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Edna Koh: Okay. Good morning, everybody, and a very warm welcome to DBS' Second Quarter 2026 Financial Results Briefing. This morning, we announced second quarter net profit rose 9% to a record $3.08 billion as quarterly total income crossed $6 billion for the first time. With us, we have our CEO, Tan Su Shan; and our CFO, Chng Sok Hui to tell us more. So without further ado, Sok Hui, please.
Sok Hui Chng: Good morning, everyone. So we delivered a record performance in the second quarter. Net profit rose 9% from a year ago to reach a new high of $3.08 billion while return on equity was 17.9% and return on tangible equity was 19.6%. Total income grew 6% and crossed $6 billion for the first time. The increase was driven by higher noninterest income, underpinned by the structural growth of our customer franchise. In particular, robust wealth management momentum was maintained. Fee income was near record levels and treasury customer sales reached a new high. We also mitigated significant interest rate headwinds with balance sheet growth and proactive hedging. Meanwhile, markets trading income strengthened as we benefited from lower funding costs and capitalized on volatile markets. For the first half, net profit rose 5% to a record $6.01 billion. Total income increased 3% to a new high as record fee income and treasury customer sales more than offset lower net interest income. Asset quality was resilient. Total non-performing assets were little changed from the previous quarter, as new NPA formation was offset by repayments and write-offs. The NPL ratio was stable at 1.0%, while specific allowances remained below the through the cycle average at 16 basis points of loans for the second quarter and 15 basis points for the first half. Allowance coverage was 130% and 196% after considering collateral. Capital remained strong. The CET1 ratio was 16.6% on a transitional basis and 14.6% on a fully phased-in basis. The board declared a total dividend of $0.81 per share for the second quarter, comprising a $0.66 ordinary dividend and a $0.15 capital return dividend. Next slide. Second quarter year-on-year performance. For the second quarter, net profit rose 9% from a year ago to a record $3.08 billion. Group net interest income declined 2% to $3.58 billion as strong loan and deposit growth, together with proactive hedging, mitigated the impact of lower interest rates. Fee income rose 25%, or $293 million to $1.46 billion, led by wealth management. Commercial book other non-interest income grew 30%, or $159 million to a new high of $681 million, driven by record treasury customer sales. Markets trading income strengthened 12%, or $51 million to $469 million, benefiting from volatile markets and lower funding costs. Expenses increased 3%, or $77 million, to $2.35 billion from higher staff costs. The cost-to-income ratio was 39%. Profit before allowances rose 8% to a record $3.75 billion. Total allowances fell 15%, or $20 million to $113 million. Specific allowances were $188 million, or 16 basis points of loans, remaining below the historical cycle average. Next slide. Second quarter on-quarter performance. Compared to the previous quarter, net profit was up 5%. Group net interest income rose 2% as balance sheet growth more than offset a 2 basis point decline in net interest margin. Fee income eased 1% from the previous record quarter. Commercial book other non-interest income grew 13%, or $79 million, from a higher treasury customer sales. Markets trading income increased 21%, or $80 million, driven by equity derivatives. Expenses rose 2%, or $49 million, led by higher staff and revenue related costs. Total allowances declined 41%, or $77 million, as general allowances were written back. The general allowance write-back this quarter was mainly due to the repayment of nearly $1 billion in weaker credit exposures, as well as a shift away from higher risk consumer segments. Half year performance. For the first half, net profit rose 5% to a new high of $6.01 billion. Total income grew 3% to a record $12.0 billion. Group net interest income declined 3% to $7.08 billion as hedging and balance sheet growth cushioned the impact of lower interest rates. Fee income rose 20%, or $500 million to $2.94 billion, led by record wealth management fees. Transaction services fees also reached a new high. Commercial book, other non-interest income grew 20%, or $213 million to $1.28 billion, driven by higher treasury customer sales to both wealth management and corporate customers. Customers trading income increased 10%, or $77 million to $858 million. Expenses rose 4%, or $165 million to $4.65 billion, led by higher staff cost. Profit before allowances grew 3% to a record $7.39 billion. Total allowances fell 34%, or $155 million, mainly due to the prudent general allowance overlay built a year ago. Specific allowances remain below the true cycle averages. Next slide, net interest income. Compared to the previous quarter, group net interest income rose 2% to $3.58 billion. Group net interest income declined 2 basis points to 1.87% as interest rates were broadly stable during the quarter. The impact was more than offset by balance sheet growth. Compared to the previous year, group net interest income was 2%, or $67 million lower. The average interest rates at the bottom of the slide highlight the extent of the rate decline over the past year. In particular, Singapore interest rates represented by SORA fell about 100 basis points year-on-year, almost halving from a year ago. Our proactive hedging strategy, as well as strong deposit and loan growth, helped mitigate a significant part of the rate headwinds. Our markets trading business also benefited from lower funding costs. Deposits. During the quarter, total deposits grew 1% or $7 billion in constant currency terms to SGD 638 billion. CASA inflows rose SGD 5 billion, led by retail inflows, while fixed deposits increased SGD 4 billion from institutional banking customers. These flows were partly offset by a SGD 2 billion decline in foreign currency CASA as customers deployed more funds into investments. For the first half, deposits rose 4% or SGD 26 billion, with growth across both CASA and fixed deposits. Liquidity remained healthy. The group's liquidity coverage ratio was 142% and net stable funding ratio was 113%, both comfortably above regulatory requirements. Loans. During the quarter, gross loans reached $475 billion as growth accelerated to 3% or $15 billion in constant currency terms. The increase was led by non-trade corporate loans as underlying demand remained healthy and was supplemented by higher deal activity. For the first half, gross loans grew 5% or $24 billion, led by non-trade corporate lending. Fee income. Gross fee income for the second quarter rose 22% from a year ago to $1.70 billion. The growth was led by wealth management fees, which increased 42% to a record from higher customer investment activity and growth in AUM. Transaction service fees and investment banking fees were also higher. Compared to the previous quarter's record, gross fee income was little changed. For the first half, gross fee income rose 18% to a record $3.41 billion, led by new highs in wealth management and transaction service fees. Investment banking and card fees also increased. Customer driven non-interest income. Customer driven non-interest income comprises fee income and treasury customer sales, which are reported as separate P&L lines due to accounting treatment, but are both driven by customer demand for financial solutions and should be viewed together. For the second quarter, customer driven non-interest income rose 27% from a year ago to $2.14 billion. The growth was led by wealth management, which drove a 25% in net fee income to $1.46 billion and a 33% rise in treasury customer sales to $678 million. Institutional banking also recorded double-digit growth amid strong demand for financial solutions from financial institutions and institutional investors. For the first half, customer driven non-interest income rose 20% to $4.21 billion, driven by new highs in both net fee income and treasury customer sales. Overall, the record performance of our customer driven non-interest income reflects the structural growth of our customer franchise in both wealth and institutional clients segments. The wealth segment. The wealth segment, comprising treasures, private client, and private bank, has been a key growth driver. For the second quarter, total income grew 26% year-on-year to a record $1.71 billion, led by a 49% increase in non-interest income amid higher customer investment activity. Wealth AUM reached a record $516 billion, up 17% year-on-year and 5% quarter-on-quarter, while net new money remained robust at $11 billion for the quarter. For the first half, wealth segment total income rose 16% to a record $3.30 billion as non-interest income increased 33%. Expenses. Expenses were tightly managed with second quarter expenses only rising 3% from a year ago to $2.35 billion. The cost-to-income ratio improved to 39%. Compared to the previous quarter, expenses were up 2%. For the first half, expenses were well managed and rose 4% to $4.65 billion. Next slide, Hong Kong. Hong Kong's first half net profit rose 23% in constant currency terms from a year ago to a record $1.03 billion. Total income increased 14% to a new high of $1.95 billion. Net interest income rose 16% to $1.13 billion, driven by strong deposit growth of 9% and a 15 basis points expansion in net interest margin. Fee income grew 32% to $641 million, led by wealth management. Commercial book/other non-interest income increased 12% or $13 million to $168 million, driven by higher treasury customer sales. Markets trading income declined $15 million to $48 million. Expenses rose 4% to $641 million, while cost-to-income ratio improved to 33%. Total allowances fell $22 million to $84 million. Non-performing assets. Asset quality remained resilient. Non-performing assets were little changed from the previous quarter at $4.76 billion as new NPA formation remained low and was largely offset by repayments and write-offs. The NPA's ratio was stable at 1.0%. Specific allowances. Second quarter specific allowances amounted to $188 million or 16 basis points of loans, remaining below the historical cycle average. For the first half, specific allowances were $345 million, or 15 basis points of loans. General allowances. General allowances of $42 million were written back for the first half due to repayments of weaker credits and lower exposure to higher risk consumer segments. As of end June, total allowance reserves stood at $6.20 billion, comprising $2.38 billion in specific allowance reserves and $3.81 billion in general allowance reserves. The general provisions overlay was stable at $2.4 billion. Allowance coverage was 130% and 196% after considering collateral. Capital. The reported CET1 ratio declined 0.3 percentage points from the previous quarter to 16.6%. The movement was driven by capital return initiatives and an increase in risk-weighted assets. The pro forma ratio on a fully phased-in basis decreased 2.2 percentage points to 14.6%. The leverage ratio was 5.8%, well above the regulatory minimum of 3%. Dividends. The board declared a total dividend of $0.81 per share for the second quarter, comprising an ordinary dividend of $0.66 and a capital return dividend of $0.15. Based on yesterday's closing share price and assuming that total dividends are held at $0.81 per quarter, the annualized dividend yield is 4.4%. In summary, we delivered a strong set of results for the first half, with total income and net profit reaching new highs. The results were anchored by continued momentum in wealth management, where fees reached a new high and wealth segment AUM crossed the $0.5 trillion mark. The strong performance reflects our ability to capture structural growth in wealth management and institutional flows, our proactive balance sheet management, as well as robust trading performance. While the macro environment continues to evolve, our strong balance sheet, sound asset quality, prudent allowance reserves, and healthy capital position provide a solid foundation for continued growth and sustainable shareholder returns. I'll now hand you over to Su Shan.
Tan Shan: Thank you, Sok Hui. You heard a lot of records from Sok Hui's presentation. I think what pleased me most was the fact that we had record fees across the franchise, and it wasn't just any particular franchise. It was really a solid quarter across all the franchises, which suggests that our teams are really building new to bank customers, new to product customers, and they're really deepening and strengthening our franchise and our client relationships across the board, across segments, across countries. Whether it was record top line, record bottom line, record fees, the team is firing on all cylinders and building a strong foundation for future growth. We also talked about the wealth AUM. Most of you would have heard Tse Koon's presentation around his vision to get to $1 trillion. And we are really building what we call the wealth continuum and the wealth connectivity. In 2016, I told my colleagues that I believe in the 4 Ds of wealth management. What were the 4 Ds then? One was digitalization. That's when wealth was beginning to get digital. One was data, that you really have to build good data to get closer to the clients, to give them the right advice and nudges. The other D was actually democratization. We believed in the democratization of wealth very early on already. And also the last D is domestification. That means you don't just do offshore, you do onshore. You have to look after your clients both offshore and onshore. And so that's why we are deeply entrenched in our 6 core markets, and we are deeply entrenched in building the wealth both offshore and onshore as well. And we are also focusing on building the continuum and the connectivity. Wealth management fees are up 42% year-on-year. That was very pleasing, and the AUM growth was also very decent at 17%. We're seeing consistency there, and the teams are working very hard to continue to grow that. Even IBG. IBG, our corporate bank, saw double-digit growth in non-interest income. And that also speaks to the strength of the franchise. We had very good non-trade loans in Q2 as well. Some of it is timing. You can't synchronize perfectly, so sometimes people repay, sometimes they don't repay. They might repay more in a quarter. They might repay less in a quarter. We had some good repayments in Q2 too, from Hong Kong. Some of the weaker real estate credits, they actually sold and then they repaid, so that was actually quite good. There might be some repayments in Q3, to be honest, but we had some big deals that were put through in Q2, driven by M&A, driven by real estate, driven by energy and renewables, driven by TMT. Quite a solid growth in IBG franchise income. Also the first half transaction service fee was at a record, and that's up 10% year on year, which suggests that the work we've done around digitalization of our corporate clients' servicing journey, payments journey, the snowballing effect of a high velocity of churn is coming through, right? The high velocity of transactions is coming through. Also quite pleasing, I thought the first half, we don't actually talk about this at all, so this is the first time, but institutional equity sales. We're seeing good growth in institutional equities. We're seeing good growth in equity structured products across the franchise, and that tells us something. It tells us that Asia, the Asian capital markets, has structural growth. It really does. Wealth management, institutional asset management, is really growing at a strong pace. That's a structural tailwind I want to talk about in my next slide. Therefore, markets, our GFM team had the highest markets trading income in the first half. We'll see if that continues, but obviously, with the volatility will come opportunities as well. With the volatility, frankly, in the first half, our corporate treasury has been able to take those opportunities and hedge our balance sheet and be a lot more nimble, and that's also been to our advantage. We will continue to do that when we see these volatilities going forward. Also quite pleasing is I felt that our teams really were pioneering a few firsts in the first half. We were the first Singapore-headquartered bank to complete our synthetic securitization, the SRT transaction. That opens the door for us to recycle our capital and recycle our assets. We're the first to tokenize physical gold, and that's seeing quite a lot of interest both in retail and institutional clients and sovereign wealth funds. We were the first Singapore bank to be appointed RMB clearing bank. Again, we are seeing strong growth in RMB as a use for trade settlements and transactions. Next slide. I want to unpeel some of the structural growth engines that we're seeing in our markets. The first, as I said, is wealth management. There's been a lot of figures being thrown around on how private wealth in Asia is projected. People like BCG are saying $99 trillion by 2029, et cetera. You're seeing very big high numbers being bandied, but the truth is, there is wealth creation, right? Taiwan, with the GDP growth at 13-over %, with the TMT sector and the hardware sector growing, you are seeing real structural growth there. We've been laying the foundation to build a strong wealth franchise. We are also seeing very good structural growth across the board. But also in particular, I want to talk about 2 countries where I think it's interesting, and that's Taiwan and India. Taiwan I talked about. It's TMT led. It's the whole Nvidia infrastructure. It's the supply chain across the semiconductor and data center ecosystem. It's also affected the stock market. Taiwan stock market's now over $5 trillion. That's #5 in the world. It's really grown. If you look at the top 6 markets in the world, actually, quite a few of them are in our backyard. Hong Kong, China, Taiwan, India, et cetera. Very good potential for us to keep growing on that. The second is India. India, in spite of some of the short-term cyclical setbacks, actually still very strong middle income, middle class growth, still strong GDP growth at 7.8%. I'm actually constructive on India being able to pivot to a manufacturing sector, the Make in India, the PLI, which is production-linked incentives. I think that's working. I see opportunities there. I see opportunities in renewable growth and in AI infrastructure growth. Even in wealth, the FCNR window reopened, as you saw earlier this year. It reopened, I think, last month. We are seeing quite good flows as well. India and Taiwan, I wanted to surface as structural growth opportunities in our core markets. Whilst, of course, Hong Kong and Singapore continue to be the 2 key big financial hubs that we operate out of. Capital markets, as I said, 5 out of 6 world's largest equity markets are in Asia. Trading volume in Asia has gone up a lot. You also have potentially the 23-hour for U.S. now opening in Asian time as well. We'll see a lot of volume and capital flows. What we want to do is have the full suite of offering, and as we entrench our wealth continuum, the new opportunity is not just the B2C wealth opportunity, it's also the B2B wealth opportunity, as more and more players want to come in and do more. We are actually ready to service them from an institutional perspective. That's also covered by our FIG II team. It's also B2B as well as B2C. In IBG, there are a few good structural growth. I talked about TMT and FIG. There's also trade. Whilst trade outside the U.S., and DBS coined a term, TOTUS, on the second of April, when Liberation Day happened. We measured this. TOTUS, which is trade outside the U.S., has gone from 89% last April to 92%. What does that suggest? That suggests that trade outside the U.S. is growing, and particularly trade in the Asian, intra-Asian regional trade is growing. If you look at China, India, for example, China exports to India has grown from $67 billion to $136 billion. That's in the last 5 years, and that's a doubling Taiwan also to India has grown by 3, 3.5x. So you see some structural growth trends in some of these trade corridors. That's our game to win. That's really playing in our backyard. In trade, we've been facilitating both what [indiscernible] calls the intentional supply chain moves, where people have to diversify their upstream supply chains, but also facilitating inventory financing, receivable financing, especially in the high growth TMT sector right now. Payments, whether it's programmable tokenized deposits, whether it's just fiat, et cetera, that's also growing, and it's more and more demand for digital solutions. Our FIC franchise spans across 15 countries, deep markets. We're seeing a lot of opportunities here to grow both our sovereign wealth fund coverage, our banks, insurance, fintechs, et cetera. AI and tokenization. To AI, what we need to do is to really harness AI smartly. What we've done as a bank is we've built on the strong foundation that we've had in the past and continue to leverage what we have. What are our moats? Our moats are customer data, customer trust, and the culture of innovation. Here what we're doing is we have a project to make sure that we have both structured and unstructured data in a complete end-to-end ownership, accountability, usable platform, safe platform. Here we're also coming up with personal agents, team agents, and enterprise agents to help both our own staff and our customers to do better. An end-to-end AI infrastructure and ecosystem, end-to-end data ownership and accountability and clarity and security. Also starting from every single employee being retrained, trained, reskilled, upskilled. All that's very hard work, but I think we're working on a foundation of already a very innovation-led team. Just moving forward and staying ahead and being humble and hungry and learning. AI and tech is a big differentiator. We want to continue to harness that. Slide. What is our 2026 outlook? As I said, we were coming on terra firma. We built a firm foundation, whether it's a fortress balance sheet, whether it's sound asset quality, whether it's healthy reserves, good data, strong people leadership, and also resilient technology and operations. We're looking to do better, hopefully. Our total income should exceed last year's figures, in spite of rates having gone down by as much as it has, especially in Singapore. Singapore rates have gone down a lot. We expect rates to remain at current levels, that means we're not expecting a rate hike this year. The market has been expecting a rate hike, and we will trade when we see those opportunities. As a bank, we're not expecting any rate hikes, and we're expecting SORA to stay. U.S., sorry. Yes, we're not expecting any U.S. rate hikes this year as a bank, but we will trade around what the market expects. SORA, we expect SORA to stay around the 1.2 or so for the average of the rest of the year. For the first half group, NI was down 3%, but we think we can narrow the gap for the full year as rates bottom out. Deposit growth should be in the high single digit. We had a very good first quarter, as you know. Second quarter was a bit slower because actually people were redeploying their deposits to invest. We will hope to crank it up as well in the second half. Growth, loan growth, we'll see. Far the structural growth trends are there in some of the industries that we work in, we should be able to see some healthy loan growth as well. We'll continue to capture whatever volatility the market gives us to hedge our book. We raised our commercial book non-interest income growth to mid-teens because wealth management is really firing on all cylinders, and we hope to continue. The markets will go up and down. When the markets go down, it will slow down. When the markets go up, it will pick up. The key is you need to have a diversified client base. You need to have a continued growth client base. You need to continue to grow your net new money, and you need to have the continuum and the connectivity. That's key. You take the ups and downs when the market goes up or down. Also important to maintain our cost discipline. We want to keep our cost-to-income ratio in the low 40s. So far, we've been around 39, 40. We want to keep that discipline. Again, keeping our strong asset quality, sound asset quality discipline. Assume SP within the range that we have guided of 17 to 20 basis points. We have a lot of GP buffer at $2.4 billion, as Sok Hui talked about. That's all for my CEO presentation.
Edna Koh: We're happy to take questions now. [Operator Instructions] First question, please. Rthvika?
Rthvika Suvarna: Hi. I'm Rthvika Suvarna. I'm with Bloomberg News. I have a couple questions for the CEO today. Some of them are AI focused. DBS put their AI economic value target for 2026, if you could share? I know that you were aiming towards around $1 billion, saying last year. I think you've said in public too that it would be harder to isolate that number as AI embeds into workflows. I'm curious to know what your outlook is for this year.
Tan Shan: It is hard to measure with both, because you have deterministic classic AI, as I call it, which is the AI ML models which is where we've come up with that $1 billion. That should continue to grow, and it is growing. You have the generative AI which really saves productivity time. You have the agentic AI, which is when the AI starts to actually help with transactions as well. On the generative side, what it does is it helps productivity and it helps save time, effort, which in the end saves you money. The time and effort that you save, you can redeploy into growth, right? There's some element of double counting there if you want to count, so it's quite hard to count. We've decided, at least for generative AI, the mile wide, inch deep stuff. Everyone can benefit from that. If everyone can do more in shorter space of time, great. We're asking people, use that time that you save to do more, to learn more, to go up the curve, to go to a higher order job. We believe that humans can be enhanced by great AI to become super humans, right? To measure that is quite hard because everyone will react differently. Everyone will increase productivity differently. Depends on attitude, aptitude, business cycles, et cetera. It's quite hard to isolate. We're going to try, but I can't give you a figure because it's really hard. You have that generative productivity saves, efficiency saves, but also better quality output part. You have the agentic part, which is very new, right? The agentic part, as I said, we have personal agents, we have team agents, we have enterprise agents. In the enterprise agent side, we have actually 12 big journeys that we're focusing on, and we're going to try and start measuring those 12 big journeys. We've just started the journeys, so you need to give us time. The baseline of the classic AI, we're going to have to beat last year, of course. There's the additional 2 layers where we're going to try and figure it out. It's going to be very hard to give you a figure, but you will probably see it in our fee income line. You're already seeing it in our fee income line. You'll probably see it in our cost income ratio. You're already seeing it in our cost income ratio, right? You'll see it in our productivity, and you're already seeing it in our productivity. Roles will change, right? A level 1 production engineer can become level 2 with AI tools. They should do more. A level 2 can become level 3. They will do more, right? You will see, I don't need to grow my tech headcount, but already we're doing more in tech, right? The same in ops, the same with RMs, the same with servicing, the same with product managers, et cetera, et cetera. All that takes time, but it will accrue. We'll finally find a way to do this. I hope that it will be demonstrated in the top line and bottom line and the cost income ratio.
Rthvika Suvarna: Speaking of wealth fees, they're clearly soaring and you are hiring at least 600 RMs to chase the $1 trillion target that you have. Is AI lifting revenue per relationship manager yet, or is wealth growth still fundamentally headcount led?
Tan Shan: I will start and then I was going to ask Tse Koon to chime in. We certainly see AI already helping both our RMs, our investment counselors, our assistant RMs, and also our customers. When you log into our app, there are nudges to tell you, "Hey, do this, do that. Have you seen this? Have you seen that?" That helps the customer self-serve. An RM when they come in, and you can ask our. When we hire new RMs, they come in and go, "Wow, the DBS RM is so lucky. They've got everything pulled together in their workbench for them." Whether it's what's missing, corporate action, things to do, suggestions to make, portfolio rejigging. We want to be able to use these AI tools, and we are, to give holistic, relevant, impactful advice to our customers, right? We can serve it digitally or physically. Also it helps the ARMs. A lot of servicing, right? Wealth is a lot of niggly servicing to do. By using AI, we can take away a lot of this grunt work for our assistant RM so that they can do more value added stuff like talk to clients, et cetera. Tse Koon, you want to chime in?
Shee Tse Koon: Yes. Just to build on what Su Shan has said, which is essentially, I would say, a pretty good summary, that in the past, we'll see a lot of talk about, oh, hiring RMs to grow wealth. That is still necessary, in all fairness, because the wealth business ultimately still builds on relationship and trust, which is what we believe in. Having said that, we do believe that it is no longer just about adding people. It's about adding people while making each and every one even much more effective. That is to be able to get every one of our investment counselors, our RMs, to be a lot more enabled so they can do things much better, much quicker. Over and above that, we're using AI across the entire end-to-end -- the end-to-end wealth proposition, for lack of a better word. How we onboard, how we advise, how we help them to execute, and then how we service. AI is going to be embedded in the entire end-to-end journey. This in and of itself, in DBS, we have gone way beyond just throwing bodies. It's about making the bodies even more able.
Rthvika Suvarna: I have a couple more, sorry. With all these risks coming out of Anthropic and OpenAI's hacking capabilities and all of those controversies that we've been reading about in the news, has that changed your usage of U.S. LLMs in the last few months, maybe? Has it changed your outlook in terms of accessing these tools?
Tan Shan: We use all tools, right?
Rthvika Suvarna: Which tools, if you could specify?
Tan Shan: We use all tools.
Rthvika Suvarna: U.S., Chinese, everything?
Tan Shan: All tools.
Rthvika Suvarna: Okay.
Tan Shan: We use all tools. We are also cognizant of geopolitics. We're cognizant of cybersecurity risks. We're cognizant of over-reliance on anyone. The basic is you must have cyber hygiene. The second basic is you must rely on no one. You don't have concentration risks, right? You layer and you work with whoever is best in class in whatever it is that they do. You get to know everyone. We travel east, we travel west, we meet everyone, we use everyone. We do proof of concepts with different people, different providers. We remain open-minded, we are guarded. We are very cybersecurity conscious. We also guard our data and our tech stack, with a lot of protections because that's sacrosanct to the customer trust. The truth is, we're open-minded and we work with everyone.
Rthvika Suvarna: Can I just pivot a little here and know a little bit more about some details on your Singapore outlook, given the renewed war in Iraq -- in Iran, sorry. If you're expecting any slowdown in income growth in the second half this year.
Tan Shan: Singapore GDP growth has surprised on the upside, and that's because Singapore actually has quite a lot of the semiconductor higher end ecosystem here. Do I expect that to continue to grow? Yes. Do I expect the financial services to continue to grow also? That's another big part of the economy. Yes. The capital markets, both Hong Kong and Singapore capital markets have grown, right? If they both grow, that's good for us. We're in both, as you know. I expect to see continued structural tailwinds for Singapore. I think inflation could continue to be an issue that could be mitigated by a stronger Sing dollar. The war on Iran will lead to volatility in things like interest rates and oil, the price of oil. Those 2 will be the variables that we can't predict, right? I think we have a workforce that is preparing to be a lot more AI-ready than others. I think the government has set the tone on let's reskill and restructure and do all the right things and just face the music, and I think that's the right narrative. Don't sugarcoat it. Just look at what's ahead and let's try and restructure our workforce sooner rather than later. I think the narrative coming out is the right one. I think we're making the investments in growth. We want to grow global champions. We want to grow our tech ecosystem. We want to grow our data ecosystem. We want to grow our AI ecosystem. I think all the top-down moves are right. I think we have also some good structural tailwinds in trade. I do think that the north and south trade will continue to grow, and Singapore, as a trade hub, will stand to benefit from that as well.
Edna Koh: Anyone else? Maybe Toby.
Unknown Analyst: I'm [ Toby Siu ] from [Foreign language]. I have one questions. I saw that the M&A activities in banking sector is quite active or hot. Can you share whether DBS plan to conduct any M&A in the mid to short term to enhance or optimize your assets?
Tan Shan: Well, we look at whatever fits our 3 criteria. Our 3 criteria has always been very consistent. It must fit in with our overall strategy, it must be something we know how to integrate and operate, and the price must be right. If the 3 things fit, we will look at it.
Edna Koh: Sheila, you had a question?
Sheila Chiang: I'm Sheila from The Straits Times. I have a question for Su Shan. DBS share price keeps going up, hitting a new high today. Do you think the valuation is too high given that you had sold at $60 earlier in the year?
Tan Shan: I'm not a stock analyst. I don't cover DBS stock. Well, I'm just joking. I think it depends on the whole banking sector in Singapore has moved up. I think it speaks to, number one, I think the potential reallocation of investments. People have been trading the AI stocks in the first half, now they may be starting to diversify. I think Singapore dollar also has an element to play in that investors may be looking for some Singapore dollar diversification. I think if you are a company with both dividends, dividend yield, and structural growth, hopefully, people will see that maybe you deserve some kind of premium. I don't talk about the stock as much. I will talk about the business. That's my job. You can talk to the stock analyst maybe. What I do want to say is, obviously, the team and I were steering DBS to really be on very strong foundation, we will continue to grow businesses that will give us good returns, that are good for our customers. Luckily, our backyard, the high ROE businesses are growing, whether it's wealth management, it's FIG, it's TMT, it's payments, it's transaction banking, it's renewables. All those high growth businesses do give us very good ROE. That's good. If you can use AI smartly to grow faster and better and to protect yourself, that's also good. You can grow without increasing your cost too much. If you can display consistent growth and you can take the ups with the downs, because the markets will go up, the markets will go down. I hope that DBS will be the kind of company that when the chips are down, we will outperform, we will have a lower beta and a higher alpha. When the chips are up and things are doing well, that we should outperform. That's our hope of my team and I in the long term. Short term, I can't predict stock price, sorry.
Edna Koh: [ Gula ]?
Unknown Analyst: Sorry. Whoops. Could I just ask a couple of questions? One is, could you speak to your record treasury customer sales? They're up 30% year-on-year, and they've been going up consistently. I think I remember in the old days, [ Bueche ] would say it's about $250 million a quarter, but now it's almost $700 million in one quarter. What drove that? Secondly, could you also give us an idea of your dividend growth? The reason why DBS is so attractive is because it announces absolute dividends versus a dividend payout ratio. Of course, it goes into your Gordon growth model. The dividend growth, which is how you get your share price. Maybe Su Shan would like to look at that a bit more closely as to what the price target could be. Just those 2 questions.
Tan Shan: Okay. Thanks, Gula. I'll take the first one, and Sok Hui will take the second one. On your question on treasury sales, you're right. That's something the team and I have been working very hard on. In a way, it demonstrates that AI is working. We do use AI both for idea generation and for nudging our customers, and also for looking at opportunities. That helps us generate that transaction fee flow, if you will. Number 2, it's both new to bank customers and new to products. You have to keep widening your funnel to get new clients. Correct? You can grow your fee income. As you widen your funnel and you get new clients, your client comes in with one product, they can also do a second or a third or a fourth. You can start with a generic loan product. You go with an interest rate swap, a currency swap, an M&A, a syndicated loan, a project finance, blah, blah. For corporate banking, for SMEs, when they do cross-border currency, we launched something called GlobeSend to counter the fintechs on cross-border payments in a very easy way. There's a lot of transaction fees, loan fees, structured fees that you can generate in IBG, SME. In wealth, as I said, it's new to bank, it's new to product, it's AI enabled, it's self-service, all the way to highly structured stuff. Across the whole continuum for wealth, it seems to be working. I think it's AI, human, and customer all working together to generate this. There will be some cyclicality, Gula, because the markets are up, you can do a lot more. When the markets are down, you can't do as much. There will be cyclicality in those numbers. The key is you must keep growing your funnel and you must keep growing your AI prowess and your ability to nudge customers when they need to be nudged.
Sok Hui Chng: Gula, to your question, you're right. I think the function of our price to book reflects to some extent the high ROE that we have. I think the ability to pay dividends is also a function of the growth in NPAM versus the growth in our risk-weighted assets. These are what you have to balance, the growth in the business versus what you want to pay out. I think Su Shan mentioned that we have done a securitization transaction that's also helping to recycle our assets as well as recycle the capital. We will continue to look at NPAM growth primarily, and that will determine our dividend growth.
Unknown Analyst: You don't have a percentage, do you?
Sok Hui Chng: Depends on MPEM growth. MPEM growth is a function of, I guess, market factors as well.
Unknown Analyst: Yes. Okay. Do you have an internal cost of equity that you look at or not?
Sok Hui Chng: We look at what the analyst also puts into their cost of equity. It's a number that's not observed, but we know that from the analyst estimates, it's probably in the region of 8% to 9%.
Unknown Analyst: What could drive that lower? Do you know?
Sok Hui Chng: I think as long as we continue to run our businesses well, I think we do get credit for being able to protect the downside, being proactive in the way we manage risk. I think all these are the factors that will help in driving the cost of equity lower.
Edna Koh: Russell, The Asian Banker.
Russell Pereira: Hi. Russell from The Asian Banker. My question is for Su Shan. With fee income and treasury sales, of course, being increasingly important contributors to earnings. With the advances of AI technology, it's getting harder to stay ahead of the curve, especially when it comes to other banks coming to the picture of AI. Do you still see the synergies of technology and people? Do you see that as being resilient enough over time to override maybe the cyclical conditions of the market? Or do you anticipate potentially having to build more revenue streams to counter that?
Tan Shan: Tech in itself is never a differentiator, right? Tech is widely available to everyone. What are differentiators and what are our moats? Our moats are, number 1, it's our culture of innovation. That is not born overnight, right? That we've built over the last decade or so, right? We started our digital journey in 2013. Our data journey in 2016. We're quite mature in doing all that. Number 2 is your data. Your data is another differentiator, and we've spent a lot of time, effort, and money to really create our data lake, to create AI ML models. All that takes years, right? In the way we work, we call it Managing Through Journeys, which is a horizontal way of working. We know every single customer journey end to end. We know the data that flows through, the systems that it flows through, the operations that it flows through. When you layer AI, in what part of the operations can you automate? It's not just automating, it's also using AI end-to-end to generate ideas, to open accounts, to help with transactions, and to help with ideation. It's a whole end-to-end thing. It's not trivial, but you've got to get your basics right around technology, around your tech stack, right? Around realizing, okay, what do you want to have as sovereign and what may not be sovereign, right? What will you buy? What will you build, right? What's important to you? Whether you have sovereign codes, sovereign models, sovereign harness even, right? All that is here to play. We want to be very well-placed in being ahead of the curve, right? Being ahead of the curve means you have a culture of innovation. You have a culture where you're not scared to fail. We're trying new things all the time, right? Heck, most people are building agents in DBS. We've got so many agents now. Everyone has their own personal agent, I call it, let a thousand flowers bloom in a walled garden called DBS-GPT, right? When we first launched DBS-GPT, it wasn't very good. Today it's very good, right? The tech helps, being able to get our data right, to be able to get our journey right, to get our end-to-end ownership of the data, the journey, the customer, everything right, is very important. It's not trivial, right? We are lucky that, as I said, we have this culture of innovation. Even our young people, our young analysts, our young associates, they are the ones coming to me with all these great ideas. Today, a young junior analyst or an associate armed with AI can be fast-tracked. As I just said, you can superhuman a young person too, it's all down to attitude. We want to hire for attitude, and I'm glad to say a lot of people in DBS already have that innovation bent. They also have a culture of resiliency around tech, right? We know what we cannot mess with, that's anything to do with production systems. We have guardrails around that. That's why the AI harness. The AI harness will have guardrails. It'll be grounded in governance, grounded in guardrails, grounded in controls and policies, and grounded in good customer data, right? All that is important. All that is not trivial. It takes years to build. I think we're ahead in that sense, we're not at all complacent because there's so much to come. We're ahead, we are able to be nimble, and we can change the way we work because we've already MTJ our customer journeys. We've already made our customer journeys horizontal. We are used to working in horizontals, not vertical silos. Can we do better? Of course we can, we will use AI to do better. If you ask me, will other banks catch up? Of course, other banks will catch up. Will we keep staying ahead? Yes, I want us to stay ahead, right? Those moats take years to build.
Edna Koh: We have time maybe for one last question. Okay. [ Vivian ].
Unknown Analyst: Congratulations on your results. My question is on China's new offshore trust tax rules. With wealth management a key growth driver for DBS, do you expect any impact on the bank? If you've seen any change in client behavior among Greater China private banking clients, or do you see any opportunities for the bank?
Tan Shan: You remember what I said about the 4 Ds of wealth management, and one of the Ds is domestication. I think the trend is coming, and we're ready for it, which means that you need to provide strong domestic wealth management solutions for clients, whether it's in China, India, Indonesia, Taiwan, Singapore, Hong Kong also. Being there domestically is a key driver for us. Tse Koon already mentioned he's building all these wealth centers. How many? 18?
Shee Tse Koon: 18.
Tan Shan: All our wealth centers are spread across our high-growth areas, including China, including Indonesia, including Taiwan, et cetera. The regulations that are coming out, there are 3. Well, there's 2 that are official. One is the 837 directive around the outbound trusts, and one is the Announcement 21. Sorry, one is the 837 directive around outbound investments, not in trusts, which I think has affected some of the fintechs, the online brokerages more. One is the Announcement 21, which is about the offshore trusts. The third one that was in the news today, we haven't seen any official announcement, so we have to wait to see whether there's any official announcement that's coming out. There is nothing conclusive yet. Okay? My short answer is we play by the rules. We are a regulated bank. We have Common Reporting standards, we have declarations when you have declarations. In a way, this evens out the playing field. In the past, I think some fintechs and all that, they do things faster, better, because maybe they were not quite as regulated as banks were. Today, that evens out the playing field. Not a bad thing in the long term. As I said, we're not going to circumvent any of the regulatory hurdles. We will play by the rules, and we are already onshore. We will continue to grow onshore. If money stays onshore, we're quite happy, frankly, because we want to build that.
Chanyaporn Chanjaroen: Just to follow up. Chanyaporn Chanjaroen from Bloomberg. When you talk about domestication in response to China flows, are you saying that....
Tan Shan: No, I was saying that as a broad wealth management trend. I've been saying that since 2016, so for 10 years.
Chanyaporn Chanjaroen: I see.
Tan Shan: Yes.
Chanyaporn Chanjaroen: It's in general.
Tan Shan: In general.
Chanyaporn Chanjaroen: Not specifically to the China flows?
Tan Shan: No, because when we were building the wealth business, we were looking at, well, we have to build digital offering. We got to be data-driven. We got to understand that wealth, there is always a home country bias, right? Whether you're from Thailand, or from Singapore, or from China, or from India, a lot of your wealth generation will be from your own country. There's always a home country bias. If you really want to provide wealth solution, you must be in their home country to understand them better.
Chanyaporn Chanjaroen: Booking is in Singapore or Hong Kong?
Tan Shan: We book everywhere. But our onshore wealth is booked in China. Yes. Of course. Yes.
Edna Koh: Okay, thank you everyone. I'm afraid that's all the time we have for today's briefing. So we'll wrap it up here. Thank you.
Tan Shan: Thank you.