiaries, we're seeing the same thing that while the bulk of the acquisition is digital and the transacting is digital, having a physical presence that people can see you exist, you're not just a will-o'-the-wisp somewhere in there, and the last mile they want to do this thing, it's all actually quite helpful. That's the basic theory. Now, do we need 600 branches? I don't think so, you know, over the next two, three years, as part of the nationalization, we will rationalize that footprint without a doubt.
To have enough presence in these five states where in the big cities where you can see, you know, 10, 15, 20 LVB, DBS branches, you can build. I think that's definitely going to be extremely beneficial to the digital strategy.
Okay. Thank you. We'll now move on to the media who've dialed in virtually.
Thank you. For audio participants, if you have any questions to raise, you may press zero followed by one on your telephone keypad now. Once again, it will be zero followed by one to join the call floor. Our first question, we have Rebecca from S&P Global. Please proceed.
Hi, thank you so much for hosting this today. I just wanted to ask, do you see a scope for reversal in terms of provisions this year, and what might trigger that? Thank you.
I think I answered that question already. There is scope for reversals because as things go into SP, you reverse out a GP into SP. I mean, that's an automatic process. We do have a lot of, you know, management overlay cushions built into the general provisions. At this point in time, we haven't got that baked into our plan, that we will have reversal provisions. Clearly, if the, you know, post April and June, if the overall moratorium situation looks better and we don't see any further downside, it's not impossible. You could see some in the later part of the year. Right now, our current premise is that you know, we said three to five. If you want, if we say let's assume you're coming closer to four, we've already done three.
You'll probably take another, you know, SGD 800 million to SGD 1 billion, which is in line with what we do every year. Our current forecast is we'll go back to normal levels of credit cost. But you know, between this year and next year, next couple of years, you could see reversals as well.
Thank you.
Okay. One last question virtually, and then we have to wrap up.
Once again, audio callers, if you have any questions to raise, you may press zero one.
Okay. I'm very sorry. We have to wrap up because we've got the analyst call. Thank you very much for your time. The next one is the analyst briefing, and that starts right after this media briefing. Thank you.
We'll do any questions.