DBS Group Holdings Ltd (OTC:DBSDY) Q1 2026 Earnings Call Transcript

DBS Group Holdings Ltd (OTC:DBSDY) Q1 2026 Earnings Call Transcript May 2, 2026

Nicholas Teh: Okay. Hi, everyone. Welcome to the first quarter ’26 DBS Analyst Briefing. As usual, you’ve heard the media briefing, so you’ve gone through the decks. We can go straight to Q&A.

Nicholas Teh: So first question from Jayden from Macquarie.

Jayden Vantarakis: I just had 3 points I wanted to ask on. The first is just to clarify on the general allowances. So I think you made it pretty clear during the media briefing that it’s unclear if we could have write-backs now. But we’ve sort of said that the GP allowance is appropriate for the current sort of situation. Just wanted to know, did you change any of the macro assumptions that go into the MEVs like the view on growth, inflation, any potential impacts on the economies in where you operate? Obviously, I realize that there’s a lot of judgment that goes into that, would be interested for your thoughts, if I could start there.

Tan Shan: Well, I can take the sort of the way we think about this part and then maybe Sok Hui can go through the MEV platform numbers. And we’ve done this quite a few times, right, from COVID to Ukraine to now Iran. We stress test for oil at $120 going all the way up to $200. We stress test for some of the markets that we work in, currencies depreciating by 20%, 30%. We stress test for demand disruption as well, or we stress test also for inflation on the cost of goods, be it fuel oil or chemicals or fertilizers, et cetera. So all that stress test goes into all our modeling and then we identify companies that are at risk and then we put them into the watch list depending on how far — how bad they look. So that’s the rigor and discipline that we do it, do it both top down and bottom up.

And as I said, when we did that against this war for Iran, the numbers were actually pretty okay. We realized we have more than sufficient buffer, ample coverage for the worst-case scenarios that we factored and stress tested. So that’s why we don’t feel that we need to do any more.

Q&A Session

Sok Hui Chng: Yes. So Jayden, I think I would say that we can put in the sort of macroeconomic variables, we can make assumptions. But I think the more important point is the transmission mechanism, which is much harder to get right on how sort of these oil prices, how the transmission will work, whether there’s a lag effect. So I think we do the best with the models that we have but we want to be prudent. And while our stress testing numbers are coming in lower than the stack of general provisions that we have, we want to be watchful and see how it will pan out in the subsequent quarters before we talk about GP release.

Jayden Vantarakis: Yes. That’s very helpful. I realize that there’s a fair amount of uncertainty but I think the bottom-up process is very helpful.

Tan Shan: Yes. And Jayden, we talk to all the big clients, right? So obviously, you talk to airlines, you talk to oil and gas players. You talk to fertilizer players, food and agri players, talk to everyone and find out, hey, when are you going to run off inventory? Hey, how much are you pricing up? Hey, have you got force majeure on this? Are you allowed to have force majeure on this based on your documentation and all that? Once it’s FOB, technically, the seller — only the seller can — the seller sold it, right? The buyer can’t do FM on once the goods are FOB. But the truth is it’s very nuanced and it’s very bottom-up because you might have someone that just declared force majeure. And then guess what, they jack-up their prices so much, actually, they have record profits, right?

Or you might have someone who says, “Oh my God, I can’t hedge my — I’m long spot and short forward but I can’t get my spot out of the Strait of Hormuz.” So you think, okay, discount that. But then suddenly, they made tons of money in their trading room, right? So it’s very single client dependent. You have to talk to everyone. You’ve got to get input from everyone. And you have to stress test for all the very large gaps and that’s what we’re doing. Talking to the big clients and getting input on the industry is crucial and that’s what we’re doing.

Jayden Vantarakis: And that’s really helpful. And then speaking of hedging, you’ve obviously done a good job in the first quarter and obviously maintain the fixed and the hedging portfolio at similar levels. I remember in prior quarters, you said that there’d be about a 50 basis points gap if you were to roll those off and then move to floating. Any sort of updated thoughts on where that is now and what you’ve been able to achieve? Because you sound a lot more sort of confident on the net interest income side.

Tan Shan: I can kick off and I’ll get Phil to amplify. So yes, we are a little bit more confident now because the market volatility has given us opportunities to do this better. When I last spoke to you, we said we’ll probably have to renew our hedges at 50 bps below. It’s now looking like 40 bps below the last price. So we’re better now. Phil?

Philip Fernandez: Yes. I mean, Su Shan basically summarized it quite well. We had a good first quarter. We basically managed to over replace the maturities. So there isn’t as much left for the rest of the year. It’s about SGD 60 billion for the rest of the year but we’re maintaining the duration of that portfolio at fairly healthy levels.

Jayden Vantarakis: Okay. That’s really helpful. And then maybe just a final question I wanted to ask, the wealth activity looks really strong in terms of the fee momentum in the first quarter. Any sort of views on how it’s panned out for April? Has client activity remained robust? What are your sort of thoughts? What you’re seeing now?

Shee Tse Koon: Tse Koon here. On the wealth numbers, it’s generally made up of both investments as well as insurance, right? And so in April, as we know, the market has gotten to be a lot more volatile. So therefore, we did see some volatility in the first 2 weeks of April. But then from third week onwards, we started to see again good momentum coming back. So I think over this period, again, it’s anybody’s call. But suffice to say, we’ve got a strong foundation of customers. We’ve got customers that have got dry powder. And therefore, it’s one of those things as we take a portfolio approach to advise our customers, we do think that we still stand in a good position. The rest is really the market, which is anybody’s guess. Having said that, we do also have a very robust bancassurance pipeline and we’ve seen the momentum very strong in Q1. So we do have a very diversified, I would say, stream of revenue in this space.

Nicholas Teh: Next question from Melissa from Goldman.

Melissa Kuang: Maybe I just on — go back on some of the points you just made, just a bit quickly. In terms of the hedging, you mentioned that you have done most of it but you have SGD 60 billion to go for the year. Wasn’t it at the last quarter, you mentioned that only the roll-off or the ones that roll off this year was only SGD 80 billion? So why — so have you done all and then you’re doing more? Or what’s going on there? Also just in terms of just getting around, again, like you mentioned that now your SORA assumption is much lower but yet you’re not expecting more impact. So how have you managed that? Because in terms of the SORA sensitivity, you’re now saying it’s SGD 11 million. But before the last quarter, I know it’s very small. You were saying only SGD 10 million. So just wanted to understand that a little bit better. That’s the first question. And I’ll just hop on to the next one after you answered that.

Philip Fernandez: Yes, sure, Melissa. So I said we over replaced in the first quarter. I didn’t say we’ve done most of the work. So we over replaced what matured and we have about SGD 60 billion left to do in the rest of the year. So we’ll look for spikes and we look for opportunities to replace that. And it’s what Su Shan…

Tan Shan: I think there was a — I think there was a misunderstanding because [Technical Difficulty] we over replaced, actually what happens is the book is SGD 80 billion that matures this year and it’s over the first half of the year. So for the first quarter, we did a little bit more than [Technical Difficulty].

Nicholas Teh: Sorry, your typing is coming through on our side.

Melissa Kuang: Oh, sorry, sorry.

Philip Fernandez: Yes. Yes, that’s right. So I think Su Shan summarized it pretty well there. So that’s the piece. On the SORA sensitivity, the Sing dollar rate sensitivity, essentially, as the CASA comes in, the sensitivity goes up. So it’s directly correlated with the deposit growth that we’ve just talked about and that’s really where the sensitivity comes in minus what we’re able to hedge. So that’s the net number you see, which has gone up about SGD 1 million per basis point over the quarter.

Tan Shan: So it’s a double — I mean, it’s funny, right, because we actually want to have more CASA but that makes us more NIM sensitive but it helps our NII, which is why we keep saying, look at the NII, don’t look at the NIM because we want to have more CASA. We want to have more low-cost CASA, right? It’s good for us.

Melissa Kuang: Right. So we are still of the view…

Sok Hui Chng: Right. Yes. So Melissa, to your point, maybe the — you’re asking why is it that SORA has gone down and how we managed it? If you think about it, it’s the deposit growth. We said we are changing our guidance for deposit growth. We — last quarter, we are thinking of mid-single digit. Now we are really talking about high single digit. And with more deposits coming in and remember, we guided that we can make 1, 1.2 percentage point for all the deposits that come in, that has actually — the additional deposits that are coming in has actually helped to mitigate the effect of the lower SORA. In fact, we can get to fairly resilient numbers despite the down drift in the rates.

Melissa Kuang: So can I just check, in terms of — when you say resilient numbers and you missed out the guidance that NII is slightly down. Are we still NII slightly down or NII flattish?

Sok Hui Chng: NII is still slightly down but it’s a big — I think it’s a big deal to be able to say we are still slightly down despite further drift in the rates environment that we have seen and that’s because we can mitigate it through the sort of deposit that comes in.

Tan Shan: Deposits and hedging.

Melissa Kuang: Right. Okay. Then just lastly, in terms of dividends, given where your new outlook for ROE and your strong returns, are we still very confident at the end of this year, we can still do the SGD 0.06 up in terms of the DBS?

Tan Shan: Well, it’s hard to predict what will happen in — through end of this year just because we can’t predict the geopolitics. So I think we’ll need to have a couple more quarters of clarity before we commit to anything. But this is a broad level discussion and we’ll definitely keep you posted.

Nicholas Teh: Thanks. Next question, Yong Hong from Citi.

Yong Hong Tan: I just have 3 questions, 2 on wealth and 1 on NII. So firstly, on wealth, just wondering how much of that net new money was driven by private banking? And any thoughts on the sustainability of this SGD 10 billion? Some color on the net new money prospect by geography will also be helpful. Yes. This is my first question.

Tan Shan: Okay. So the SGD 10 billion, SGD 6 billion was for the high net worth and SGD 4 billion was for treasures. The geography was actually very wide. So no single concentration. I think we should be able to hopefully maintain the momentum. I don’t want to overpromise but what do you think Tse Koon?

Shee Tse Koon: Yes, yes. So as we’ve discussed earlier on, given that our Treasures franchise is actually pretty much onshore and therefore it’s, 4 out of 10 is from there. So by nature, it is already very well diversified, right? And then the 6 is PB/TPC, which is more a global kind of a business. So it’s very, very broad-based. Now as to whether we are able to — as to whether we are able to sustain, I do believe we can for simple reason that we have talked about it, it’s a macro trend that wealth is continually being generated out here in Asia. We continue to be onboarding new customers. We’ve got a strong pipeline. And so if anything, I would say these kind of numbers is what we have consistently seen now over the last 4 years — 4, 5 years. So I don’t see a reason why this should not continue.

Tan Shan: Yong Hong, I think what is pleasing for me is that the One Bank is working, both IPG and wealth connectivity across all the markets is happening. We bank the business, we bank the family. We talk about succession planning. They do their key man risk insurance with us. We look after their kids, their grandkids. So it’s very sticky and it’s also focused on the future, not just this generation but the next one and the next one. So we’re building a sticky franchise. The wealth AUM is going to be lumpy, right, especially at the high end because you get one big client, yes, you know, it goes up, then if the guy needs to send money out somewhere to do something, it goes out. So it goes in, goes out, it’s quite lumpy. The key is, we must keep having a cadence of new-to-bank and next generation and then bank — set them — engage them and lock them down with trust, estate planning and banca and that’s exactly what we’re doing.

Yong Hong Tan: Okay. Okay. My second question is, what is the proportion of AUM in investment products in the first quarter? And where are we in the month of April? Yes. So I’m just wondering what is keeping you from upgrading your commercial noninterest income guidance for the year?

Tan Shan: Okay. So 58% of the AUM is in investment products. Your second question was what?

Yong Hong Tan: And how does that compare with the month of April? Because you were saying potentially April, we are seeing a little bit less upbeat in terms of equity market sentiments. So just wondering what has been the trend in April for this ratio?

Shee Tse Koon: Are you talking about the wealth side or…

Yong Hong Tan: The proportion of the AUM in investment products. Basically, just some color on the wealth momentum in April.

Shee Tse Koon: So okay. So the wealth momentum in April, basically, wealth management is made up of I&I, right? So both insurance and investments. On the investment side, in April, first 2 weeks, there was, as we can see all in the market, is pretty public, generally quite muted. But the third week, again, it started to bounce back. So it’s kind of pretty volatile during this time. But having said that, within the whole investment arena, we have a broad base of different instruments, right? It’s not just about equities but there are also various structures involved in there. At the same time, we have a very broad range of funds, both public and private, which customers continue to gain exposure in. So it’s very, very broad-based. On the insurance front, the momentum has been exceptionally strong and that has continued into April.

Yong Hong Tan: Okay. Okay. Got it. And so would you say that your wealth or your clients in the wealth segment, they are still basically putting their money into use and basically deploying their deposits into investments. So basically no slowdown in that from what we have been seeing since the first quarter.

Shee Tse Koon: Yes, I would say in a broad sense, yes, because the advice that we give to our clients has always been to stay invested. We do not believe in timing the market. So we always tell our clients time in the market is far better than timing the market. And therefore, we take a portfolio approach. And it is in these times that we also would, in some cases, where relevant, help our clients or work with them to rebalance their portfolio. So there are opportunities actually in these times for them to build a portfolio.

Tan Shan: And I’ve always said, right, Yong Hong, that I think the role of capital as a source of passive or active income is going to rise for young people and for retirees because the velocity of money in Main Street is going down but the velocity of money in Wall Street is going up, right, if you want to use an analogy. And therefore, we want to start them young. So Tse Koon is not just building the high net worth, right? We’re going down the chain to do digital wealth, so digiWealth, our digi portfolio is doing really well. I mean the AUM has doubled or something like that, right, over the last few months. And we want to promulgate concept of regular savings plans, easy, save as you earn and easy sort of risk-adjusted portfolios to suit retail wealth life cycle needs for longevity and for retirement and for active income if you’re in the gig economy, right?

So don’t just focus on that top end sliver. Look at it holistically, look at wealth starting from retail wealth all the way up the wealth continuum, especially in some of our key markets like Singapore, Taiwan. And then for other fee, recurring fee, look also at GTS, look also at loan fees because we’re trying to build the snowballing effect of more flow, more sticky transactions, more operating accounts and more fees. So the loan fees is being hard fought but won, you can see it’s consistently strong because we’re winning key mandates now. We’re the lead for a lot of the syndicated loan structures that we do because of our industry focus. As for GTS, we’re winning more and more cash operating mandates, right? We’re winning because we are a dependable bank with digital.

We know how to tokenize deposits. We are safe. So we are also a diversifier bank for many of these MNCs that hitherto only bank with global banks but now they want to diversify risk, so they come to us. So we’re winning operating mandates as well. So what we’re trying to build is a nice cadence of recurring fee income across the board. So wealth is one, GTS is one, loan fees is one, payment fees is one. So using AI, using smart models, using customer engagement, et cetera, to build that sort of fee engine.

Yong Hong Tan: Okay. Got it. Maybe just one final question on NII. I think there was some — you sounded a bit — a little bit more optimistic from deposits. Just wondering, given the April bond yield trends, does that even give you more opportunity to do more hedging and that potentially also is another driver why you sounded more optimistic on NII?

Tan Shan: I guess in a word, yes. Phil, do you want to say any more?

Philip Fernandez: Yes.

Tan Shan: You know what, yes. But I don’t want to overpromise and underdeliver, right? So I — so you know our — we’re using 1% on SORA and we’re expecting no U.S. rate cuts now. And so we’re ready for — if times are bad and the war turns out to be even worse than we anticipated, then it drags on and the stagflation, then we are building a fortress balance sheet just to prepare for the worst. So if it’s really bad, we’re ready for it, right? So if things all go pop, we’re ready for it. We’ve got enough reserves. We fight for deposits. We invest in HQLA, we play safe, we take off risk on SMEs and CCUL. So I think from a risk and a CASA perspective, we’re good. Then if the markets pick up, the war ends early, hey, then we can go forth and conquer more fee. Hopefully. less volatility on the downside and more also alpha on the upside.

Nicholas Teh: All right. Let’s move on to Aakash from UBS. [Operator Instructions]

Aakash Rawat: Congrats on a pretty solid quarter. If I can just start off the first question with understanding the net interest margin a bit better. So can you break it down how much was the impact of rates on the net interest margin? So SORA coming down, SOFR coming down, HIBOR coming down? And how much was the HQLA deployment impact separately?

Tan Shan: [indiscernible] really unpack the impact. So you want us to unpack the impact of SORA, HIBOR. We can give you the sensitivity, which I thought we did.

Aakash Rawat: Yes, sorry, not by rate separately. I’m just saying what was the rates impact and what was the HQLA impact? If I look at the slide where you break down the commercial book NIM and the group NIM, so commercial book was down 5 basis points, group was down 4 basis points. Is it fair to say that HQLA impact was plus 1 basis points on the NIM? That’s the only number that we’re looking for.

Philip Fernandez: Yes. So Aakash, maybe I’ll try and give — this is Phil. Maybe I’ll try and give a bit of color there, right? So bear in mind that the average group NIM is in the 180s, right? When we deploy surplus deposits, we typically get 1% to 1.2%, depending on which currency you’re talking about. So there’s a dilutive impact on NIM. But as we’ve always said, our guidance is on NII, right? Because NII in dollar terms is what we’re targeting. And Su Shan was talking about 17% ROE and so on. Really, the ROE and the NII are what we are focused on. So it’s not easy to tear apart exactly how much was created by this particular slice of deposits versus that. So I’d encourage you to look at the NII line and that’s where the sensitivities that Su Shan mentioned.

Aakash Rawat: Yes. I totally understand that. I understand it’s positive for NII and it’s a good business to do. But I’m just thinking from a NIM perspective because it makes the calculation a bit easier. Out of the 4 basis points, can you say minus 2 basis points was HQLA impact, minus 2 basis points was rates impact? Or any — like what was that — because some of the other banks…

Nicholas Teh: We will come back to you after.

Tan Shan: It’s quite hard because it depends on how much we get, how much we can do. We’ll come back to you later.

Aakash Rawat: Okay. That would be great. The second question is just on wealth management. If you think about your guidance last year, right, it was kind of implying like SGD 800 million per quarter revenue for wealth management. This quarter, we obviously did SGD 900 million plus, which is very strong. But you’re still not changing the guidance for the full year. So I’m just trying to understand like what drove this strength in Q1? Was there anything exceptional which you’re looking at and saying we shouldn’t change the guidance for now? And what would also be very helpful here is if you can break down this SGD 900 million by month? Like how was Jan and Feb and how is March? I’m guessing March was slower than Jan and Feb but please correct me if I’m wrong.

Tan Shan: Yes. So yes, we I think what we are seeing is, as Tse Koon said, right, I mean, banca did very well, and banca tends to be countercyclical. Investments tends to be cyclical. So the markets are up, investments are up, markets are down, investments are down. So because that part is hard to predict, we’re not raising or changing any of our guidance on wealth. I mean we obviously don’t — we don’t hold ourselves to our budget, right? If the markets are good, we do our best. If the markets are bad, we hunker down. But I think what has been a pleasant surprise is the banca side has been really outstanding. And that’s because, as I said, right, I think customers are seeing us as a long-term wealth manager of choice for their next generation and that’s why they’re coming to us to do these long-term plans.

And these long-term plans take time to hatch. They don’t happen overnight. It takes months, right? You’ve got to get the guy in, the wife, their children, they’ve got to do health checks, you’ve got to discuss estate planning, all very sensitive things. And these take months, if not years, to hatch. But it’s hatching now, right? So — but that’s based on our years of investments in the team, the family office team, even in the SME team. So what’s pleasing for me on banca is we’re starting to see also my SME teams, my corporate bankers discussing key man risk with their key man clients, the family-owned businesses because they should and they have to. It’s a great solution for our clients. And so that’s also pleasing for me. So I think Tse Koon already gave some guidance on April.

So just expect that when the markets are down, the fees for investments will be down and we hope to mitigate that with banca fees and we hope to mitigate that with new-to-bank customers.

Shee Tse Koon: Yes. And at the same time, as I also guided, also mitigate that with actually the approach we have taken to wealth management, which is not one of just trading in and out but really taking the opportunity to build a portfolio. So I’ve also mentioned that it’s not just about equities, just for discussion sake, we have also onboarded a whole series of funds, including hedge funds. So in some volatile times, actually the hedge funds can do really, really well. And we have seen customers also starting to put their money to work through hedge funds. So there are — there is a full suite of solutions that we have to kind of navigate through these volatile times, right? So the first primary impact, of course, overnight, things happen, you might see the market move. But along the way, we have, I do believe, what it takes from a strong customer base to a full suite of solutions.

Sok Hui Chng: Aakash, where you’re coming from, I think the words — we guided to high single digits for the commercial book noninterest income. High single digits is a range. So I would say it’s gone up a bit now. It’s not just high single digits, if that satisfies your kind of curiosity on why you did a SGD 900 million plus, very strong and you’re still not changing your guidance.

Nicholas Teh: And just bear in mind, Aakash, because seasonality, you usually can’t take 1Q times 4.

Aakash Rawat: Sorry, the last question — that’s very helpful color. The last question is just on Hong Kong CRE. So you also mentioned that how property market seems to be bottoming out, recovering. Residential property prices have been up for like 11 months in a row. Are you starting to expect recoveries from this book? Or are you still expecting NPLs this year?

Tan Shan: So I am more constructive on Hong Kong CRE now but it is very much location specific. So Central Grade A office properties like the U.S., right, New York, Grade A, Manhattan, Grade A, London Grade A, is all doing well. The fringes are not, less so. So we don’t have — Hong Kong CRE, our exposures are really just to the top quality blue-chip names. And they’re actually seeing a nice recovery. Some of the CEOs have told me their rentals in Central have gone from HKD 90 to HKD 130 per square foot. So that’s real recovery. And you see the big hedges, hedge funds, NII and even the big tech companies have come back to Hong Kong Central and taken up floors, right, some taken up buildings. So I am constructive. I’m pleased to see also that the West Kowloon side is seeing quite a lot of movement, people taking more space, helped by the strong capital markets in Hong Kong, helped by the growth of wealth management in Hong Kong and helped by the strong support that Hong Kong is seeing from the Mainland for both its capital markets and its investments in new manufacturing and biotech, et cetera, and tech, et cetera.

So yes, I’m more constructive on Hong Kong based on that.

Aakash Rawat: Can this result in any GP write-backs or any overlays that you have earmarked for the Hong Kong portfolio freeing up?

Sok Hui Chng: We’ll continue to assess such a split already.

Nicholas Teh: Okay. Thanks, Aakash. We move on to Harsh from JPMorgan.

Harsh Modi: Okay. Great. So just to understand the NII guidance, if Sing dollar appreciates and your constant currency balances go down, is that the main risk between flat NII and a slightly lower NII year-on-year?

Tan Shan: If the Sing goes up? Normally…

Harsh Modi: Your constant currency deposits are pretty strong, right?

Philip Fernandez: Yes. it’s a fairly — this is Phil here. It’s a fairly second order effect, probably low tens of millions. That’s the translation impact of the U.S. dollar NII stack back into the Sing dollar functional reporting currency. That’s what you’re asking, right?

Harsh Modi: I’m trying to understand what are the moving parts because it seems like your language has become more positive on NII between fourth quarter and first quarter. So what are the more — I’m guessing one is the SGD 60 billion of hedging and second is Sing dollar. Is there anything else which would be…

Tan Shan: Harsh, actually that’s not — we might sound more positive but honestly, it was tough, right? Q1, SORA went down how much year-on-year? 150 basis points. SORA was down 150 basis points. Remember what I said about our sensitivity, right? It was SGD 11 million per basis point. So it’s not easy, right? It’s tough. So you see that. So the big driver for NIM is still SORA. It still beats everything else hands down. But the team did a great job in getting more deposit growth. The team did a great job in hedging. And the market is offering more opportunities for hedging because the market is so volatile, right? So from that perspective, because we’re seeing the volume growth, we’re seeing the hedging opportunities, we’re seeing the fee growth.

We’re seeing the new-to-bank. That’s mitigating the massive SORA headwinds that was upon us. When we looked at the markets last year, right, at the end of last year, the SORA headwinds were real and they still are real, right? But on the balance sheet, right? And then keep growing, keep your NTBs, keep your CASA grab and keep your focus on all the growth cylinders that we’re doing and all the credit sort of stress testing that we’re doing. So we’re standing firmer. I think we’re on terra firma and terra is firma.

Harsh Modi: All right. If I could just understand that hedging bit, Su Shan, thanks for that. And it’s incredible how well NII is despite all of these. So kudos to your team. But what exactly are you hedging? I’m just trying to understand the mechanics of it because if it is consensus that this is how, let’s say, the Sing dollar rates are going to be, or U.S. dollar rates are going to be, like some peek into your secret sauce, what exactly are you doing to get to this outcome?

Philip Fernandez: Okay, Harsh, Phil here again. So we use a variety of hedging strategies. So there’ll be funded, unfunded, some deployment to HQLA. But also the loan book itself, right, also gives us certain opportunities to put on hedges. And some of those can be single currency, some can be cross currency. So we — some can be basis swaps. So there’s a variety of hedging strategies that we employ. That’s probably what I would say on the matter.

Harsh Modi: There’s nothing one big thing which we can point to that, like this worked very well because the cross-currency swap spreads went down. So it’s nothing like, it’s across the board. So there’s nothing that we can monitor, is what I’m trying to get to.

Philip Fernandez: We are very opportunistic. And on particular periods, we will see opportunities in one market, in other periods, we will see opportunities in other markets. But overall, look at the outcome of the hedging strategies, look at the margin we’re able to get on deposits. Those are the numbers you can kind of look at and get a sense of how we’re doing to mitigate the very, very large sort of headwind that Su Shan just mentioned.

Harsh Modi: Perfect. And final question is on capital. Under what conditions will the bank not increase the dividend by SGD 0.06 in fourth quarter?

Tan Shan: Wow. Under what circumstances? [indiscernible] Yes. I mean, if the war continues, the markets melt down, the taxation, demand disruption. So it depends on the macros, Harsh. So I don’t want to overcommit now because we still have 3 quarters ahead of us and it’s a very difficult environment to predict, which is why the team and I just focus on fortress balance sheet, focus on growth, focus on credit and build a strong foundation. Then by Q2, Q3, we should have more visibility. Sorry, I can’t give you any guidance because I really don’t know, to be honest.

Harsh Modi: I understand that. So is it fair to say unless there is a reasonably bleak outcome, we should probably get that SGD 0.06 pickup.

Tan Shan: Hope so.

Harsh Modi: No, no, that is all. I understand. You can’t commit and I understand world is a difficult place. Final question is on buyback. The capital set aside for buyback. What are the uses of that capital? How long will you wait for the stock to come back — to come down? And if it continues to go up, if it is up SGD 5 or SGD 10 12 months from now, what do we do with that capital set aside for buyback?

Tan Shan: Well, we’ve done 12%, right?

Philip Fernandez: SGD 400 million.

Tan Shan: Yes, we’ve done SGD 400 million, got SGD 2.6 billion left. We said that we have up to 2027. So we’ve still got 1.5 years more to decide. So we will definitely keep you posted. As of now, because we can’t predict whether the markets will crash or not, don’t want to commit either way. But we will be prudent with the use of it and we will keep to our promises.

Harsh Modi: Okay. So — sorry, Nick, I know I’m overstepping here but just final thing. If we do not use this capital, is there a possibility that some of it can be paid back by end of ’26? Or will you wait till the end of ’27 to pay back that SGD 2.6 billion, in whatever form and shape?

Sok Hui Chng: We said it’s 2027, the buyback. So yes, so we would still wait until 2027. If we don’t actually do the buyback quantum in the — in what we have committed, we will do it in the form of some kind of dividend.

Tan Shan: As you’ve seen, it’s there, right? So it’s there to support — at least you have that sort of comfort that if all hell breaks loose and the markets tank, you’ve got that support there potentially.

Nicholas Teh: Next question from Nick from Morgan Stanley.

Nicholas Lord: First, just on — coming back to just balance sheet growth actually. I wonder if you could just make any comments on sort of appetite to borrow from your customers. I mean, is it sort of that we’re seeing working capital-driven lending because prices are going up? Or is it that there is sort of still appetite for CapEx and any view you have on how that continues? And just linked to that, I know you’ve mentioned lots of reasons why you are getting deposits but was there anything particular in Q1 that drove that deposit growth? And I’ve got a couple of other questions afterwards.

Tan Shan: Okay. Nick, I’ll take the balance sheet growth question first and you were asking about loan growth. I’m actually quite happy to see that the non-trade corporate loan growth pipeline is quite decent. First Q was driven by all the growth industries, right? So tech, TMT, data centers, tech platform, metals and mining, some real estate in Singapore for the government land sales. Although Hong Kong surprisingly, I guess that speaks to the recovery in the Hong Kong property market, Hong Kong, we saw quite a lot of repayments in the real estate sector because they managed to sell a lot more and they could repay us. For second quarter, we continue to see decent growth. We’ve got a couple of big deals in the pipeline that I hope will go through.

And it’s in energy and renewables, some real estate and some acquisition financing and again, TMT as well. So fairly decent. In terms of the large — these are all mostly large corporates. We’re not really growing in the midsized or SMEs right now, neither are we growing in the consumer unsecured side. Then it depends, right? The couple of deals that I mentioned, I hope to see them through. It’s almost at the last stages but anything can happen, right? So don’t want to change that. And then trade loans as well, that thing tends to be quite end of quarter type of trade loans. But again, a lot of it around the AI server value chain, working capital for energy and renewables and supply chain for chips. So again, that comes in normally at the third month of each quarter.

Your second question was around deposits. What was the question on deposits?

Nicholas Lord: Yes. You’ve given obviously lots [Technical Difficulty] anything specific in Q1 that had driven that deposit.

Tan Shan: Sorry, you are breaking up.

Nicholas Lord: Sorry, yes, I was…

Tan Shan: I lost you for a bit.

Nicholas Lord: Yes. No, my question was, you obviously saw good deposit flow in the first quarter and you’ve mentioned lots of reasons why deposits are coming in generally. But I just wondered if there was any one factor that had driven deposit flows in the first quarter.

Tan Shan: It’s broad-based [indiscernible] grow. And there were some — first quarter, there was some retail seasonal bonus inflows. There was corporates operating balances. There was — we had a couple of successful FD campaigns as well. And I think the work that we’re doing around our AI models, around our campaigns, whether it’s for the multiplier or for bundled products for corporate, for SMEs is working. I think a lot of it is just focus, right? We told the team, hey, focus on growing operating accounts, focus on winning mandates, focus on new-to-bank. So whether it’s SME, CASA, whether it’s large corporate operating balances, whether it’s wealth, new accounts, whether it’s retail CASA bonus, it’s just all cylinders firing for cash.

Nicholas Lord: Okay. Perfect. And then my second question, just on banca. I mean you’ve mentioned how it’s grown and how it’s important as a driver of wealth. Can you give us any disclosure on roughly how much of your wealth management is coming from banca and how that changed Q-on-Q?

Tan Shan: Well, how much is banca versus — it’s roughly about 20% of total fees — total fee income.

Nicholas Lord: Total fees or total wealth fees?

Tan Shan: Total wealth fees.

Nicholas Lord: Okay.

Tan Shan: I think it was [indiscernible]

Sok Hui Chng: Yes. Yes. That’s right. That’s right. No, we, so far, we don’t give details on banca but it’s about 20% of total wealth fees and that’s seen a substantial increase from last year.

Tan Shan: But it’s lumpier, Nick. So if you have one big policy, sometimes it’s lumpy. But as I mentioned, a lot of it depends on new-to-bank customers. And also we’re getting some success around SME key man policies as well.

Nicholas Lord: Okay. And sorry, just one final one. CBG Wealth Management net new NPA formation in 1Q was 61%, which just looks like a bit of an outlier. I know it’s small in the group context. Is there anything that drove that?

Tan Shan: Yes, it’s fully secured. So it should be okay. It’s a one lumpy situation that’s fully secured.

Nicholas Teh: Last question, Sukriti from Bank of America.

Sukriti Bansal: Congratulations on a good set of results. So just keeping it short to 2 questions. One, just wanted to understand, you said loan growth should broadly track GDP but given the ongoing macro uncertainty, is there a risk that you see that loan growth surprises to the downside in the second half if corporates turn more cautious? And what are some of the pockets where you’d be most watchful?

Tan Shan: Yes. Well, I think we we’re very focused on where we want to grow our loan book. So we’re very nuanced on what we’re avoiding as well. So as I said, the team knows that we want to go where there’s growth. And so that’s TMT, there’s FIG, there’s the whole semiconductor supply chain and avoiding the riskier credit. So I think — and also renewables, of course. And then there’s quite a lot of M&A deals in the pipeline. So I think we’re good. Will it be canceled in the second half? So it really depends. So if the war continues, then there is going to be downside risk, I think, on the asset book growth as deals get canceled. So — but so far, from the pipeline that we’re seeing, it looks okay. What has surprised me on the downside, people are repaying also, right?

It’s not a bad thing. As I said earlier on, I said, I didn’t anticipate Hong Kong real estate loans to be repaid so quickly but they were all repaid quite quicker than I anticipated. So in a way, it’s good for credit but it’s less good for my asset book. But I think there is enough — certainly in the TMT pipeline, there’s enough around the corporate trade loans for the foreseeable future this year. But let’s see. I mean, if the second half looks bad because of Iran, then we might have to shave a couple of billion off our budget. But it’s okay. I mean we’ll continue to grow deposits and we’ll continue to redeploy the excess deposits. So my NII, hopefully, we will still be in line with our own budget projections.

Sukriti Bansal: And actually, a follow-up there on the deposit side. You did mention all deposits are accretive. But at what level do we see that excess deposits become ROE dilutive? And how do we think about continued deposit growth if there’s a risk that loan growth is not as high?

Tan Shan: It doesn’t matter. You want to go all out for deposit growth, right? Cash is king. Cash is clean. Cash is everything. So just go all out for deposit growth. Your loan growth, you’ll be instructed by the creditworthiness and the ROE and the cross-sell and all that and we are very careful about avoiding the bad credits and being instructive on stress testing, et cetera. But deposit growth, just go all out and win market share. It doesn’t matter whether your loan growth is muted or not, you just go all out for deposits because you can redeploy them in HQLA, it’s high ROE, it’s liquid, it’s good credit.

Sok Hui Chng: Yes, it will be NIM dilutive. It could be NIM dilutive.

Tan Shan: It could be NIM dilutive.

Sok Hui Chng: This will not be ROE dilutive.

Tan Shan: Yes. But don’t worry about the NIM, look at the NII and look at the ROE.

Nicholas Teh: Okay. Thanks, Sukriti. That’s all the time we have. So thanks, everyone, for dialing in. We will speak to you again next quarter.

Tan Shan: Thank you.

Nicholas Teh: Thank you.