DBS Group Holdings Ltd (D05) Earnings Call Transcript & Summary

Okay. Welcome, everyone, to the third quarter analyst buy-side, sell-side briefing for DBS. You would have heard the media briefing, so we can go straight to Q&A. Before we start, just some brief instructions. [Operator Instructions] So without further ado, let's go ahead to the first question from Yong Hong from Citi.

I just have 3 broad questions. [ Thing ] number one, you talk about corporate paying down loans, which is reflected in the underlying loans growth and lower CASA ratio. So are these translating into higher competition for loans and deposits, which together could put some pressure on NIMs? And also, would you have the October monthly net interest margin? That would be my first question.

So there are a lot of subquestions there. So the -- yes, I mean, in the top end, [ let's say ], the impact on [indiscernible] large corporate side haven't seen it so far, the big lending. So we've been able to hold this up. Where we've seen some NIM compression because of the simple loan is trade, and we [ let the trade go down ]. We're going to trade this low margin. If you can get it well priced, you should be able to get [ 40 to 50 ] basis points. When it starts getting down to 25 basis points [indiscernible] actually. So you're seeing some of it over there. And the other thing, you're seeing a little bit of it in the mortgage book in Singapore. So you can see mortgage through-the-door pricing, I said [indiscernible] [ 2 8 or 2 9 ] for the quarter. But if you look at some of the newer pricing, people are pricing down to 3, 3.1 levels. So you're seeing a little bit of it over there. But the bulk of our lending, which is the large corporate in this thing, we're not seeing compression in that book yet. So that is one question. The second question is talking about CASA, which I didn't follow that question.

I think -- yes, I think on the CASA, [ basically ], from the comments that corporates are paying down their loans and that is reflected in the lower CASA ratio this quarter. So are these translating into higher competition for your deposits and maybe higher funding costs into fourth quarter and beyond?

Yes, [ short answer, I'm not sure I know ] that the low CASA ratio comes from there. I think a lot of it comes from the repricing. People move it from current accounts to fixed deposits. And so if we look at our CASA ratios overall, in the Sing dollar book, our CASA ratio is still about 86%. And in the U.S. dollar book, it's lower. We're still about 35-odd percent. It's come down obviously from [indiscernible], but it's not a big switch from [ this thing. It's ] actually moving to [ FPs ]. So our total deposits are doing fine. In terms of the -- for me, actually, our cost of deposits held up better than we anticipated. If you look at our [ EBITDA -- deposit EBITDA ] for the quarter, it was about 38% from beginning of cycle. If you count it from the beginning of '21 when rates started hiking, it's at 38%. I [ usually guide it ] for it getting up to mid-40s. I think by the end of the year, we might get to 40%. Next year, I think it probably still not hit the mid-40s. It will probably still be closer to 42% or so. So you are obviously seeing an uptick in deposit pricing, but not as much as we had expected we might see.

Okay. And my next question is on your outlook next year. I know you're expecting flattish net interest income next year. Just want to expect -- I just want to understand what kind of Fed fund rate are you factoring in. And any sensitivity for [ any 25 ] basis point movement in the Fed fund rate to your net interest income?

So maybe I will [ give way ] to Sok Hui to answer that.

So if you look at the outlook for next year, we are assuming that rate cuts will not happen until the second half, right? So that's one key assumption. So again, depending on the number of cuts, by the tail end of the sort of second half, there'll be lesser impact. And then we will also have $105 billion of fixed rate assets that will reprice into next year. So that also sort of helped in the NIM. And we also have the inclusion of the Citi portfolio, which will add about 3 basis points to NIM. So all in all, we are sort of guiding to at least on the underlying side, there will be probably some softening. But with the Citi portfolio, I think we should at least be able to hold overall net interest income.

Okay. Got it. And just want to follow up on that. I think -- can we check what kind of growth rate are you expecting for your noninterest income? I think you had mentioned double digits for your fees. But what about the treasury markets and customer sales income?

Same thing. So we think we'll get double-digit growth. If you look at our treasury sales income, it's also up 12%, 13% this year, and [ that's been quite global ]. A lot of that is obviously [ same ] consumer investments. So yes, we think both that and the fee income, we should be able to do double digit next year.

Okay. And my final question is on capital. I think your post-dividend CET-1 ratio is about 13.8%. And based on these excess capital you have, if you assume 13.5% kind of target capital ratio will be about $1.1 billion or $0.40 per share. Just want to share if this number is partly -- broadly in line with your internal capital target.

Sorry, what's your -- how did you arrive at the 13.8%?

I think your reported number is 14.1%...

Correct.

Just [ taking ] the dividend payment off the reported CET-1 ratio.

But then we always have a [ net profit shared ] every quarter, right, which is why we said that we were able to hold the 14.1% for this quarter. So Citi actually impacted us by 0.5 percentage point, but the organic profit accretion as well as some reduction in RWA overall contributed a plus 0.5% increase after dividends. So we tend to actually be able to hold it at around the current levels.

So actually, I think that the -- just to your question, though, is different. So I guided earlier that we have almost like $2 billion to $3 billion of surplus capital. And so because -- first of all, our target capital ratio is between 12.5% and 13.5%. So 13% is a better number to work with than 13.5%. And second, we think our CET will be stronger than you think because of what Sok Hui said. We have [ profit accretion ]. So we do think [ we have that ] much capital to return, and it is something that we're mindful of. And so it is something that when we evaluate -- the Board takes a look at it, as you know, at year-end. We did one earlier in the year, which was sort of mid-cycle, but we will take a look at it at year-end and come to a view on what we want to do with that.

The next question is from Aakash Rawat from UBS.

I have 4 or 5 questions, short ones, most them. The first one is just wanted to get your outlook on the Hong Kong property, so when prices have continued to fall there. So what I want to ask is really how worried about -- are you about your exposure to the mid-tier developers in that market? And if you can share what is the split between mid-tier, top tier. What is the sort of gearing level across these developers? And based on your Hong Kong financials, I think the provision coverage seems to be like 99%. Is that the right number to look at? That's my first question.

So on the Hong Kong property, obviously, [ first of all ], I think commercial real estate in Hong Kong is under some stress because I think there's a lot of supply also coming on board. There is [ some of this thing ] and supply coming on board. Now again, [ everybody's guessing ] whether the Chinese large company will come in and take up the space or not, so difficult to say. Now in our own case, our whole exposure is really top end. So we really don't have a large [ multiyear ] next year exposure. We were quite different from some of the other banks. And so the bulk of our exposure tends to be the Swires or the Jardines or the Hendersons, the top end names in the country. So I'm not overly concerned. Our secured book in that for the commercial real estate is like 15% [ LTV. So you can ] see a big drop in prices. Our collateral also holds value. But more than that, the companies themselves are fundamentally very strong. And so we're not seeing any signs of stress because of the counterparties that we bank.

And the provision coverage, is that around [ 99% ] based on the Hong Kong financials? Is that the right number to look at?

I don't know the answer. Do you have...

Hong Kong financials.

The DBS Hong Kong financials reported. [ Any impact that separately ]?

Yes.

[indiscernible] coverage ratio is 105% at the end of September for the whole Hong Kong -- overall Hong Kong franchise.

Okay. Jacqueline, that's our Hong Kong CFO. She confirms the number at 105%.

Fantastic. The second question is just more broadly on China [ peer ]. So I think -- you've talked about your property exposure many times. But the question is just if China is expected to grow much slower in the future, and given that DBS has a decent exposure to China and a lot of the growth in the past few years has been derived from China-related exposure, should investors be lowering the EPS growth rates for DBS? Like I think DBS has had like a 7%, 8% EPS CAGR in the last, let's say, 5, 6, 7, 8 years, right? Should that be much lower going forward just because China is going to grow much slower? Or do you think that DBS is not a proxy for China system so it can still keep growing at the same pace in the future? Just wanted to get your thoughts on that.

So Aakash, first of all, we haven't grown our China-related exposure or business now for the last 2, 3 years. We've been treading water, if you will. And we should be able to get high single-digit EPS growth rates. So obviously, it's not all coming from China. In fact, if you look at even this year, China and Hong Kong have been [ sold ], negative even, and we've continued to be able to generate the growth. So one of our investment theses for DBS has been that we get a diversified opportunity across Asia. It's not just dependent on one country. And even though they're smaller, but India, Indonesia, et cetera, are outperforming. Our India business is going gangbusters. Indonesia will be very robust for us. And so the diversification helps. And frankly, this is why I sometimes make the case that because we have -- apart from 2 solid markets in Singapore, Hong Kong -- we have 4 growth markets. We can handle the peaks and troughs in these markets better because the first half of the decade, we were heavily China driven, and we had challenges in Southeast Asia, South Asia. The last 3, 4 years, China [ had been slow ], but we've been catching up in Southeast Asia and South Asia. It's a good balance, if you will. The second thing to me is [ you never slow ] China. [ It improved at ] 4%, 5%. And because we are so tiny, I think we can still find opportunities for growth. Some of the sectors are doing very well. And the China outbound business, the China Plus One is doing very well as well. And so in those sectors, the new tech, China Plus One, we continue to find good opportunity. We also continue to find good opportunity in the Greater Bay Area. And so what happens is when you're tiny, you can pick and choose your battles, and you don't always get [ buffeted ] by the macro aggregates.

Got it. That makes a lot of sense. Third question I have is on the loan growth side again. So if you look at the system data for Singapore, right, apart from higher rates causing people to repay loans, there's also a big drag coming from the manufacturing sector. And that manufacturing sector might have something to do with the global tech cycle, which has been pretty slow. And that tech cycle seems to be bottoming out now, if you look at the data in Korea and Taiwan. So I just wonder, do you also see that in your book that the tech cycle has had impact on loan growth and that might actually reverse next year, in which case numbers can be better than expected?

So Aakash -- so remember the bulk of our tech exposure not in Singapore. We have tech exposures around the region though. And the tech cycle, I thought it would bottom out by the summer, and we should start seeing some pickup in the back end of the year, it hasn't come to yet. So now what you can see is that pickup has been postponed and you might start seeing the pickup by year-end early next year. Like you have seen, the emerging levels are changing. So I do think there might be some upside coming from there. But tech is a broad category. So in our tech thing, we're also relying not just on the upstream, the PC mobile industry, the flat panel industry, the semiconductor industry, the data center industry, there are a lot of different moving parts in tech. And our portfolio is therefore quite diversified. And so you've got to think of which parts of that sector -- of that entire value chain, I'm going to pick up and which are not. Long answer. But if I had to bet, I'd say there is some upside in tech-related sector going into next year. But again, it's too early to be definitive about it.

Okay. Got it. And just my -- last 2 questions. The second last one is on Wealth Management. If you could just tell us what is the net new money in Q3? You said it was quite robust. What's the exact number there?

I think it was between $5 billion and $6 billion. So it's been consistent. We've been getting $6 billion in the quarter. It was between $5 billion and $6 billion. And we got some money, I mean, we are on track in for the fourth quarter also, October looks okay.

Right. Got it. And then the very last question is, I mean, I think just back to the tech issues, there's definitely probably a highest [ scrutineer ] in DBS compared to many other banks for several reasons. And I think there's been a lot of tech issues across banks globally as well, right? So banks are generally seeing more tech issues post-COVID. But my question is like why do you think in Singapore, it's mainly -- across the region in Asia actually, why is it DBS that is seeing more issues compared to other banks? Is it because you're trying out a lot of new things, which possibly other banks are not? Or like how would you think about that?

So Aakash, I think it's because we've progressed more than most banks in the world on a micro service architecture. So what happens when you -- we're really out there, which means that you put together a stitch a lot of other -- our own developed services as well as third-party services. And you sort of stitch them all together. What that does mean, though, is that you're reliant on different people for different pieces of software. And each of the software has its own release cycle, right? So they'll do their own upgrade path. They'll go to next version, they'll put security patches and so on and so forth. And because we have had so many of those, it increases our vulnerability to any one of them, right, if it goes up. And therefore, when you go down this architecture, my big learning is you've got to therefore be even more rigorous in your change control and operation management. That's the point I was making at the media piece. That the architecture gives you massive advantages. It is quicker. It allows you to increase -- multifold your cadence, it allows you to be more nimble, more adaptive, which is why all the big tech companies do it. But it does increase your service of vulnerability for software bulk et cetera. So we're going to be more rigorous and that's something that we need to improve.

Right. And do you think that many other banks would also be going down this route in the future, in which case they will also probably have to deal with the same issues that you're facing right now?

Every company in the world is going down this route. There is no company that is not. We just started in 2013, '14. If you look at a lot of the global U.S. bank, Goldman, JP bank, they started in 2016, 2017. But everybody in the world figured out after Amazon and Facebook that this is the best way to build technology in the future. So almost every company that I know is heading in that direction at a different pace.

Thanks, Aakash. Next question is from Nick Lord from Morgan Stanley. Nick, could you try to unmute yourself?

Okay. Can you hear me now?

Yes.

A couple of questions just on the liability side. First of all, just in terms of the deposit side, I'm just wondering if you could talk about some of the trends there. I mean, are you still seeing sort of very strong inflows of deposits? How much flexibility do you have to manage your deposit inflows in terms of pricing? Or is there a level of pricing you have to pay in order to sort of maintain the customer relationship? And then the second question is just on the wealth side. I mean it's a good pickup in wealth fees. I think in the presentation, you spoke about it being Bancassurance driven. I just wonder if you could talk about, is it all Bancassurance driven? Or are you seeing a pickup in activity elsewhere in the Wealth Management business?

Okay. On the deposits, we are quite thoughtful about deposit pricing, right? And so obviously, it varies by currency, Sing dollar, U.S. dollar, other currencies, et cetera. Like everybody, our CASA is moving on. About last year, we lost about $90 billion of CASA if I remember. This year, we're expecting to lose about half that, $45 million of CASA, which is consistent with our modeling. Our modeling has been that over 2 years, we'll probably lose up to about $140 billion. So we're actually going to come in a little bit below that. Next year, our thing is we'll probably lose another half of that $45 billion. So somewhere in the '20, '25 range, you'd probably lose more in the rates say where they are. And that's consistently factored that into our NIM projections. As CASA gets repriced, it's a deliberate choice. And whether we go back and try to bring it back and fix deposits or not. If you need the funding, then the price that we defer, there you have to pay at market or close to market to get the FD money in. But where we have enough liquidity and we don't need to price the fixed deposits, then that will go, right? And so it's a tactical choice to make depending on the nature and shape of the book that we have. On the Wealth Management, I don't -- I mean I'm not sure it's not this bank. The investment activity is growing. In fact, when I see the total growth of 20%, 22%, the large part is driven by growth in investments, not just bank. I'm not sure -- was there enough presentation when we had -- let me see if I can pull out the relative...

Much smaller.

Yes. So Banca grew quite about the same. So Banca is [ non-Banca ] all going about the same, about 21%.

And sorry, is that -- I mean -- and therefore, there must have been a pickup in the non-Banca side. I mean, we've still got a very high rate environment. So what is it that people are sort of moving into -- why do you think people are more interested to invest now than they have been in the last 2 or 3 quarters?

So third quarter, actually, the investment activity did pick up. Our switch from deposits to investment in the third quarter are discernible. We moved up by 4, 5 percentage points from deposit investment. And people are doing both end sort of like a [indiscernible]. So I think a lot of beginning to go into fixed income because the people figure that the rate cycle is peaking, then people are going to put some duration on fixed income bond and so on. But equally in the third quarter, people were also moving to do equity than structures, and we saw that. That slowed down actually into October because of this uncertainty around the geopolitics and so on. So the equity-linked part is so down, but the fixed income is still quite robust.

Thanks, Nick. Next question from Melissa from Goldman.

I have 3 questions. Maybe firstly, just on the outlook. I just want to clarify a few things. Firstly, in the net profit line you said, flat from this year flattish. Can you just inquire is it like the net profit or the core profit you're talking about the split. Then also within that in the expense line, in terms of the outages and all those IT that you're doing, you mentioned that USP spending $80 million. Is that $80 million already included in the expenses forecast for next year? Then also in the margins, if I can just clarify. This quarter, the margins for Citi, I think you mentioned next year, Citi will do about 3 bps increase in margins. But for just this quarter, does Citi help in terms of the margins as well? That's my first question.

On the first one, I think what we are looking at is flattish bottom line on an organic basis, and then we get a couple of hundred million bucks lift from Citi, Taiwan or on top of that.

Couple of million on the income line and the bottom line. We -- next year, 200 here.

Sorry, $200 million is...

Is the contribution from Citi at the [ NPA ] level.

Okay. Okay. And so the flat net profit is flat net profit. So the flattened core net profit, right? That's what it is?

Yes, flat core organic, excluding the citi component, we expect it to be quite flat.

Then your second question on the expenses, $80 million. Actually, it's not all new money because since we are stopping doing various activities, the products and services and so on, so some of it which is redirecting the resources to bring the resiliency and update. But there is some new money as well. And some of that, we've already taken this year. So it's why expenses are up a little bit higher than we expected. But the rest of it is all factored into next year's assessment, when I gave some guidance for next year expenses, we've included all that.

Right. Okay. Got it. Okay. Then the second question, in terms of your $3 billion excess capital that you've been mentioning and what will consider what you would do at the end of this year. Just wanted to understand, in terms of this $3 billion release or thinking about that, will any of these issues that you're happening to have what kind of hold you back from doing it? Or it's just as normal, think about year-end? And if you can -- you might look to bring that level down.

Melissa, it's hard -- it's mature to say what. We will look at it at year-end. Assuming that we don't wind up having more problems and disasters and challenges between now and the next 6 months. Because if we do, then we'll have to watch to see the regulators decide to impose more financial penalties. If we don't, then yes, we should be in a position to cut down our trajectory or our plans to return capital. But we need to wait and come to a view over the next 2 months.

Right. Okay. And then just lastly, in terms of your CRE, your peer actually looked at the valuation and had to do a little bit of a valuation update to sound credit cost for it. Just wanted to get your confidence in terms of your valuations and what your LTVs are on your CRE book?

We also -- we update our valuations quite regularly. And so we're quite confident. Our -- the nature of our portfolio is slightly different, right? So we don't have a lot of U.S.-based commercial real estate lending, including to real estate trusts, et cetera, in the U.S. with some other banks have done. We never went into that line of business. So we don't have that. And yes, we update our valuations quite regularly. I'm quite comfortable with what we have.

Okay. If I can just -- sorry, just quickly in terms of your SPE. In terms of the SPE, you break down new NPLs and then existing NPLs, SP. The new one, I suppose, was for the money laundering. I just wanted to understand the existing one. I know it's the same level as it is in first quarter, but up versus second quarter. Can you just share what drove the increase quarter-on-quarter?

It's actually not the impact. It's a few tens of million and there's a couple of cases out of China, we just thought we'd top up based on the negotiations with the clients.

Right. Right. And the China one, is there specific a sector it's related to?

No, there are only a couple of deals in there. A couple of -- sorry, it's a couple of the property-related smaller exposures we have.

Okay. Thanks, Melissa. The next question is from Harsh from JPMorgan.

A few questions. First question on tech. Is there any business impact in the sense, let's say, if there is a small merchant who is exclusively using DBS for payments and now they kind of -- they started looking at alternatives. As in -- yes, all the aspects apart, anything that you see can have any sort of impact on your deposit franchise kind of very low probability, but how are you thinking about that? And I have a couple more follow-ups.

I don't think so. So I don't -- we're not seeing any of it. I don't expect to see an impact on the deposit franchise, no.

Okay. On Hong Kong, probably a bit of a follow-up. Yes, lion's share of your exposure is to the blue chip names. But it's always the tail, which is a worry. So effectively, as in my understanding of what you're saying is there is no exposure at all to the mid- and small or higher risk landlord at all in your entire Hong Kong book?

No. I won't say no, but it's not material and the LTVs of that even on the updated collaterals are very low.

Okay. Even if there is a default, there is -- the loss given default is going to be minimal?

Correct.

Yes. Okay. What will be very useful to you, I know, that exposures are well covered. But on overall CRE exposure for the group, we have details from other 2 banks, it just makes it easier if we have just dedicated disclosure on CRE across various geographies. That will be very useful if you can consider that.

Okay. Can do. The total CRE exposure in Hong Kong is $19 billion. Of that, about $3 billion is for office, $3 billion is retail, which is mostly the big REIT and CRE opportunities, et cetera. And the balance, $13 million is more mixed use, which is a large-scale this thing. And again, all of the -- when I think about our mixed use project and divestment, these all the big guys, right? So [indiscernible], those kinds of people.

Right, right. Cool. And now moving on to NIM. Is there -- should we see that this as a peak NIM in either direction, interest rate goes up or down. If it goes up, you have some benefit on the deposit spread. But on the asset side, as you are seeing some competition, it kind of continues. If rates go down, you still have a degree of repricing. So like 2.15%, 2.20%, that they kind of become peak NIM for next few years. Is it fair to say that?

I think it depends on [ how we rate ]. If you look at the forecast, the rates are here of plus minus 25 basis points, I think big NIMS as peak there. 2.15% to 2.20%. If you go into the can, you see another 3, 4, 8 hikes because power decides, then, of course, we've seen an increase, right? So if you go back to I think our deposit beta is still in the 40s. And while there's some beginning of cycle, even on a quarter-on-quarter basis, our deposit betas are relatively low. And therefore, if you see an aggressive rate hikes, then we will see an increase. But assuming you don't see rate hikes from here, then yes, I think you should assume NIMs will peak at the 2.1%, 2.20% level.

Perfect. And that brings in to the last couple of bits on the mortgage competition. So last year, we saw significant deposit competition. This year, as we said, deposit EBITDA is low, no one needs to compete for FD because credit demand is low. But mortgage competition across all the 3 banks, and this is not the foreign bank, small guys. The big 3 guys are competing sub-3% kind of mortgages. How are you thinking about it? Because the logic given is to deploy excess capital, excess liquidity, it is still a core product. But it kind of can become a bit of a spiral down because if I can justify 3, which is 70, 80 bps below T-bills -- Sing dollar T-bills, I can justify 250 as well. How do you think about the RW that product? Is there any Basel IV angle to it? Like how do we think about the mortgage competition over the next 6, 12 months?

Well, in the first business, mortgage is a very attractive in terms product because RW on that tends to be very low. So since RW especially, this thing is very low, even with no NIMS, you actually can make a very decent return. But having said that, I also don't think we need to continue to keep pricing down. I don't think it's sensible. And therefore, we're also quite selective, right? So NIM in the third quarter is 3.29% and last 3 years, so we've been willing to let a little bit of share erode just to be thoughtful about the pricing.

Right. So that's exactly what I wanted to hear that. If you come and say that you're willing to lose market share, then there is a floor on the deposit -- on the mortgage pricing than everyone...

Look, we've actually led market share runoff in the third quarter.

Thanks, Harsh. Next question from Neel Sinha from CLSA.

Piyush, I think most of my NIM and related questions and the results have been answered. I had quick follow-up on your other assets. I'd like to know how Lakshmi Vilas is doing. And where -- now that it's been almost a year out of the lockdowns, you mentioned before during the lockdown period, it wasn't the right time to put the foot on the pedal because the economy is on. Most other sectors that I look at in India, they're doing really well. There's pricing power that's come back in a major way on a number of the sectors. So I'd like to get your thoughts on that and where you think it will be in terms of your overall portfolio, asset portfolio in about, let's say, 3 years or so. And also a bit of an update on SRCB. That was a very promising entity. I think it still is. But yes, China has gone in the other direction now, right?

Yes. So I think India has been consistent with that. The market has been [ well ] and now that we finally got [indiscernible] integration all done, we have a great platform, which is -- okay. So we're getting based on momentum -- so I think our India business is up in the 30% range through this year, our unsecured book, our secured book, the gold loan book, loan against property, we launched the corporate side, SMB book, everything is growing very robustly. So I feel actually quite good about the India platform. And I indicated earlier that we think over the next 3 or 4 years, we can effectively double, triple the size [indiscernible] data or the numbers [indiscernible] remember that numbers, but it's on track. And so this year, we're really beginning to see our performance. On the Shanghai Rural Commercial Bank likewise. If you look at the bank, I mean, the online investment thesis is playing out. It's center-centric. It's a consumer retail deposit funded to a large extent. It focuses on the SME and some of the new sectors. It's maintaining a healthy NPL. We are on the risk committee the bank. So we closely oversee the risk portfolio. So NPL ratios are 1.1 to 1.2. They are reasonable. The margins in the bank are still good. So the bank has continued do well and continue to throw up good dividend for us.

And CET1 ratio is high.

Yes. And the core equity ratio is high. So we're actually quite constructive on that bank. And like I said, while we've been trading water generally in China for the last couple of years, we have been [indiscernible] to grow the GBA franchise. There we found opportunities, and that's on track. We set up a multiyear program for GBA, like 4, 5-year program and it's on track. We are continuing to track to that dividend.

We have a follow-up question from Aakash.

Yes. Great. Just a question is on the AML-related exposures. You said it's around $100 million, and you've taken provisions for most of it already. Just want to check, is there a chance that this number can grow bigger? I mean this is $100 million out of the total $2.8 billion that has been talked about so far.

Yes. So we -- unless people find out new, we've done a complete search, it's not just the people which is [indiscernible] went and did a complete search, everybody has who might look similar, might have connection, might have vision. We pulled out everything. So it's actually a conservative number. So yes, there's nothing that I can see which might come out, but they might fit in another syncate or something and who knows? But right now this is it.

And then in terms of the provisions, like these are -- they seem to be very prudent, right, because these are property backed and if you manage to...

So we are verifying zero value to most of the properties.

So it is prudent because I don't know. My big worry is they're property backed with this thing, but if they decide to, for clue, take away all the properties because it came from these guys and who knows. Just basically on all that.

Okay. Got it. And then the second question I had was, so your guidance for trading income next year is also a double-digit growth, which is on top of this year, which was already quite a strong year. How does this align with your -- you're struck with this $1.1 billion income per year number in the past? How do we align these 2 things?

Tailing income, we've got to get the definition right. When I talk about -- $1.1 billion is what I call my software to page to try and elaborate how we think of the treasury and markets income. And it doesn't necessarily conform to trading and other income in the statement because it's a mix of both things, a mix of non-interest -- net interest income in the treasury book, plus the trading side of the treasury book. As you add both of those together, you get this not customer sales related, but pure warehousing and positioning related. And that is actually down. So if you're bigger -- to see that I thought we'd be able to do about $275 million a quarter, $1.1 billion for the year. Then in the last quarter, I guided down saying because of the high funding cost on that book, they're likely to be closer to $230 million. If you look at the third quarter, we even get anyone here there. So we were actually down at like $166 million or something for the third quarter. So the problem is that trading book is we're expecting it will improve, but I don't think it's going to go back to the $1.1 billion next year because the funding cost of the book is still very high. This quarter, we will be able to shrink a little bit on the book, and so that had a little bit. But when you're funding the book at these high -- extraordinary high rates, it's not that easy to make money on that book. Outside of that, the customer sales activity of that. So the [ C&M, ] the markets, products that we sell to our customers, that's growing by robustly at 12%, 13%. That will continue to grow quite nicely. And then the rest of the fee income obviously has nothing to do with that. They will continue to go in it.

So Aakash, just to be very clear, when we give guidance, it is -- like if you look at 9 months, Page 5 of my presentation deck, you show that 9 months treasury markets, the trading income is $612 million. This is the number that would be -- that would approximate to $200 million per quarter for 9 months this year. When we give guidance, whether it's $275 million per quarter, $250 million per quarter, we are talking about an aggregate number, which is in this line. So this is the best line to look at where you see treasury markets income. So the effort to try and split it up by lines of income, which we show you this time around as a new chart on Slide 10, it's very hard to forecast that $1.1 billion that you talk about for 9 months because of the accounting asymmetry that exists between NII and non-NII. And therefore, we actually encourage you to actually try and start modeling based on the commercial book income, which is stable, you see the treasury markets customer income in that line as well, quite distinct from the trading income component, which can be volatile.

Thanks, Aakash. The last follow-up is from Neel from CLSA.

Yes. Sorry, I think I got muted for the follow-up. On Lakshmi Vilas again. You mentioned like thinking about a threefold increase in the franchise. How much growth -- over the next few years, how much growth capital will that entail, I mean, beyond, of course, the current 6-month restriction?

No. So the only part of our markets outside, we have to put some capital in is actually in there. And we recon that over the next year, we will have to put in about $500, $600 million in [indiscernible] over 3 years. But when we mentioned the surplus that we have, we also factored that in what we need to put aside fund in India. I think you were muted again.

I think Benton is forced with muting me. I said $500 million, $600 million is not much.

Okay. Thank you. I think that's it for the call. We don't have any more questions.

All right. Thank you, everybody.

Thank you.