DBS Group Holdings Ltd
SGX:D05
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DBS Group Holdings Ltd
Earnings Call Analysis
Q1-2024 Analysis
DBS Group Holdings Ltd
The company had an excellent first quarter, achieving record highs in net profit and return on equity (ROE). Net profit increased by 15% year-over-year to $2.96 billion, while ROE climbed to 19.4%. Total income grew by 13% to $5.56 billion. The primary drivers were a 14% rise in commercial book income, an 8% increase in net interest income due to higher net interest margins, and a substantial 23% boost in fee income led by wealth management and loan fees.
The balance sheet remained robust, with a non-performing loan (NPL) ratio steady at 1.1% and strong loan allowance coverage at 125%, which goes up to 223% with collateral consideration. The Common Equity Tier 1 (CET1) ratio was healthy at 14.7%, demonstrating strong capital adequacy. The liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) were well above regulatory requirements, indicating solid liquidity positions.
The board declared a dividend of $0.54 per share, a 10% increase compared to the previous quarter. This contributes to a strong total shareholder return of 17% for the year-to-date. Notably, the company's market capitalization crossed $100 billion for the first time—a milestone for a Singapore-listed company.
Fee income surged by 23% to exceed $1 billion, driven primarily by wealth management and loan-related fees. Treasury customer sales hit a record high, contributing significantly to non-interest income, which increased by 44%. Despite a 9% decline in markets trading income from the previous year's high base, total income was still propelled to new heights.
Management is optimistic about surpassing last year's profit, aiming to protect and potentially exceed the $10 billion net profit mark. The guidance on fee income has been revised upward to mid-to-high teens from the previously expected double digits, reflecting robust early-year performance in wealth management and other segments. However, given the unpredictable nature of investment banking fee growth, conservative estimates are maintained for some areas.
Commercial book income showed strong growth of 14%, driven by broad-based business momentum across various segments. Loan growth was broad-based as well, especially robust in Singapore and India. However, loan growth in Hong Kong remained sluggish. The company's risk management remained exemplary, with specific allowances for loans steady at 10 basis points. Additionally, strategic asset reclassification contributed positively to net interest income.
While the geopolitical climate remains uncertain, the company has identified opportunities for growth and productivity gains. The technology and operational improvements are ongoing, with a focus on simplifying systems architecture, enhancing service availability, and building deeper engineering skills. The recent stabilization in non-Singapore locations and a focus on AI optimization highlight ongoing efforts to build a resilient operation capable of withstanding external pressures.
Despite global geopolitical tensions, macroeconomic conditions in several Asian markets remain resilient. Positive performance measurements in recent months suggest a stable environment for continued growth. Consumer demand and stable growth rates in Asia further support an optimistic outlook for the company's core operations and income streams.
Growing wealth management fees demonstrate strong market sentiment and effective conversion of deposits into investment products. The successful integration of Citi Taiwan has also positively impacted fee income, which saw a 45% growth, or 35% excluding Citi Taiwan's contribution. The company has maintained a competitive edge in wealth management by adapting to consumer behaviors and preferences.
Although the firm's non-performing asset formation was slightly higher than in previous quarters, there is no discernible negative trend. The operational risk adjustments are primarily driven by the company's increased income, reflecting responsible risk management aligned with growth. Continuous monitoring and stress-testing of portfolios ensure anticipated risks remain within manageable limits.
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Okay. Good morning, everyone, and welcome to DBS' First Quarter 2024 Financial Results Briefing. This morning, we announced net profit rose 15% to $2.96 billion. Return on equity increased to 19.4%. Both were at new highs. To give us more color on the quarter, we have our CEO, Piyush Gupta; and our CFO, Sok Hui Lim. They will take us through the presentations, which can be found on the DBS Investor Relations website, and you can follow along.
Without further ado, Sok Hui, please.
Thank you, Edna. Good morning, everyone. We will start with Slide 2. We achieved a net record performance in the first quarter with total income, net profit and ROE at new highs. Net profit rose 15% from a year ago to $2.96 billion and return on equity climbed to 19.4%. Total income increased 13% to $5.56 billion with commercial book total income increasing 14% to $5.31 billion. Net interest income grew 8%, lifted by higher net interest margin, which rose 8 basis points to 2.77% from higher interest rate, so our loans grew 1%. Net fee income grew by 23% and crossed $1 billion for the first time with increase led by wealth management and loan fees.
Treasury customer sales income also reached a new record. Markets trading income recorded a good quarter at $246 million despite the higher funding cost. But nevertheless fell 9% from the high base in the previous year. The strong growth in commercial book total income more than offset a decline in markets trading income propelling group total income to $5.56 billion, up 13% from a year ago and also a new high. Expenses rose 10% to $2.08 billion, and the cost-to-income ratio was little changed at 37%.
Compared to the previous quarter, net profit was 24% higher. Commercial book total income increased 9%, led by growth in fee income and treasury customer sales to our net interest margin was slightly higher. Markets trading income more than doubled from low fourth quarter levels. The balance sheet continued to be strong. The NPL ratio was unchanged from the previous quarter at 1.1%. Specific allowances remained low at 10 basis points of loans similar to recent quarters. Allowance coverage was at 125% and at 223% after considering collateral.
Capital was healthy with the CET1 ratio at 14.7%. Liquidity was also healthy with the NSFR and LCR, well above liquidity requirements. The Board declared a dividend of $0.54 per share over the enlarged post-bonus share base.
Slide 3. Compared to a year ago, net profit rose 15% to $2.96 billion as total income total grew 13% to $5.56 billion. Commercial book total income rose 14% or $644 million to $5.31 billion. The growth was broad-based.
Citi Taiwan contributed 4 percentage points to the increase. In other words, the majority of the 14% growth was organic. Net interest income grew 8% or $263 million from a higher net interest margin as well as loan growth. Fee income grew 23% or $192 million on the back of strong wealth management and loan fees. Treasury customer sales and other noninterest income grew 44% to $189 million, led by an increase in treasury customer sales to a record. There was also a nonrecurring gain of around $100 million on FX hedges we took on our overseas operations.
Moderating the increase in commercial book total income was a decline in markets trading income of 9% or $23 million from the previous year's high base to $246 million. As we have guided previously, $246 million is a good quarter for markets trading income, especially in the light of higher funding costs. Expenses rose 10% or $197 million to $2.08 billion with Citi Taiwan accounting for 5 percentage points. Profit before allowances was 14% higher at $3.48 billion. Total allowances fell 16% or $26 million to $135 million.
Slide 4. Compared to the previous quarter, net profit was -- rose 24% as total income grew 11% and expenses declined 6%. Citi Taiwan was included for the full periods in both quarters. Commercial book total income rose 9% or $417 million with noninterest income driving the increase. Net interest income was little changed. Net interest margin increased 2 basis points while loans grew 1%. Fee income increased 20% or $176 million led by wealth management and loan fees. Treasury customer sales and other noninterest income rose 59% or $231 million due to record treasury customer sales and a nonrecurring gain on FX hedges.
Market trading income more than doubled, rising $133 million from a low base in the fourth quarter. Expenses fell 6% or $126 million. The previous quarter had included several nonrecurring items.
Profit before allowances was 24% higher. Total allowances were a little changed. Reported net profit was 30% higher as there had been charges in the previous quarter of $100 million for CSR provision and $24 million for Citi integration.
Slide 5. Compared to the previous quarter, commercial book net interest income was stable at $3.65 billion, Net interest margin improved by 2 basis points to 2.77% with higher asset use from fixed asset repricing moderated by lower HIBOR. Deposit cost increased at a slower pace compared to previous quarters at the rate of CASA outflows decelerated.
Compared to a year ago, commercial book net interest income rose 8%, driven by 8 basis point expansion in net interest margin and the consolidation of Citi Taiwan. Markets trading net interest income was a negative $142 million. We took advantage of opportunities to deploy funds into high-quality assets, which was accretive to net interest income but diluted to NIM.
This quarter, we also reclassified income from perpetual securities, which have stated coupons akin to conventional bonds from noninterest income to net interest income to align the accounting from these securities with their associated funding costs. You recall that the funding for perpetual securities are shown on the net interest expense while income is reflected in other income line.
So this alignment and reclassification applied prospectively at $56 million to this quarter's markets trading net interest income with a corresponding reduction in markets trading noninterest income. The comparative amount for each of the previous 4 quarters were $59 million to $60 million and remain classified as noninterest income. The contribution from these perpetual securities is expected to be stable going forward.
Combining commercial book and markets trading, the group's net interest income grew 2% from the previous quarter to $3.51 billion, while net interest margin rose 1 basis point to 2.14%. Excluding a 1.6 basis point impact from reclassifying perpetual income in markets trading, net interest margin was stable. Compared to a year ago, net interest income grew 7% with net interest margin improving by 2 basis points.
Slide 6. Loans grew 1% or $6 billion in constant currency terms during the quarter to $431 billion. Non-trade corporate loans rose 3% or $7 billion with a growth broad-based across sectors. Trade loans and consumer loans were a little changed.
Slide 7. Deposits increased by 1% or $7 billion on a constant currency basis this quarter, driven by growth in fixed deposits. CASA outflows slowed from the previous year. LCR of 144% and NSFR of 116% remained well above regulatory requirements.
Slide 8. Compared to a year ago, gross fee income rose 26% to $1.27 billion as momentum was sustained, excluding Citi Taiwan, which had been consolidated in third quarter 2023, gross fee income grew 17% in the first quarter unchanged from the 17% in the fourth quarter and faster than the 11% in the third quarter. The first quarter growth was led by wealth management fees which shows 47% to $536 million. Excluding Citi, the growth was 35%, a stronger market sentiment and sustained net new money inflows boosted sales in a wide range of investment products.
Bancassurance fees are also higher. Card fees grew 33% to $301 million from higher customer spending as well as Citi, which accounted for 2/3 of the increase. Loan related fees were also higher, rising 30% to $185 million. Transaction service fees were stable at $231 million. Investment banking fees declined 59% to $18 million from lower capital market activities.
Compared to the previous quarter, gross fee income rose 19%. Leading the increase was a 45% rise in wealth management fees from continued strengthening of market sentiment and from seasonal factors. Loan-related fees and transaction service fees were also higher.
Slide 9. Commercial book noninterest income, which you see in the red box rose 30% from a year ago and 32% from the previous quarter to $1.66 billion. The increases were due mainly to fee income and treasury customer sales, which both reached new highs. There was also a nonrecurring gain of around $100 million on FX hedges we take for our overseas operations.
The commercial book accounted for 81% of total noninterest income in the first quarter. After the reclassification of markets trading out of noninterest income to net interest income, markets trading noninterest income was at $388 million in the first quarter exceeding the levels in the previous year and previous quarter. Combining commercial book and markets trading, total noninterest income rose 23% from a year ago and 30% from the previous quarter to $2.05 billion.
Slide 10. Compared to a year ago, expenses rose 10% to $2.08 billion with Citi Taiwan accounting for 5 percentage points of increase. The cost-to-income ratio was 37 -- of 37% was stable compared to the previous quarter, which had included nonrecurring items, expenses fell 6%.
Slide 11. Asset quality remained resilient in the first quarter. Nonperforming assets rose 3% from the previous quarter to $5.22 billion. New nonperforming asset formation was partially offset by repayments and write-offs. The NPL ratio was unchanged at 1.1%.
Slide 12. Specific allowances remained low at $115 million or 10 basis points of loans, in line with recent quarters.
Slide 13. Total allowance reserves stood at $6.53 billion with $2.60 billion in specific allowance reserves and $3.93 billion in general allowance reserves. Allowance coverage stood at 125% and at 223% considering collateral.
Slide 14. The CET1 ratio rose 0.1 percentage points from the previous quarter to 14.7% as profit accretion was partly offset by higher risk-weighted assets. The leverage ratio of 6.5% was more than twice the regulatory minimum of 3%.
Slide 15. The board declared a dividend of $0.54 per share for the first quarter over the enlarged post-whole bonus share base. In other words, shareholders received 10% more dividend for the first quarter 2024 compared with fourth quarter 2023. This morning, our market capitalization crossed $100 billion, the first time a Singapore-listed company has done so. Based on Tuesday's closing share price and assuming that dividends are held at $0.54 per quarter the annualized dividend yield is 6.2%. For the year-to-date, up to Tuesday's closing price, we have delivered total shareholder returns comprising share price gains and we already paid fourth quarter 2023 dividend of 17%.
Slide 16. In summary, we achieved record quarterly results with total income, net profit and ROE all at new highs. The year started with broad-based business momentum as loans grow and both fee income and treasury customer sales reached new highs. While geopolitical tensions persist, macroeconomic conditions remain resilient, which [indiscernible] Fed rate cut expectations. Against this backdrop our franchise is well positioned to deliver strong earnings and shareholder returns in the coming year. Thank you very much.
And I'll now hand you over to Piyush.
Thank you, Sok Hui. So let me start with just picking up where Sok Hui left off. I mean this is obviously a very, very strong first quarter. It's exceptional by any measure. And, I guess, it's safe to say everything went our way, including some onetimers and everything, but everything went our way.
If you look at the underlying, just to give you some more color on some of the features that Sok Hui, has already addressed. On loan growth, actually loan growth are more robust than we expected, quite broad-based, but a chunk of it was in Singapore and in India. India is actually quite broad-based. We've been able to leverage the GIFT City branch and being able to build the book nicely across everything, public sector, energy, auto, NBFIs.
Singapore was strong, some of it to do with the government land sales and property, but a large chunk of it to do with the commodity complex. Both the [ softs ] and the energy traders. So it is quite broad-based.
The headwinds in loan growth still Hong Kong because loans are still shifting from Hong Kong to the mainland, so that still continues to be slow. And Singapore, the mortgage book. The overall market sentiment is soft. Some of the releases planned for -- launches planned for this year are actually being deferred. And we are continuing to maintain pricing discipline. So our market book actually came off a little bit and is likely to come off through the first half of the year as we maintain pricing discipline on that front. But nevertheless, you put all of that together, $6 billion of loan growth was very robust.
Our NIM, again, the commercial book NIM was actually slightly better than we expected. It went up by 2 basis points. And that's despite the headwinds from HIBOR, which came off by 50, 60 basis points in the quarter. The uptick in the commercial book is really coming from the fixed asset repricing. We had guided earlier that we have about $40 billion of fixed asset -- fixed rate loans, which are likely to reprice this year. $16 billion of that came up for repricing in the first quarter. And we are getting a better uptick on that than we had originally forecast in terms of the new rates being able to book that. And so that's been helpful to the commercial book NIM.
On -- at the same time, our assumptions on CASA outflow or CASA repricing is coming in better than we forecast. So net-net, commercial book NIM was stronger. On the market's front, we're actually finding a great opportunity to be able to do the carry trade, be able to take money and place it out at very good yields in the short end with center banks and short end paper. It's accretive to net interest income, even though it is detrimental to NIM. So the markets NIM came off a bit, but partly because of the reclassifications Sok Hui explained, the stated NIM actually looks okay.
And therefore, when you put all of that together, our NIM was flat for the quarter, and we still think our original NIM guidance that we will see a slight decline over exit NIMs from last year is intact. Fees was particularly pleasing. It was very, very strong. Wealth management across the board, it's looking like it's 45% up. But if you take out the Citi impact, obviously, there's a onetime impact, its 35%. 35% up from last year. Last year, the base was low. The first quarter last year was particularly low because the Credit Suisse impact happened in the first quarter of last year.
But even if you adjust for that and you compare with first quarter of the year before, for example, we still grew 20-odd percent on the wealth management line. And that comes from a lot of stuff, one, customers are increasingly beginning to put money to work. So our conversion of deposits into investment products continued to grow. It was about 50% last year time this time and it is up to about 55% in investment products. But at the same time, our customers are also adding more duration. So the nature of the risk that they're putting on is also a little bit different. And therefore, the fee income has been actually quite strong.
Net new money continued to do well. We continue to see the same net new money as we have over the last few quarters. Card fee was also strong. Sales are going up across the board in all of our key card markets. Of course, the 33% fee is [ flattered ] by the Citi addition. If I back out Citi, it's still about 12% double-digit growth in card fees. So again, that's fairly robust.
Treasury customer sales is other thing, which hit a huge height. Now this is, again, Sok Hui, pointed it out, we were -- this again flattered. We had about $100 million gain on some hedges we take for our overseas operation. That's a onetimer. We saw negative mark-to-market in the fourth quarter. We saw a positive mark-to-market in the first quarter. But -- and we are going to adjust that, so we don't see that noise going forward.
But even if you take that out, the growth overall is a strong 22-odd percent, and that is also broad-based. It's both from the individual side, wealth management, but also equally from the corporate side where the outlook on rates caused a lot of people to start hedging or even restructuring old hedges. So that is actually very strong as well. Our cost-to-income ratio at 37% is 5% growth if you exclude the Citi Taiwan, which means I think our expenses are relatively well managed.
Finally, on asset quality, the 1.1% NPL rate is unchanged. Our NPA formation is a little bit higher than the last couple of quarters, but it's quite idiosyncratic. There is no trend over there. And if you look at the $300-odd million, it's not too far from other quarters we've had in the last couple of years. So given where we are in the cycle and the interest rate outlook, I don't think there is any thing to take away from that.
So moving forward to Slide 4. I thought it will be worth making a quick commentary on our tech situation. As you know, MAS decided not to extend the 6-month pause and they said they noted we made substantive progress. I'm also quite pleased with the progress we made over the last 6 months, and it's multipronged. We're focused on improving service availability. We focused on getting alternative channels for payments and enquiries. We focused on quicker recovery of services, something should go down. We focused on trying to make sure there's greater transaction certainty for both payers and recipients. And so we've done a lot of the heavy lifting.
But in truth, we still have more work to do. And so through the balance of this year, there are still areas that are a work-in-process. We have found other opportunities to simplify our systems architecture. So there's some stuff we'll continue to do. We realized that some areas we need to build deeper engineering skills and centers of excellence and some critical third-party technologies. We are doing that both by hiring people and training people, but that obviously will take a few more months.
We figured that we can improve our chain management and the use of AI, especially gen AI in that is quite helpful. That would take the rest of this year to bed down. And finally, in terms of monitoring, so we can pick up issues quickly. We've done a lot of very good dashboards. But again, there are opportunities for us to continue to building up more detailed and granular dashboards. So there is still work to do in the course of this year, but -- like I said, I think we've done most of the heavy lifting at this point in time.
Finally, I'll move to Slide 5 in terms of outlook. All the geopolitics is still uncertain. And quite clearly, the Middle East, the wars, the Ukraine-Russia situation, even the China and U.S. is all countries to be tricky. But the macroeconomic conditions seem to be quite resilient. I think growth rates in Asia are quite stable. PMIs have been positive now for the last couple of months across most of the countries. Consumer demand is generally holding up. And even though the strong dollar means there'll be some currency depreciation in a couple of countries, it doesn't look like anything that should cause us too much worry.
So against the backdrop, if we take each of the pieces of our income statement, our interest income, I think, will be modestly better than 2023. And I used the word modestly advise and even though we had originally factored in 5 interest rate increases when we guided for flat net interest income, 2 of those net interest increases have been factored in for the tail end of the year, November, December. And so they didn't really have too much impact on this year's net interest income outlook anyway.
We are currently forecasting about 2 rate increases. So we'll get some tailwind from interest rate increase and maybe $100-odd million upside from interest income.
On noninterest income, we had guided earlier for double digit. I think we'll get mid- to high teens because the first quarter was already very strong. And we are seeing that momentum in wealth management, treasury customer sales, et cetera, is quite strong. So we do think that mid- to high-teens growth in that line is possible. If you blend those 2 together, I think total income could be 1 or 2 percentage points higher than our previous guidance of mid-single digits.
Our cost-to-income ratio, we haven't changed our guidance. We've said low 40% is the range, given the first quarter was 37%. A lot of this depends on actually the income line more than the cost line. I think at cost -- at high single-digit cost growth is still intact. SPs, we've kept our guidance at 70% to 20% only because of the uncertainty. Given the rates are going to be higher, like I've said before, we've got to keep -- continue to keep an eye on the unsecured consumer book. We've got to continue to keep an eye on the SME book and so on. And therefore, it's not unreasonable to assume that at some stage, you should start seeing a pickup in provisions to go back to long-term averages.
Having said that, as Sok Hui pointed out in our presentation, we are not seeing any obvious signs of stress anywhere. And therefore, it is conceivable that there is some upside on that line. But at this point in time, we think it's just prudent to keep our guidance at original levels.
But when you put all of that together, we've actually guided for the fact that we thought we could protect our $10 billion net profit number. And at this stage, at the end of the first quarter, I think it's a reasonable assumption that we should be able to beat last year's profit number.
So why don't I stop there, and we can then throw it open up questions.
Thank you Piyush. We will now take media Q&A. [Operator Instructions]. We have a question from Prisca.
Prisca Ang [indiscernible]. Congrats on the excellent results. I have a question about the income. I think you mentioned that you guided for double-digit previously, but now you're guiding for mid to high to teens. Could you give a bit more color on why this is our guidance for the income?
Do you want some more color on?
[indiscernible] guidance of fee income because previously it was double digit and now it's mid to high teens.
Well, I think as I mentioned in my comments, both wealth management, particularly wealth management has been particularly strong. And the first quarter growth, even excluding Citi Taiwan, was mid-30s, 35%. So it is obviously flattered by last year's first quarter, but it's a very strong quarter.
As we go into second quarter, momentum continues to look relatively good. And like I said, if you look at our situation in the last couple of years, we've gotten a lot of net new money. We've got almost $24 billion a year in 2022 and '23. Yes, and this year, it's actually continuing at the same momentum.
Now a lot of the money when it comes in, first comes in fixed deposits. But when the market conditions improve and people's animal spirits waken up then people start putting that money to work, and we are seeing that happen in the early part of this year. People are beginning to put risk on and take some of the money out to deposits and into investments. So that's really what drives the strong wealth management fee income growth.
Cards continues to be relatively robust. It's lower double digit, but it's still getting double-digit growth. This quarter, our loan syndication fee is also very strong. We got a 30% lift in loan syndication fees. That's a little bit more choppy. It's not consistent. It goes up and down by quarter. But given our overall outlook in the environment, we think that, that line should also be relatively strong.
So the only question mark right now for us is the investment bank. Investment bank, this was probably one of our poorest quarters in several years. ECM, in particular, was, I mean, completely moribund and debt capital markets, there are some more issuance in Singapore, but issuance are with China and issuance in the G3 space was slow. And so the investment bank was very, very slow. And the fact, however, I don't think it can get any worse. It was so bad that -- if anything, there's probably some upside in that line as well.
Okay. We have another question from [ Gula ].
Congratulations on the very good results and prospects of beating the $10 billion this year. But can I ask just some nitty-gritty questions. So in terms of your security book, will you be able to protect the yields in that? I mean, how are you looking at that? Because I think with short-term one, short-term yields are coming off based on what happens this week because -- sorry, that's the first.
The second question is on the credit cost on the SPs. Yes, granted they are lower Q-on-Q, but year-on-year they were high. Is this from Singapore or another market? And could you just give us an update on your CRE portfolio in Hong Kong and the U.S.?
And the other question is on the RWA which grows. And what was this rise due to -- was it from loan growth? And was it from Singapore or another market?
And the third -- the last question is on margins on your bancassurance sales. Are these within -- I mean, are the sales within expectations? And what sort of margins do you get on bancassurance? And how long does the agreement with Manulife has to run?
Okay. So let me take a couple of these questions. I'll ask Sok Hui to respond to a couple as well, Gula. So the yield in the securities book are actually -- we're giving up short-term gains to be able to protect the yields over a 2-, 3-year period. So we're adding a little bit of duration. If we really wanted to put all our money in the real short term, all of the stuff that is maturing is roughly like 2.5% yield assets. And we could actually take that money and redeploy it in 5.3%, 5.4% dollar or even 4.6%, 4.5%, 4.6% in dollar. We actually don't do that.
So we actually give up 30, 40 basis points because we actually invest in 2, 3-year duration, and that still gives us about 4.5%. So our yield pickup is north of 2% even in the current environment where we are. So I don't see that being a problem. I think most of the asset repricing we're going to have through this year plus/minus that we might be able to get now.
As you get later in the year, the pickup will be lower because the assets which are coming off are slightly better priced than the 2.5. But there's no question that as the $40 billion de-prices, we do get a pickup of somewhere in that order of magnitude.
Your second question SPs. SPs were 10 basis points. Yes, there might have been the odd quarter where SPs are lower. I remember 1 or 2 quarters were 7 or 8 basis points. But I don't think that's the right way to think about it. We've already guided that our -- through cycle SPs you should be looking at provisions, you should be looking at 17 to 20 basis points. In the past, through-cycle, we used to guide 22 to 25 basis points. And therefore, the fact that we're having a very benign environment is actually a little bit surprising given where the interest rates are. And so for 10 basis points, I'll take it any time of the day. I think it's just a fantastic [ fee ] of low credit cost.
On the outlook, you asked about CRE, it actually hasn't changed very much from the last quarter guidance. We're obviously watching it very closely all over, but particularly in Hong Kong. We explained in the last quarter that our total Hong Kong CRE book is about $18 billion, if you're throwing mixed-use, retail, office. But the bulk of it is to the very top end of the market. It's still all of the -- you can imagine the Henderson, [indiscernible], et cetera. And again, we have stress tested that portfolio even through the quarter, assuming a 50% drop in prices from where they are, assuming there is no income accretion, and we're not seeing any pressure or problems with that book.
On RWA, Sok Hui do you want to take that?
Yes. So, Gula, your question on RWA, the Pillar 3 disclosure is actually posted on our website. If you look at the decomposition of total RWA growth, about $7 billion came from credit risk, about -- market risk was up by about $0.8 billion and operational risk about $1.5 billion.
Breakdown of the credit RWA decomposition is actually on Page A-6 of the Pillar 3 disclosure. And you can see from that schedule, the asset size contributed $5.8 billion to the increase, foreign exchange $2.3 billion, an improvement in asset quality $1.8 billion down. So those are the key drivers for the credit RWA growth.
On the operational risk, increase is mainly a function of our income that has grown, and therefore, we put aside more operational risk RWA. And market risk grow because we put on more market risk assets.
Your last question on Banca, Gula, actually, I don't have off the top of my head what -- how much fee we get on banca, but it's a mix, it varies between the general insurance, life insurance, even within life it depends on the products you sell, whether you're selling whole life, endowment, or annuity. So it's a whole mix across the portfolio. Some of it comes as distribution fees, some of it is our annuity earnings that we get from the upfront payment we got from Manulife. So I forget what, but maybe Sok Hui on the site can check whether we know roughly what we get on banca across the portfolio.
But on the actual Manulife deal, the deal goes on through 2031, if I remember. So we have another 7 years of the deal. We have got halfway through that deal which means that of the total upfront payment, we probably have amortized half of the fee and the other half will come through in the next 7 years.
Okay. So can I just ask you a question, which -- why does DBS not what to keep its insurance? I mean this was maybe before you were CEO. But I don't know if anyone else remembers?
Well, I can tell you -- so I would have done the same. I think that you have choices to make. I saw one of our competitors said they like being a financial conglomerate. I think there are challenges to being a conglomerate as well because -- so not only that, we got out of asset management as well as insurance. And I think on the whole, the focus on the banking business for us has proven to be beneficial. We think manufacturing insurance takes a very different skill set. And if you're only doing your own manufacturing and distributing it, you still have to run 2 separate companies, insurance company and a banking company, and there's no obvious synergy between running the two.
And therefore, we've found that actually being just a distributor of insurance as opposed to a manufacturer of insurance has actually proven to be very, very good for us.
So -- do you think -- do you get more margins as a distributor? I mean, is there less -- I mean there's less cost, et cetera, on the manufacturing side. So is that -- does that work out better?
No. But it depends on different businesses is my point. And you can make a good ROE on the insurance business, but then I could also go into the jam-making business and say that's a great business as well. So we -- you pick and choose the businesses you want to be in based on your core competencies and where you think you can bring the greatest value for the shareholder. So for us, actually, focusing on the banking and the distribution part of the business, we thought there's a better use of both our capital and our management capabilities.
Next question from [indiscernible].
Congratulations on the numbers. I have 3 questions. The first one, when will you expect to deliver the remaining IT requirements so that MAS can remove the additional capital requirements? And when will your CIO, your new CIO start?
Second question on your management gains, Could you spell out the amount of net new inflows and [indiscernible] inflow wealth?
Third one, many firms are positive on the India wealth scene. Are you also interested to expand in that space there? And is your current franchise post LVB takeover. How ready are they to get into India [indiscernible] there.
So [indiscernible] the first one. The new CIO comes in on May 10, so another week. And in terms of our residual requirements, I think we are -- in terms of -- when we measure the specific activities, we're about 90% done. We have a long tail, but we need to do something that I talked about in my presentation. We also need to tighten up a little bit more in some of our non-Singapore locations.
So if I had to have a guess in terms of what we need to get done is going to take us most of this year. Now what MAS fees and when MAS decides to remove the capital charge is not up to us, it is up to MAS. And I think they evaluate us on an ongoing basis, and they keep talking to us. So at some stage, I guess, they will get more comfortable about where we are in this process. But frankly, I wouldn't be able to hazard a guess on that one.
On the second, if I understood right, you wanted to know what was our net new money in wealth management, it's about $6 billion. It's about the same as we've been seeing every quarter for the last several quarters. We saw that in the first quarter as well.
And your last question on India Wealth Management. We are also dialing up our India wealth management, but like many other things we are dialing it up for India and Indian diaspora people, but the international financial centers, the family offices out of Singapore and booking centers outside Singapore. The domestic business in India to grow the wealth management is not obvious to be how profitable it is likely to be.
Frankly, the only country in the world with domestic wealth management is clearly profitable as the U.S. And in most of the countries in the world, just a domestic franchise, creating local products for local customers tends to be very hard to make profitable at scale.
What we are doing in India is, what we're doing in every other market, scaling up the mass affluent space. And that we are well equipped for both through the LVB branch network and our digital offerings. So we are continuing to do that, and we're getting some traction with that.
[Operator Instructions] just wait for a few more minutes, incase anyone has a follow-up question or a new question. Okay. It looks like there aren't any further questions. So with that, we will draw the session to a close. The investor or the analyst briefing, we will start at 11:30. Thank you everyone. We will just drop off here. Thank you.