DBS Group Holdings Ltd
SGX:D05
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
26.9685
43.02
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SGD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
DBS Group Holdings Ltd
You don't have any saved screeners yet
Good morning, everyone, and welcome to DBS' Second Quarter Financial Results Briefing. This morning, DBS announced solid second quarter earnings, which took our first half net profit to record $3.71 billion. Return on equity was 14%, significantly higher than a year ago. To tell us more, we have with us our CEO, Piyush Gupta; and our CFO, Chng Sok Hui. And without further ado, Sok Hui, please.
Good morning. We achieved our first half performance as net profit rose 54% from a year ago to $3.71 billion. Return on equity rose from 9.5% a year ago to 14.0%. First and second quarter net profit were the 2 highest on record. Business momentum accelerated in the first half, mitigating the impact of lower interest rates. Loans grew 6%, deposits 3% and fee income rose 20% with the first and second quarter, the 2 highest on record.
Both treasury customer flows and treasury markets income also reached new highs. Underlying expenses were stable, and the cost-to-income ratio was 42%. Asset quality was resilient with the NPL rate at 1.5%. New NPA formation fell to prepandemic levels and was significantly offset by repayments. Specific provisions declined 46% from a year ago to 18 basis points. There was a general allowance write-back of $275 million, while overlays were maintained.
General provision reserves remained prudent at $4.05 billion. There were $0.8 billion above MAS minimum requirements and $1.2 billion above Basel Tier 2 eligibility. Total allowance coverage was 109% and 199% after taking collateral into account. Liquidity was ample with CASA accounting for all the deposit growth over last year. The CASA ratio rose 10 percentage points to 76%. The liquidity coverage ratio and the net stable funding ratio was at 136% and 127%, respectively.
Capital was healthy with a CET1 ratio rising to 14.5%, well above the group's target operating range. The leverage ratio of 6.8% was more than twice the regulatory requirement of 3%. With a full listing of regulatory restrictions imposed a year ago, the Board declared a second quarter dividend of $0.33 per share. The Scrip dividend scheme has been suspended.
First half net profit rose 54% from a year ago to a record $3.71 billion. Total income was 4% lower at $7.44 billion, a strong growth in business volumes was more than offset by the impact of lower interest rates and lower gains from investments. Asset quality was resilient and total allowances declined by $1.85 billion from the $1.94 billion set aside in first half 2020 to $89 million this half year. Net interest income fell 12% of $589 million to $4.20 billion, as 7% loan growth was more than offset by 27 basis points fall in net interest margin due to lower interest rates.
Fee income rose 20% or $308 million to a new high of $1.82 billion. All activities delivered strong performances with wealth management and transaction services rising to a record. Other income declined 2% or $28 million to $1.43 billion as record trading income offset lower investment gains due to favorable market conditions a year ago. Expenses were 3% or $91 million higher at $3.13 billion due to the erstwhile Lakshmi Vilas Bank. Underlying expenses were stable. Asset quality was resilient. There was a general allowance write-back of $275 million from repayments of weaker exposures and credit upgrades. This compared to the $1.26 billion set aside a year ago. Specific provisions were $308 million lower at $364 million.
Second quarter net profit declined 15% to $1.7 billion from the previous quarter's record. Total income was 7% lower at $3.59 billion as both fee income and trading income declined from their first quarter highs. Profit before allowances fell 10% to $2.05 billion. Net interest income was 1% or $18 million lower at $2.09 billion as the 3 percentage -- loans growth was offset by a 4 basis points decline in net interest margin to 1.45%. Fee income was $868 million, 9% or $85 million lower than the previous quarter's record. The decline was due to a moderation in wealth management fees from exceptional levels of quarter ago.
Other income declined 20% or $162 million to $632 million as trading income fell from the previous quarter's high. Expenses were 3% or $44 million lower at $1.54 billion. There was a smaller write-back of GP this quarter of $85 million compared with $190 million in the previous quarter. Specific provisions were $36 million lower at $164 million.
Next slide. First half net interest income was 12% lower than a year ago at $12.20 billion. Strong loan and deposit growth mitigated a 27 basis point decline in net interest margin to 1.47%. The fall in net interest margin was due to interest rates that remain low, following steep cards by central banks post the onset of COVID in March 2020.
Second quarter net interest income was 1% below the previous quarter at $2.09 billion. Higher loan and deposit volumes offset the impact of lower net interest margin. Net interest margin fell 4 basis points to 1.45% due to an increased deployment of surplus deposits at lower yields as well as lower market interest rates.
Next slide. Gross loans amounted to $403 billion, growth accelerated from 1% in the previous half to 6% in first half, with a 3% increase in each of the first and second quarters. Non-trade corporate loans were $7 billion higher in first half led by drawdowns in Singapore and Greater China. Trade loans increased $6 billion with a rebound in regional trades. Housing loans rose $2 billion as bookings continue to be strong, while wealth management loans were also higher on buoyant investor sentiment. Second quarter growth was led by trade and nontrade corporate loans. Housing loan and wealth management loan growth was sustained at the previous quarter's level.
Deposits. Deposits rose 9% in constant currency terms from a year ago to $483 billion, 3 percentage points or $14 billion of the growth was over the first half. The growth continued to be led by CASA, which enabled more expensive fixed deposits to be released. CASA rose $26 billion in the first half, while fixed deposits fell $13 billion. The CASA ratio was 76%, up 3 percentage points from end 2018 and 10 percentage points from a year ago. Faster than loan growth and deposit growth resulted in a loan-to-deposit ratio of 82%, up 2 percentage points from end 2020.
Fee income. First half gross fees rose 19% from a year ago to a new high of $2.08 billion, both the first and second quarters were the highest on record. Wealth management fees in the first 6 months grew 27% to a new high of $945 million, while market conditions continue to be the major driver of wealth management. The business has also grown structurally due to 3 factors: first, we have expanded our reach to the retail segment; secondly, our digital platforms have enabled us to capture more customer flows; third, we have grown annuity income streams by focusing on a range of core investment products.
Insurance fees were also higher as they recovered to prepandemic levels. Card fees rose 10% to $334 million as consumer spending recovered from a year ago with growth led by online transactions. Travel spending continued to remain low. Investment banking fees increased 81% to $114 million from a recovery in equity transactions and record fixed income fees.
Transaction services fees grew 10% to $454 million from higher trade and cash management activities. Loan-related fees rose 2% to $230 million. Second quarter gross fee income grew 26% from the previous year. All activities rose by double-digit percentages as financial market activity and consumer spending recovered from the trough a year ago. The growth was led by a 31% rise in wealth management fees, a more than doubling in investment banking fees and a 26% increase in card fees.
Gross fee income was 9% lower than the previous quarter as wealth management fees moderated from the first quarter's exceptional levels. Investment banking fees were higher while transaction service fees and card fees were a little changed. Loan-related fees declined modestly.
Expenses. First half expenses were 3% higher than a year ago at $3.13 billion. Excluding the erstwhile Lakshmi Vilas Bank underlying expenses were stable. Staff costs increased as the business environment improved, but were offset by lower occupancy and computerization costs. The cost-to-income ratio was 42%.
Consumer banking and wealth management performance. First half Consumer Banking and Wealth Management income declined 12% from a year ago to $2.71 billion. Income from loans and deposits fell 35% to $1.13 billion as the impact of a lower net interest margin was moderated by higher volumes. The decline in income from loans and deposits was partially offset by a 20% rise in investment product income to $1.16 billion and an 8% increase in card income to $378 million. Assets under management increased 13% to $285 billion. We maintained our domestic market share for savings, deposits and housing loans at 52% and 31%, respectively.
Institutional Banking. Full year institutional banking income was stable from a year ago at $3.0 billion. Cash management fell 42% to $424 million as the impact of low interest rates was moderated by volume growth. The decline was offset by increases in other products led by double-digit growth and loans and investment banking. GTS deposits grew 12% to $177 billion.
Treasury and Markets. First half treasury markets income and treasury customer income were both at record levels. Treasury markets income increased 31% to $934 million from strong performances in equity and credit trading. Customer income was 13% higher at $913 million with Consumer Banking and Institutional Banking each accounting for half year month. Second quarter treasury markets income was $360 million. It was 28% lower than a year ago and down 37% from the previous quarter, which were the 2 strongest quarters on record. Customer income was 10% higher than a year ago and 13% lower than the previous record quarter.
Hong Kong. Hong Kong's first half net profit rose 8% in constant currency terms to $617 million. Total income declined 5% to $1.26 billion as the impact of low interest rates was moderated by higher fee income and loan growth. Asset quality was resilient with allowances falling 82% or $130 million to $27 million due to lower general allowances. Net interest income declined 19% to $690 million. Net interest margin fell 44 basis points to 1.30% due to low interest rates, but was moderated by 4% loan growth.
Fee income grew 28% to $395 million. All activities grew by double-digit percentages, led by investment products, bancassurance and cash management. Other noninterest income rose 12% to $171 million from treasury customer sales. Expenses were a little changed at $491 million and the cost-to-income ratio was 39%. There was a general allowance write-back of $18 million compared to the $124 million that was set aside a year ago. Specific allowances were $12 million higher at $45 million.
Asset quality. Asset quality was resilient as the economic environment improves. There has been no change in loans under moratorium and delinquencies since March. First half new nonperforming asset formation declined to prepandemic levels and was significantly offset by repayments. As a result, the NPL rate improved from 1.6% 6 months ago to 1.5%.
Specific allowances. The resilient asset quality resulted in first half specific allowances declining 46% from a year ago to prepandemic levels. Specific provision charges amounted to $363 million or 18 basis points of loans. Second quarter specific allowances were $164 million or 14 basis points of loans. They were 18% lower than the first quarter and 43% lower than a year ago.
General allowances. General allowances reserves of $4.05 billion remain highly prudent. They included general provision overlays built up in prior periods, which were maintained. The write-back in the first half for general allowances was from repayment of weaker credits as well as credit upgrades. The general provision reserves were $0.8 billion above MAS' minimum requirements and $1.2 billion above Basel Tier 2 eligibility. Allowance coverage was at 109% and 199% when collateral was considered.
Capital ratios. Capital continued to be healthy. The common equity Tier 1 ratio rose 0.6 percentage points from end 2020 to 14.5%. Profit accretion and the methodology refinement for market risk weighted assets were partially offset by the increase in credit risk-weighted assets. The CET1 ratio was above the group's target operating range of between 12.5% and 13.5%. The leverage ratio of 6.8% was more than twice the regulatory requirement of 3%.
Dividend. The Board declared a dividend of $0.33 per share for the second quarter and the Scrip dividend scheme has been suspended. With a full lifting of regulatory restrictions imposed a year ago, the dividend has reverted to its prepandemic level. Based on yesterday's closing share price and assuming that dividends are held at $0.33 per quarter, the annualized dividend yield is 4.3%.
In summary, we achieved an exceptional first half, comprising the 2 highest quarters on record. Strong business momentum was sustained in the second quarter and the pipeline remains healthy. Asset quality has been better than expected. New NPA formation was at prepandemic levels and was significantly offset by repayments. Specific allowances were also at prepandemic levels having almost halved from the previous year. The balance sheet remains prudently fortified with $4 billion of general allowance reserves well in excess of requirements. Our capital and liquidity are also strong.
While risks remain, we expect business momentum to be sustained in the coming quarters. We are well positioned to support customers and deliver shareholder returns. Thank you.
Thank you, Sok Hui. And again, welcome, everybody, to our quarterly -- half yearly results. As usual, I think I'll take a few minutes and just touch -- recap some of the things Sok Hui mentioned and maybe give you some sense of the outlook going forward.
So first, just to underline what Sok Hui said, the business momentum for actually the full half year has actually been extraordinarily strong. Second quarter continued to be as strong as the first quarter. Loan growth of 3% in each quarter was actually far in excess of what we anticipated. And the good news is, it was very diversified. So we saw increase in the property sector. We saw increase in TMT, increases in the energy sector, particularly renewables and sustainability related loans. And the loan growth was from Greater China, it was from Singapore, Southeast Asia. So very diversified loan growth continues to be very robust.
What was particularly pleasing though was the fee income, the noninterest income. The fee income has been just quite very broad based. So wealth management is very strong. First quarter was strong. Second quarter was also very strong. And I think that reflects not just the underlying growth in the business but also some of the digitization that we've been able to do in that range of products.
Transaction banking was strong, again, reflects some of the digitization that we've been able to do in both the trade and the API linkages we have. Cards has been picked up. It's about -- at the gross level, it's about 10% where we used to be prepandemic. So the rest of it will come with the travel opening up I would imagine. And investment banking was very strong, both ECM and DCM. DCM on the back of just the large amount of issuance being done around the region because of the low interest rate environment. And ECM, a lot of it is still retail property related, but in general, strong investment banking activity as well.
So a very diversified fee income growth and extraordinarily strong treasury markets growth. And as Sok Hui pointed out, that was not just trading, trading continued to be robust in both quarters. But as I pleased, it also reflects underlying customer flow activity. And by the way, for the third time, I think that also reflects the digital activity, and we have a lot of electronic origination from the customers today that we did not have a year or 2 ago. And obviously, our trading was good. First quarter was off the chart. Second quarter was slower. But as I compare our overall trading performance relative to the global majors, I think we've done pretty well through the half year. So second quarter was as strong as first quarter, overall first half, quite pleased.
I think the other part of the story is, as we're looking forward, we continue to see a really good business momentum all around. The pipelines are very robust. Now we're guiding full year loan growth to high single digit, sort of we grew 6% in the half of the year, we might grow about 3% in the second half. The reason for the slowdown really is a chunk of the growth in the first half was the trade book. We put on $6 billion of trade assets. Some of that reflected increase in commodity prices. It's unclear to me what's going to happen in the second half, and we might be able to hold that, we might have to give some of that up. So trade is an uncertainty.
But the nontrade activity is as robust as it was in the first half of the year. So looking at it to be good. Mortgages are also in Singapore. The mortgage also looking decent. We grew $2 billion in the first half. I think it will slow down. We're expecting only $1 billion more in the second half, even though bookings in the first and second quarter were well over $4 billion, very strong bookings. So remains to be seen how that plays out.
The fee income, we're now guiding mid-teens fee income growth because, again, each of the product categories we spoke about, we continue to see good momentum. We got into the third quarter with continuing momentum across each of the categories, wealth management, transaction services, payments, et cetera, everything stays strong as we went into the third quarter. So hitting relatively okay with that. And expenses continue to be stable, as Sok Hui pointed out. If you back out Lakshmi Vilas acquisition, the rest of the expenses are quite flat. So fairly well controlled. Again, I think all the digitization that we've done over the years is helping in that regard as well.
If you take a look at the credit outlook, there is the other big upside we've seen. Sok Hui already talked about NPA formation. It's actually gone back to prepandemic levels. And they are all 1Zs and 2Zs. There's no other thing. In the first half of that, we saw a couple of names, not large, but in the auto-related sector, auto components in the Southern China belt and auto distributor in Indonesia. We saw something in the textile garment sector, which got impacted because of the lockdowns. We saw a little bit to do with building and construction in Singapore, but nothing systemic, like I said, 1Zs and 2Zs.
The good news is that for whatever NPA formation is happening, we're getting repayment. So with pretty much the entire NPA formation in the first half, almost 80%, 90% of that got set off because we got repayments. These repayments are also leading to some recoveries on the provision line as the repayments come back. So it's generally looking quite resilient.
Our guidance for the rest of the year, I'm saying and we are saying it's going to be short of $1 billion. Now we're saying it's going to be less than $0.5 billion, pretty sure. We were less than $100 million in the first half. And so you can see in the second half, we're still hedging our bets a little bit. And that's mostly because we're not sure what the impact of delta and the moratoriums might be.
Though other than the macro unease, if you look under the hood a little bit, the portfolio is looking actually quite solid. We're not seeing any signs of weakness across the board. And even the loans under moratorium, they're all down to about 10% of the levels they were when we started. So the mortgage book in Singapore, we had $5 billion is now only $500 million. The SME book in Singapore was $5 billion and now it's down to about $400 million. The Hong Kong book is down to about $1 billion and change. And some of the books also the extensions have been pushed into year-end or even into next year. So there seems to be -- it's unlikely you're going to see a lot of pain from that in the back end of the year.
The good news is the 90% that's come off moratorium, the delinquencies are looking fairly decent. We're not seeing a big pickup in people's inability to pay once they come off moratorium. So actually, that's looking okay. The real uncertainty is in the consumer book. By and large, delinquencies are okay. Taiwan has gone up a bit on the cards portfolio. It's the only country where I'm seeing a pick in consumer delinquencies. Indonesia is holding, but I think Indonesia might weaken in the back end of the year. But net-net, we could see some upside. We certainly don't think we'll exceed $0.5 billion on the provision line, if you will.
And finally, a last comment on this various new initiatives we've launched, as we talked about last quarter. In the middle of last year, we took a view that interest rate environment is going to be a headwind for the next 2, 3 years, close to 0 interest rates. So in addition to dialing up, a large part of the fee income and noninterest income activity that we've been doing in our core business, it would be sensible to start looking for alternate and incremental sources of revenue growth. And we've sort of shown some of the things that we got. We've got a couple of inorganic deals done. We've launched a few businesses which are digital in nature. We launched a couple of new funds activities and investment banking franchise in China.
If you ignore the BAU stuff like the retail wells and supply chains, but add the rest of the stuff, I think we'll probably wind up with an incremental $350 million, $400 million of income from these activities next year, which would be $200 million, $250 million more than this year. So this should be able to start helping us cover some of the interested shortfalls that we've seen over the last 12, 18 months.
Again, it's early to say if we do continue to get meaningful traction, then we could see more upside in these numbers. But I think that will happen more in the following year than in next year. But net-net, when you look at where we are overall, we are really pleased. It was a strong first half of the year, and we go into the back end of the year with a fairly high degree of confidence.
So I think we're happy to take questions.
Thank you, Piyush. We will now open the floor to questions from our media friends on the line. Before you ask a questions, it would be helpful if you could state your name as well as the media publication you represent. Diana, we can take the first question, please.
[Operator Instructions] Our first question is from Rebecca Isjwara from S&P Global Marketing Intelligence.
I was just -- I have 2 questions. First is could you elaborate a little bit more on the decline in performance over the second quarter? I know you mentioned a bit earlier on. And second, do you expect net interest income, or NIM, to stabilize? Or do you expect these 2 metrics to keep trending lower?
Rebecca, I missed the first part of your question, something you said about -- we couldn't follow.
Yes, about the decline in performance over the second quarter. And could you explain a little bit more about it?
The decline in performance over the second quarter. Well, I think the point is the first quarter was an extraordinarily strong quarter. It was just off the chart. We made $2 billion of bottom line in the first quarter. And as you know, that's a global phenomenon. The trading was very, very strong and wealth management was very, very strong. You've seen from -- most banks around the world that trading was hard to replicate. In fact, we did much better than most global banks. So our second quarter trading results are not that far off. I mean, they're down from first half. And similarly, wealth management. If you look at the total income line, we are trading down about $200 million quarter-on-quarter, and wealth management is down about $100 million. But the second quarter trading and wealth management results are still significantly higher than any averages that we have or any other comparable period. So that explains really the bulk of all.
Other thing, as you alluded to, NIM is still down. NIM is down about 4 basis points between the first and second quarter. And the pace of NIM erosion is dropping off. I mean if you look at our total NIM in the last 18 months, we've done about 40 basis points. Of that, the biggest erosion happened in the first half and second half of last year, some 17 and 23 basis points. So the first half of this year only eroded 4 basis points, it's pretty much leveling off.
I think there's still some scope for NIM to continue coming down through the back end of the year. And this is partly driven by the fact that we continue to get surplus deposits. We now have about $30 billion that we're placing with central banks, and the yield on that varies a bit. The yield on that was somewhat lower in the second quarter than the first quarter, for example. So that's a big drag on NIM. But at the same time, it's a very good use of money because it's ROE-accretive since there's no risk weighting on these assets are pretty much 0 is weighted. And at the same time, it's P&L-accretive. And so as I mentioned in the last quarter, for this kind of money, I'm not managing to the NIM, I'd rather manage to the P&L and manage to the returns.
Our next question, [indiscernible] from [indiscernible].
I have 3 questions. The first one, when do you see the bank's business travel to start picking up? Second, the project had $350 million Singapore revenue plus that will come from new initiatives next year. Which business or unit will be the biggest contributor? And the third question, are you close to any transactions regarding Citi's consumer asset sale? And what is your budget for such transactions?
First question was around travel. Your question was when does travel will open up. I mean I'm not an epidemiologist or a policy wonk. But from everything that we can see, they're opening up for travel in several countries around the world. In the west, the U.S. has opened up, the U.K. has opened up. I think there's a high likelihood that as vaccination rates get up, you'll start seeing opening up around the region. So you might see some opening up in the fourth quarter. I think the bulk of it will only happen next year, however. But again, I'm not a soothsayer, so I'm not sure I can give you too much more insights on that one.
On the incremental revenue, the chunk of it next year really comes from the 2 M&A deals because they both bring in revenues from day one. But some of the other activities are also quite useful. We expect to start seeing significant or meaningful numbers now from the funds activities, from the digital activity, digital exchange, et cetera. Some of the others, like a participation, party or Climate Impact X and so on, we have the early days. We're going to start seeing some transactions start happening only at the end of the year. And that's not an issue up in our numbers in a meaningful way anytime soon.
On your third question, which is on the Citi transactions. Frankly, the process is underway, and there's very little more we can say at this time. We indicated earlier that we take a look at some of the assets. We are in the process of doing that right now.
When you say what is the budget? We've always said we are not price chasers. So we're very mindful of making sure that we do transactions that we can get to be accretive in a reasonable period of time. But from a different plan, as you can see, we're sitting on surplus capital, we have 14.5% capital adequacy and that are reasonably in excess of our operating range. We like to long term be close to 13%. So that does give us some cushion without having to go and raise new capital.
Sorry, I just want to make sure you say that on the long term, your CET1 ratio should be closer towards 13%, so the surplus would be the budget, right?
Well, the surplus is available. Budget, it depends. We could always go and raise more capital if there's really attractive deal which came our way. But at this point in time, I just want to point out that we could do a deal of up to that amount without having to go back into the market.
But could you say that in dollars term, like is it going to -- because you have been talking about bolt-on acquisitions, which would mean like a few or $400 million something. But I think the surplus currently is in terms of more than $1 billion, if I'm not mistaken?
Actually, surplus is even more than that. But we can do -- we paid $1 billion for the Shenzhen Rural Commercial deal. For me, it's still a bolt-on, and that is accretive immediately because the way the accounting works that -- so that's a $1 billion asset of capital we put to work, but it was accretive immediately. So if the deal is good and the capital accretion is good, we have the ability to do more than $300 million, $400 million size deal.
I see. And when you said earlier that the process is underway, you were referring to the general process at Citi rather than any transaction that DBS is engaging with the bank or...?
Yes, the general process at Citi.
Our next question, Chris Wright from Euromoney.
Two questions from me. The first one, your results that relates to asset quality is very much in line with what we've been seeing, not just in Asia but around the world and the earnings results over the last 2 weeks. It's a pattern of returning provisions, a strong outlook for credit losses, NPLs, which aren't budging or in a couple of cases are even coming down, all of which looks great. And yet, as you live in Southeast Asia, we look around and we see Indonesia in the absolute worst condition of the pandemic that has been to date. Malaysia is in trouble. Vietnam for the first time experiencing lockdowns. India, of course, has been through terrible suffering. And one finds oneself thinking how can both positions be simultaneously correct. On what basis can we assume such resilience of the customer base in the markets to mature exposed outside of places that are clearly doing well, like Singapore.
Secondly, just following up on [indiscernible] question about Citi. Obviously, Citi has 13 disparate businesses on the block and some seem to make more sense for you than others do. Are you able to give any indication as to which geographies you have engaged discussions with Citi about potential acquisitions there?
Chris, the answer to your first question is obvious, and that is that the impact of the pandemic on health systems and on consumer demand is evident in some small sectors. And those sectors are really actually not large in the scheme of the global macro economies. So if you look at the PMI data, you look at the GDP growth data, you look at the retail spend data, if you look at every macroeconomic data around this thing, it's all north of 50%, in some cases, getting up to 60%.
So the fact that we're seeing a more spread of the pandemic and more cases happening is really not translating into 90% of economic activity around the region. So what happens is, yes, that the F&B sector, to some extent, the tourism sector, the isolated sectors tend to suffer. But certainly, if you look at the nature of our book, our actual exposure to those sectors is very small. So it's not a large part of our business. And the bulk of our exposures, which are manufacturing, exports, PMT, property -- think about property, property prices are on fire around the world. If you really thought that the pandemic should be equated to property, property prices should be down, property prices are up 10%, 20% in the first 6 months across the world.
So a large part of the macro economy is dealing from the sectors that are really coming under pressure at this time. The other thing I would -- my personal submission is, we focus a lot on the number of cases of the COVID. We start focusing more on the actual medical outcomes. How many people are going to hospitals, how many deaths there are. It's actually not consistent and it's not as bad as people are worried a year ago. And so even in countries like India, Indonesia, we're talking about 30,000, 40,000 cases. When you translate that to the actual number of actual deaths, et cetera, it's much smaller than people originally anticipated. But net-net, the more important thing is that the macroeconomic data and indicators continue to be very robust, and that's where the bulk of a banking sector portfolios tend to be concentrated.
On your second question, we had indicated earlier that the countries that have some interest to us are countries that we have a presence in India, Indonesia, Taiwan. There's 3 markets that we said we would take a closer look at.
Our next question, Anshuman from Reuters.
Thanks to see that numbers today. Great show, as always. Piyush, just want to check with you on -- in terms of -- you talked about this is more of a -- I mean the impact in the corporate sector has not seen a lot in Southeast Asia in terms of the business exposure. But you've seen other banks, I mean, is DBS benefiting because it has less exposure to the likes of Malaysia, Thailand and other places versus Hong Kong and China compared to other banks. And we are seeing a little bit of outperformance in the results there.
And the second question is, how do you anticipate the -- with interest rates remaining low, do you see any changes at all in the environment? And do you expect any changes in the mix of your business on the interest side? Will there be a recovery next year, do you expect interest income to improve?
So on the first question, obviously, the profile and nature of your business makes a difference. I think it's a little bit more driven, Anshuman, by the business mix as opposed to the geography mix. Geography mix matters. And I think we're fortunate that we don't have some of the Southeast Asian countries. I can see in my own book, for example, Indonesia is a little bit weaker than Singapore or Hong Kong. So I can extrapolate there's probably 2 for us the Southeast Asian markets as well.
But the bigger question is, how much is the consumer and SME portfolio compared to a large corporate portfolio, particularly if you have unsecured consumer and SME. And to that extent, it's quite helpful to us that we have a disproportionately large part of our portfolio in the large corporate and secured business segment. Our actual exposure in the SME and the consumer segment ex the mortgage book in Singapore, which is fine, is really not very large.
So I think you see differences based on business sector concentration perhaps more than the country piece. And if you look at some of the other banks in the region, they do have larger exposures in Malaysia and Thailand, Southeast Asia, but also they have larger SME books in some of those countries. So that might have some bearing.
Your other question on the interest rate outlook, it's hard to call. I mean you saw the pronouncements from some of the Fed governors even yesterday. My own take was that you won't start seeing rate hikes into the fag end of '23. But now there clearly seems to be the possibility that we might start seeing it much earlier. In fact, if you look at the dot plot, some people are even beginning to forecast that you might start seeing rate hikes at the fag end of '22, '23.
You're seeing some tightening actions in some central banks around the region, but it's hard to say. I mean, I really, again, can't get my mind around what is the inflationary impact, other transient nature inflationary impact is going to disappear. Is it going to be around, and therefore, how quickly the central banks need to start acting. I do think that taper will begin sooner. You might start seeing the taper coming quicker, and that will obviously have some bearing on this as well.
In the meantime, for us, it's a business usual. We're seeing a lot of liquidity. If there is a change in monetary policy, I think some of the liquidity might start disappearing. And as the liquidity starts disappearing -- we're staying very flush, but if the liquidity starts disappearing, and that's generally helpful from an interest rate environment, but it's hard to call.
Also, Piyush, if I can ask just one more question. We are seeing the record fundraising in South Asia, either it's IPO markets or we seeing M&A, what we're seeing sort of -- there seems to be a lot and is happening in Philippines, Indonesia, other markets. How do you -- when you talk to corporates, when you look at -- talk to executives, is there a feeling that this is here to stay? The capital markets are really broadening out ex Singapore and Southeast Asia? And do you expect more activity in this sector?
I think the capital markets are definitely getting more robust across the region. I'm seeing a lot more issuers. So we're also being able to do deals from outside of our traditional Singapore-centric customer base that is true. I think some of that is driven by just record low interest rates. So people are funding up opportunistically. Some are actually using it even for working capital and not just for our investment.
But I think there's an investment cycle coming back. And therefore, some of the fundraising that you're seeing are not just replacement of bank borrowings, the working capital, we are seeing some of the new fundraising is beginning to go into pure investment activity. So I do think that the capital markets activity is going to be fairly solid. With all of the tensions between China and U.S., I do think you will start seeing a lot more listings in Hong Kong and in China. So I think that will help the overall sentiment, general sentiment as well.
[Operator Instructions] As there are no further questions, I will now hand the session back over to Edna. Please go ahead.
Okay. Thank you, everyone, then. If there are no further questions, we'll just bring this time to a close. Just appreciate everyone's time this morning, and we'll see you next quarter. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.