“Why are we adding up to $200 million in management overlay? The short answer to that is this high interest rate environment is not precedented. Therefore, we're just being abundantly prudent and cautious in case there is some stress that comes out of the system,” Gupta says. While banks do not have to reveal their management overlays, DBS is likely to have around upwards of $2.2 billion in overlays.
During a 1QFY2023 results briefing, DBS Group Holdings group CEO Piyush Gupta is guiding for loan growth of 3%-5% this year, with net interest margins of 2.05%-2.1%. This is higher than the 1.93% achieved for the whole of FY2022. Housing loan bookings have recovered, but may see some impact from the latest cooling measures where Additional Buyers Stamp Duty was raised except for first time buyers. For foreigners ABSD was raised from 30% to 60%. Gupta indicated that 88% of DBS’s consumer mortgages are to first-time buyers and owner-occupiers so the impact may not be that significant on the bank.
Although asset quality is expected to remain resilient, Gupta guided specific provisions (SP) for the year at 10 bps to 15 bps compared to just 6 bps in 1Q2023. In fact, after a general allowance write back in 1Q2022, DBS set aside $99 million in general provisions in 1Q2023.
