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

Two sets of questions. The first one is just touching on the China-related regulations again. So I understand you said that you don't share the net new money break by nationality, but I think DBS has said in the past that less than 1/3 of the net new money comes from Chinese clients. I was just wondering, without giving any specifics, can you say within this cohort, how much is main and domiciled clients as opposed to all the offshore Chinese clients. Just some rough idea of what portion is million domicile was not. And have you seen any change in the inflow of this clientele in the past 1 to 2 months? That would be the first question, and maybe I'll ask more after that.

[indiscernible], can I just take this question. As we have mentioned earlier on, we do not disclose the details of either nationality, not all domicile. Having said that, within our net new money, as we've guided and Su Shan has talked about, actually, our entire wealth franchise does have both an onshore element and an offshore element. So obviously, if we're talking about kind of our onshore treasures, onshore retail, emerging affluent kind of net new money, right? The net new money would all be onshore, right? Wherever we have an onshore presence, which are in our core markets, right? Now if we're talking about our offshore wealth franchise, which are predominantly booked in Singapore, Hong Kong, because Singapore, Hong Kong have been traditional international wealth centers like Switzerland, like London, like the U.S. themselves, right, where when we look at the wealth business, there's always kind of set numbers that the world looks at as international well flows into these international centers. Now what I'll say is that for these offshore wells, Actually, these offshore wells have been circulating within the offshore markets. So in case you're thinking, how much it flow from onshore to offshore, the fact of the matter is that in these offshore markets, the is we are winning market share from other banks from their offshore port. If that's what you're kind of getting to, right? So we are growing both onshore, onshore and offshore, offshore. And those are growing very strongly on multiple fronts.

Great. I think that's very helpful. Is it possible you share some relative size of the 2 businesses? So how much is the onshore China business versus offshore China business?

No, I'm afraid we do not go into that level of detail. But we do have, I would say, a very robust wealth franchise, as you have seen how we have been performing all this time, right?

Okay. And then on the insurance sales. So again, life savings insurance products, would you have any sense of how much of these sales are to mail and connected clients?

Sorry? On what?

[indiscernible] the bank or sales are to mainland connected clients? We don't break it down.

I mean, again, yes, we don't break it down, but again, suffice to say within each of those markets in which we operate in, there is an insurance offering onshore, right? So whether it is in Singapore, in Hong Kong, in Taiwan, in India, in Indonesia and in China, there are regulated insurance partners that we work with to offer these solutions. And these are all kind of advised distributed booked onshore, right? And then, of course, in our wealth centers offshore, Likewise, there are insurance solutions, a fair amount of debt also for legacy planning which is not uncommon.

So that's a difference between a DBS and a global bank, right? We are in the 6 core markets in Asia. So we are onshore. And we have onshore partners, and we have branches, we have wealth centers. And we have our apps [indiscernible]. We are the onshore bank and in the in offshore solutions, we're there for them, too.

Right. But can I understand that, and I think I appreciate the comment that you made earlier that if well stays onshore, DBS also has a strong onshore presence to participate into that wealth as opposed to just offshore. But I just wonder, is the nature of the business very different onshore versus offshore. Onshore, I mean, you all know in the Bell management business a lot more competitive, margins would be a lot more tenor. And this would -- if onshore wealth were to stay onshore in the future, the wealth management business for DBS would look very different from what it does today. But that will be a...

I wouldn't say so, Aakash, because actually, this has always been the way wealth management has functioned, right? So the difference will be that in many of these onshore markets with the exception of, let's say, Hong Kong, Singapore being international centers that in themselves, right? So the so-called onshore clients in Hong Kong and Singapore already have the ability to access full holistic suite of products and solutions that are international, right? You go to certain other markets the kind of products and solutions might be or the onshore solutions in some of the markets might be somewhat lesser, somewhat lesser because they are subject to whatever is available onshore, right? But for -- as I've mentioned earlier on, that is still sufficient for us to tap into the onshore wealth opportunities, and we have seen that growing actually across all our onshore [indiscernible] franchise, right? But within the offshore ones, as it's always operated, would it be very different. I mean if you look at what the market says, right, between Singapore, Hong Kong, international wealth itself is today already $5 trillion, right, of AUM, growing at the fastest pace, even faster than Switzerland. And by 2030, this $5 trillion will be about $7.9 trillion. So the offshore, offshore proposition has always been there continues to grow. The onshore, onshore has always been there and it's also growing in our core markets. Asia is generating a lot of wealth and Asia is attracting a lot of wealth coming in.

So Aakash, I think it will grow, right? And we're ready for that growth. I think we got products like the mutually recognized -- mutually recognized fund product, which is MRF. We've got funding SIPs. We have DBS Securities onshore. We are active in onshore insurance policies. So I think you need to build both, right, to be a holistic wealth offer in Asia, you need to build both, and that's exactly what we've been doing. So that gives us a diversified client mix. So if one channel goes down, the other goes up, right? That gives us a diversified client mix. And I think a brand name like DBS in China has a good chance of success because we were not involved in any of the trust products where customers lost a lot of money. We've stayed away from selling CDOs and CDS, et cetera, we've been pretty holistic in our wealth offerings onshore. And we've gotten a good reputation for being a safe bank and a smart bank and a digital bank. So I think we have upside onshore, which is why [ Zuken ] and his team are building wealth centers in China. And if -- and the money stays onshore, there's no property to buy not buying properties, then they will be looking for wealth solutions. So I see upside bank, and we're building for it.

Clearly, we're doing it, not just in China, all right? These wealth centers I've clearly hold the market, right, that we are building 18 additional wealth centers and upgrading another 36 existing ones. Now these are actually across all our core markets, right? So in Singapore, even in Singapore. So Singapore, Hong Kong, Taiwan, China, Indonesia, India, we are kind of doing that, right? So we are hiring, we are putting technology that enable them. And we are also adding new as well as upgrading existing wealth centers.

Got it. I think that's very helpful. I just have one related question. So Su Shan, I think with all this complexity and uncertainty in the Hong Kong, China, corridor. I mean, DBS does look very well positioned. Are you starting to see any net new money benefits because of all these challenging headwinds in the North?

Net new money benefits for what?

For the DBS Wealth Management business because the whole Hong Kong China corridor is so complex now. Is DBS net beneficiary of all that? Like instead of money going to standard [ HSBC ] in Hong Kong is coming to DBS simply put.

I think suffice to say, I don't think I will look at it from just this single ends, right? But I'll look at it really from a much broader lens, which is the reason we are quietly confident about the wealth opportunity, which is the fact that, number one, there's a lot of wells being created in Asia. Number two, we are also seeing interestingly a lot of interest in Asia even from customers outside of Asia, right, namely from European countries, from the Middle East, et cetera. And that goes to what I mentioned earlier on that the $5 trillion looks like it's going to grow to $7.9 trillion, right? And this is about international wealth. Over and above the domestic or should I say, Asian wealth that's being created. So I look at it from that lens. And the way we get DBS. I think DBS benefits from the fact that -- we are an Asian headquartered Asian headquartered bank and the headquarter is in Singapore, where we are known to exercise the rule of law, stability, et cetera, et cetera, et cetera. And that's -- I guess that's the reason why we have been named by Euro [indiscernible], right, as the best private bank in the world and safest private bank and on top of the other [indiscernible] we have won from Global Finance and Euromoney over the years as a bank at large. So I do think we benefit from that. We have also kind of won best innovation bank, et cetera. So I think it's a sum total of many of these factors where any macro trends, I would say whether it is some of these that you talk about or the or the geopolitics instability in the world, et cetera. We tend to see DBS benefit because of also the Singapore brand.

And also, I think the differentiator for DPS is the One Bank Solution. So our corporate bankers are very much part of the business growth, the supply chain diversification the connectivity opportunities in South, Southeast Asia, et cetera. So being there to connect that business growth means that you then have a front seat or early start in the Wealth Management as well. So our team worked together, they hunt impacts. And so if we're helping corporate clients grow in Southeast Asia, South Asia, or elsewhere, that's always opportunities offshore as well.

Okay. I think we have to move on. So next question from Jayden from Macquarie.

Just on the capital management side. I think, obviously, the business is in great shape, and you've increased the guidance. Now the $0.15 special capital return dividends, if I understood correctly, they'll sort of come through this year and then next year. Any thoughts on being able to sustain it longer or even think about a revised sort of dividend path because it does sound like the outlook for the business is actually very strong. We'll be keen for your thoughts on this.

Thank you very much, Jayden. So if you look at the capital return dividend, we set it up because we wanted to return excess dividend. And by definition, the excess dividend should be a finite amount. So I think we'll continue to calibrate. But I would say that we do not sort of intend to sort of keep it as a continual feature of our capital management.

Okay. And if I may ask a follow-up question, Sok Hui, I think there is a buyback obviously. Can you sort of remind us how much is remaining of the funds that were set aside for the buyback? And I guess, what the current sort of expiry dates for that would be?

Yes. So we set up to sort of do a $3 billion share buyback. And to date, we've done $0.4 billion. So there's $2.6 billion that's unutilized, and the time frame is end of 2027, as we originally communicated. And we think that at this kind of price to book it's a bit challenging to go and do share buyback. We have better deployment of the capital. And so we are thinking and is subject to board discussion, board approval, and we still have 1.5 years to go before we make the decision. But it is possible that we may, if -- we don't sort of utilize the $2.6 billion were converted into a capital return dividend as well because those are all excess dividend that we had calibrated to be paid out but it's not back to further discussions at the board level.

Next question from Sukriti from Bank of America.

Can you hear me?

Yes.

Just one follow-up on Wealth Management and one quick question on loan growth. On wealth management, of course, we've had many standout years now. Looking ahead, when we think about growth. You mentioned the -- over the next few years, we could continue to see net new money at [ $40 billion ] plus. But overall, on the fee side, how are you seeing trends there is competition or will that fee momentum also continue to support the wealth expansion? Or do you think at some point that fee momentum kind of stays where details a little bit. And most of the growth will be supported from here from the offshore booking centers? Or is it more broad-based across offshore and onshore?

Okay. We'll take it and then I'll consolate the loan growth side, [indiscernible], we'll take that, and then Sok Hui could amplify find my answers. So fee growth is a function of a few things, right? Number one, it's a function of the market. The good thing is global markets don't tend to move together. Sometimes U.S. goes up, Asia goes down, Asia goes up U.S. goes down. [indiscernible] go down, some of the stocks go up, right? Gold goes up, whatever. So the good news is the fee income is cyclical. This market dependent, but it is if you are not just geared to a single stop or single country or single product, if you have a diversified offering, you should -- you will have some volatility, but you should still have growth. Then the second component of fee income is obviously a number of customers, right, and net new money. If you continue to grow that, you should continue to grow your fee income in line with your new clients and your new net money net new money. The third component is new to product, right? So sometimes, clients start with one product and they buy another one or they invest another one, et cetera. So the velocity of that sort of inclination to new products also helps. Then the fourth component is AI, right? Because your productivity is as good as your tools and your people and your ideation. And can AI help all 3? Yes. AI can help on ideation. AI can help you not your customers. AI can help you inform your RMs and your investment [indiscernible], AI can help you fulfill trades. And so if you use AI smartly along the customer wealth journey, you can also use AI [indiscernible] your fee income. So these 4 things taken together should mean that if you have a holistic grounding for your wealth clients and you are able to give them ideas. You can asset we allocate, you got to shift with the markets. You help them make money and you keep them safe when the chips are down. and you keep them diversified and you keep the portfolios healthy, you will gain market share. And that's what we intend to do. We intend to gain market share, right? Sok Hui and the team have a lot of ambition to gain market share. The good news is as for at the level we are. The gap between us and #1 and 2 is still very big. And those growth is still matter. So we still have a lot of white space that we need to cover, and the team is working very hard to cover that white space growth. Sok Hui, do you want to amplify that?

Yes. Yes, thank you, Su Shan. I think on the fee side, right? To Su Shan's point, a lot of that also has to do with diversification of the various investments, insurance solutions. So suffice to say that we have today already put on a pretty comprehensive suite, right, our products and services. So whichever way the market goes, I do think that we have sufficient solutions, and we have seen how customers rotate in and out as well. At the same time, likewise, the way we are building out these fees, right, also has an element which will be kind of recurring. There are also those that I would say are episodic or some that are not necessarily episodic, but it's still the ongoing distribution kind of fees. So there are multiple levers or should I say multiple kind of drivers that contribute to this fee income. So I do think that is something we can continue to sustain with volumes as well. Then what is onshore, offshore, I would say, yes, actually both, right? As I alluded to earlier on, we do have a full suite of onshore products and services, likewise, the offshore ones. So I don't see anything imminent, right, that is going to suggest a different kind of trajectory in that sense.

Understood. Sir, just one quick follow-up on the Wealth side. On the offshore booking centers -- sorry, onshore booking centers, you mentioned the 6 key markets where you are expanding the number and growing it to 18. But are there any new markets that you may be looking at as well within Asia, we do have markets like Korea where is also growing. I know you did a partnership with Samsung there recently. But is there any thought process to expand to more pockets?

Okay? So there is no plan to open up in new markets per se, right? Like what we have in our core markets now, right, the 6 core markets plus what we have in Thailand, right, which is secure this business. So it's a 6 plus 1. No immediate thought about any of that kind of onshore, onshore expansion. When I mentioned earlier on the wealth centers, right? These are all wealth centers within these markets. So 18 new ones that we're adding, as I've mentioned, even in our own home base in Singapore, we're going to add some. And then we have some existing ones, 36 of them, which we will upgrade right as well. So that's what we're trying to do, right? But no new entry market in that sense, right?

So last question from Wai-Fai from HSBC. Wai-Fai? We can hear Wai-Fai. You want to drop me an e-mail or text Wai-Fai. Maybe in the meantime, I think there's one follow-up question from Yong Hong.

Yong Hong are you there?

Can you hear me?

Yes.

Maybe just a follow-up on loans. That was very strong. Could we get some color on the key drivers, how sustainable that is? And also some thoughts on how your risk management about these loans, especially around the [indiscernible] just in case, basically in the next few years, the spending from the digital sectors normalized in the years to come.

Yong Hong, thanks for the question. As you saw in the second quarter for our non-trade loans is very strong. And if you unpeel that essentially [ 4 billion ] is what we would normally do based on the underlying security that we see from our clients, the penetration. And then there is the opportunistic growth that we saw in the second quarter of about $6 billion. Half of that comes from the [indiscernible] complete acquisition, which we did to bridge financing for them. And then there is also the opportunity that we saw from the whole [ GRS ] financing on real estate in Singapore, but it's a fair number of loans generated there. On the side, it's actually a lot of what we call short-term financing. It's the short-term loans taken up by the customers in Taiwan. And then there's a little bit of DC financing and Singapore and a small project in the U. S. In terms of what we do on data center, the number is not large. We're involved in a lot of underwriting and then we typically sell down a huge change, and that's where we made the fees out of it. And so all of our data center financing are very well structured. Yes, triple net leases for those in the U.S. with no preterm. And so the color parties are very strong on the underlying on the take up. And so not too much concern around that. So overall, the momentum goes with what we see in the general macro which is some of it in AI, some of it in ERI, real estate, primarily in Singapore. And then we were also supporting our clients and other acquisitions that we do in the aircraft leasing industry.

Yes. Then on the sustainability part, should we be expecting this kind of growth run rate for the rest of the year and maybe even into next year, just based on the pipeline?

Yes. I think the underlying growth momentum, we are looking for somewhere between [ 5% ] every quarter and the steady state that we're aiming for. The repayments that we can't predict. And so when you look at repayment itself, there will be repayment from customers where they saw some of the higher loan rates that they get. And as a result of that, some repayments could be vary. We do have some line of sight for some that has already come in. And so the growth itself will be essentially be dependent on the rate of repayment because the [indiscernible] and then the acquisition one, they come and come and we will [indiscernible].

[indiscernible] just 2 questions. One is to comment on the wealth management momentum in July. And the other is how to think about potential GP [indiscernible].

Our momentum was okay in July, right? It was quite well spread. [indiscernible] is okay, still up on the year. We shouldn't give the numbers yet enough, but it was pretty decent across the board.

Yes, yes. I think it's a fairly -- yes, I'll say fairly Yes, robust within the expectations.

On GP?

I think you asked a write back. I think we sort of continue to stress test our portfolio. I think the macro environment is quite uncertain. And I think we have always taken a prudent approach to anticipate what might be needed. So you heard that we have taken sort of general provisions ahead of Hong Kong real estate and then they will all pay back, and so we released some general provision. So that tells you that we have always taken a more prudent approach. And therefore, we'll continue to stress test and depending on external environment, which continues to be very unpredictable that will guide us on a decision of what GPs we can release.

Okay. I think that's it for the call. We've come to the end. So thank you, everyone, for joining. We will speak to you again next quarter.

Thank you. Thank you, everyone.