iFAST Corporation Ltd. (AIY) Earnings Call Transcript & Summary

Hi, everyone. Welcome to iFAST Corporation's Fourth Quarter 2023 and Full Year 2023 Results Presentation. My name is JP. I'm from the Corporate Communications team at iFAST. I'll be running through the key summary and the financial results before inviting Mr. Lim, Chung Chun, our CEO, to carry on with the other sections. In our key summary, starting with the first slide. In 2023, our net profit increased by 340% year-on-year to $28.3 million on the back of a 22.8% increase in our total revenue to $256.5 million. The increase in profitability was driven by initial contributions from our Hong Kong ePension division as well as improvements in our core wealth management platform business. At the end of 2023, our AUA increased to a record high of $19.83 billion, driven by net inflows of $2 billion during the year. iFAST Global Bank's customer deposit amounts grew 53.4% Q-on-Q and 257.9% year-on-year to GBP 213.5 million, equivalent about $358.6 million as of 31st December 2023, contributing to higher net interest income. Going forward, as part of our 3-year plan, we target to make solid progress as a global digital banking and wealth management fintech platform with a truly global business model. We also target to accelerate Hong Kong growth and effectively deliver on ePension services; and thirdly, effectively develop innovative fintech services that are complementary to digital banking and wealth management platforms. On an overall basis, and barring unforeseen circumstances, we expect 2024 to see robust growth rates in revenues and profitability compared to 2023. On our next slide for key summary. The ePension division in Hong Kong will be an important growth driver in 2024 and 2025, while the overall wealth management platform is expected to continue to show healthy progress. We expect iFAST Global Bank to post a reduced loss in 2024 compared to 2023. iFAST Global Bank is targeting to breakeven by fourth quarter 2024, driven to a large extent by growth in net interest income as the deposit base continues to grow. iFAST Global Bank is expected to become an important growth driver for the growth in 2025 and beyond. For the final dividend for full year 2023, the directors proposed a dividend of $0.0140 per ordinary share, similar to the same period in 2022. And the proposed final dividend will be subject to approval by shareholders at our Annual General Meeting to be held on 26th of April 2024. On the next slide, our group AUA, as I mentioned, hit a record high of $19.83 billion as of 31st December 2023, and we show the breakdown between the B2B and B2C sections. So the B2B segment contributes roughly about 69% of total AUA, while the remaining 31% comes from the B2C. In terms of our net inflows and our unit trust subscriptions. So for the full year of 2023, our net inflow stood at $2 billion. In 4Q 2023, net inflows was about $0.33 billion. Net inflow in 4Q 2023 before the transfer out of stock from an institutional client was higher at $0.78 billion. Our gross UT subscriptions ended the full year 2023 at $4.49 billion. And in the 4Q alone of last year, gross UT subscriptions was at $1.11 billion. Moving on to Section 1 of our financial results. So starting off with the financial results of the group for 4Q 2023 compared to 4Q 2022. So total revenue stood at $82.19 million in 4Q 2023. That's a 69.3% year-on-year change. Net revenue was up 92% year-on-year to $57.13 million. OpEx was up 46.5% year-on-year to $40.71 million in 4Q of last year. And net profit was up 917.1% year-on-year to $13.18 million in 4Q 2022. Moving on to the financial results for the group again, but for the full year of 2023 compared to full year 2022. So total revenue was up 22.8% year-on-year to $256.54 million. Net revenue was up 36.7% year-on-year to $161.66 million. OpEx was up 21.6% to $136.23 million. And net profit was up 340% year-on-year to $28.27 million. But of course, if we exclude the impairment loss of $5.2 million related to the India business which was recognized in second quarter 2022, our net profit was up 340% year-on-year compared to that impairment that I just mentioned. The next slide shows the results overview for the last 5 full years. So I won't go into the details. Moving on to the financial indicators for the nonbanking operations on a quarterly basis. So total revenue was up 57.2% year-on-year to $75.66 million in 4Q 2023. Net revenue was up 94.3% to $53.86 million. Net profit was up 390.7% to $15.75 million in 4Q 2023. Similarly, for financial indicators for nonbanking operations for full year 2023, so net revenue was up 35.7% to $129.31 million. Net profit was up 121.3% to $36.88 million. On the last slide for this section, so on the proposed final dividend for full year 2023, the directors, as I mentioned, proposed a dividend of $0.014 per ordinary share, which is subject to the approval of the shareholders at our AGM, which will be held on 26th of April this year. The proposed final dividend brings the total dividend to $0.048 per ordinary share for full year 2023, which is similar to full year 2022. I'll now invite Chung Chun to carry on with the business update in Section 2. And Chung Chun.

Thanks, JP. So for me, what I'd like to do is talk about the plans that we have for the next 3 years. We typically like to make it our vision or our plan for the group's business. So as you may have noticed that all this [indiscernible] run our business, quite a lot of business models are new, and we emphasize being able to progress consistently through all the rapidly changing business model, taking advantage of the opportunities that arise because of the way the Internet has changed the model. So to be able to do that, it's important [ that again, ] and we also like to ensure that the shareholders understand what we're trying to achieve. So that's why we can create our plan. So in the past, we have talked about 5-year plan, 4-year plan, 3-year plan. Last year, we talked about 3-year plan, and now we've updated the 3-year plan for us to communicate it. So the 3 main points that we would like to talk about, the first really is to be able to make solid progress as a global digital banking and wealth management fintech platform as a truly global business model. So a few points in that statement. The first is the global digital bank. So we have added back to the -- our overall group feedback ecosystem. We believe that with that, within the group, that will help us accelerate the overall potential of the group. I will elaborate more later on. The other point really is what we call a truly global business model. I think historically, most businesses are very much constrained by geographical boundary. But clearly, Internet has changed the world, and it actually brings up [ trust ] as well as opportunities. The opportunity for companies are able to tap into the power of the Internet, and be able to cross border and tap to the opportunities that arise. I think we have seen that actually many industries have been transformed by the Internet. I think [indiscernible] businesses right now [indiscernible] on a global basis. If you take something like Google, for instance, it's essentially global, even though a U.S. company, but tapping to customers around the world. There are companies like Netflix, Spotify, right? They are basically tapping into customer base from around the world, but only operating from one or few countries. Banking, interestingly, is an area where you actually find that most banks are not trying to tap into the potential of a truly global business. What most banks do is to credible to every country. They have a license setup, operations setup, branch before. They tap the customer base in those area. Despite the fact that banking wealth management doesn't actually involve fiscal [ movement ], so our belief is that in time to come back in and well management will be increasingly run on the truly global business moment. And this is where we see a huge opportunity, huge untapped opportunity, an opportunity where most banks are still not even [indiscernible]. So that is something that we want more emphasizing. Second part of it will be about our Hong Kong business. So Hong Kong, broadly speaking, there are 2 parts of the business. One is the wealth management platform that we've been running for all these years. The second part is the part that's relatively new, the ePension part of the business. ePension itself, you have the eMPF and then you have the [ wholesale ] part of the business. So the eMPF part of the business has started to contribute in bigger win recently. So in the last 4 months of 2023, you see that, that has started to contribute quite well to the revenue and profitability. So that has actually helped to lift the overall profitability of our Hong Kong business as well as that of the total. We are clearly still at the early stages of this ramp up. And 2024 and 2025 will see the bigger ramp up of this overall business and bigger contribution from this. So the challenges here for us really is to make sure that we are able to deliver on our services smoothly without too much an operational issuance. Our eMPF is a business where we take a service fee. That fee is not dependent on market condition. That fee, more or less, is a really [ low ] based on the milestone in terms of a certain base level of work and serve as an additional amount that comes about arising from higher or more dividend. So the fact that it's not dependent on market condition, I think, is a positive thing because historically, while we are [indiscernible] to have some volatility resulting from the market condition. So this will help us ensure that the overall profitability will be smoother. The third point that we like to touch on really is on the -- being able to continue to develop innovative financial services that are complementary to our core business as a wealth management platform and also solicit the complementary to digital banking. So example, in terms of what are some of the new things that we'll be doing [indiscernible] on the bond business. Bond business today, investors can buy bonds through us. But you find that a bond business is one where, unlike the stockbroking business, right, bond dealing is actually still done in the bond industry in a relatively nontransparent way. All right. In a bond transaction, take Singapore, most customers will buy from the bank, then the bank customer or order by the bank then you get quote from the RM, RM will get a quote from the bond desk, and then [indiscernible] put on different varying level of markup, et cetera. So that's still a relatively primitive way, I think, of doing the business. I think the future, clearly, will be one where things are done on a transparent basis. So our vision really is to be able to help make the bond dealing as close to that of a stock dealing as possible. So that's where the Bondsupermart comes in, the need for a bond marketplace comes in. I'll elaborate a bit more on this. Another area that we are increasingly trying to give, but we're still at the early stages will be [indiscernible]. I think once we get into banking, other than being able to allow investors to get good interest rates in different currencies, the other part that we want to ensure and get easy for customers is payment. Pay the debit card, online payment, the equivalent of a [ PayNow ] in Singapore and things like that or even cross-border. So these services are important in ensuring that we can develop well in the overall digital banking. Yes. So these 3 points more or less sum up the core focus for us in the next 3 years. And let me elaborate a bit more on [ vision this call. ] So this chart here that what we show is the iFAST [ impact ] ecosystem that we have actually been showing for the last couple of years. There are some updates periodically in terms of number of customers, et cetera. But the other update I'd like to draw attention to that we put in here on the map that's on the chart, where you see -- where you put in the Central Bank together with fund houses, et cetera. So the way to understand this chart really is that iFAST, as a platform, is sitting in the middle. We provide a range of services, and we link up the various product providers on the left-hand side to the various distribution channels on the right-hand side. So the distribution channel include, firstly, our B2C channel, FSMOne. Secondly, it includes all the different financial advisory companies that use us and the banks and [ stock ] and firms or even the Internet firms in [indiscernible], especially that use us for our services as a platform. On the left side is really the different product. We start up with the fund houses. And then we put on stockbroking, ETF and so on. Then we essentially start to make the users of that on to the stock and ETF that trade [indiscernible]. So we're better in the Central Bank because now we are [indiscernible] the bank in the U.K. So the bank, of course, is directly able to access the Central Bank. So a very clear benefit of this is if you think in terms of the deposit base, right? So for sterling, right, where we take deposits from the [ client. ] As of today, we pay 4.25% for current cost savings account to the retail bond, right? [ Retail plan from West, ] from U.K., from overseas or Hong Kong, from whichever country, they will open account on us and they can place deposits with us. These are overnight money. They can withdraw money anytime. They will [ pay now ] equivalent part of our service. And they're paying 4.25%, right? But when you pay 4.25%, we're not taking risk to be able to do that. We basically think that to this interest rate environment, we're giving to [indiscernible] them, all right, the Central Bank and into this interest rate environment, they give us 5.25%, right? So we basically -- and they pass on very good interest rate to the consumers. 4.25% will be one of the highest for what's essentially current account, savings account. Yet we're just making 1%. We're not taking any balance sheet rates. So that's why [ winning it back were make excess ] of the Central Bank, and that's part of a model. And we feel that, that, in itself, which will allow us to grow the business very substantially. I think many digital banks around the world, when they talk about launching the business as a new digital bank, they talk about lending, et cetera. We are going to do some lending, but we expect to be conservative. We actually give a big part of what we do with the deposit. It is essentially [indiscernible] very safe approach. So if you look at our balance sheet today, there's a lot of cash. So that's because we have a big chunk of the deposits that we take, we pass it to the [ bank rate. ] Therefore that we can just take a decent spread without taking the balance sheet risk. The other part is we buy investment [ reform. ] We are happy with a spread of 1-plus percent. Yes. So that's what we do. So anyway, back to this chart in the ecosystem, yes. So we are increasingly building an ecosystem whereby we're connecting the various product providers as well as exchanges in Central Bank to the various end customers as well as financial institution or users of our platform on the website. So that's something that we'll continue to build upon as we move along. You also noticed also that, yes, we leased out all the various services and many of this stock exchanges, central banks, prime holders, et cetera, in different countries. And as I said, there's an increasingly [ bottomless world ]. And yes, we'll continue to build on that and expand on those. Next slide. So just a couple of points about the bank. We see the addition of digital bank to the -- our overall group as something that will help us accelerate our overall wealth, the overall growth of our wealth management. If you look at most countries around the world, especially those in Asia, including Singapore, you will notice that the biggest wealth management players are, in fact, banks. So the question is why that the case? Is it because banks are the best adviser or distributor or have the best technology that allowed them to do the wealth management business well? The truth is not a case, right? The reason why banks are generating the biggest wealth management players simply because they have the simple advantage of having the clients' cash or debt. So iFAST has grown over the last 24 years without this particular advantage of having the clients' cash within our system. So in a sense, in the last few years, we have come to a point when we feel that we want to also have some of these advantages that the banks have traditionally enjoyed. That's why we decided to buy the bank [ 3 ] years ago. And I suppose the other difference really is the -- most banks actually you look at this business, especially the business in relate to the retail consumers. They look at it in a localized manner, but we look at this business as a global business. So having that overall bank -- a global bank and the large part to be able to accelerate the growth of our overall wealth management platform. Yes. So we're a bank. We're looking at being able to attract deposits globally from various countries. A large part of the state with the bank, but we also expect that in fact to come, a decent portion will also find its way to the platform side, say, Singapore, where Singapore platform is linked quite seamlessly with our U.K. digital bank. So you can just transfer money from a Singapore platform and be able to invest in the whole range of investment product [indiscernible] So that will allow us to capture a global business in a digital way. In Singapore, there are lots of private bank, and they're doing a huge business, but most private banks are essentially doing non-digital business. They are relying on the RMs and so on, and they're going after the big customers. I think the [indiscernible] model client saw a masterful [indiscernible] those are across [indiscernible] because to be able to do that, you need to bring additional solutions. So for us, we're actually basically [indiscernible] and that's how we see [indiscernible] progress. Moving on. Yes. So as I mentioned, we see the bank as an accelerator for us. So at this point in time, the bank is still making losses. Last year, we made a loss of over $8 million as a group. Of course, if you look at $8 million loss, over $8 million loss relative to the number for group profitability last couple of years, it didn't look like the bank is -- for some people, it looks it such a good idea to shareholder bank. But if you're thinking in terms of the potential that having a bank, a retail [indiscernible] what it can help us do in the future, then you realize that certainly that some of this initial process are part of the approach. There are quite a number of digital banks around the world business, but we actually find that most of them really lose huge amount of money when they launch, massive amount of money, tens of millions or hundreds of million. It's actually quite common. I find that, to a large extent, that happened also because the cost of implementation, cost of implementing the system, the technology, is so high for most of these startups [indiscernible] that's why [indiscernible]. For us, we view that, yes, a loss of $8-plus million at this stage is -- it's a small number relative to what the bank can do for us [indiscernible] The 3 local banks in Singapore, really, the biggest profit generator in the whole country, and it looks like it continues to be the case in the possible future. So we see the bank being able to help us drive quite a bit of growth, especially 2025 and beyond. So that's how we see it. Moving on. Yes. So the second part really is about Hong Kong. As I mentioned earlier, Hong Kong has started to contribute more, second to the lead. So for Hong Kong, a year ago, we saw a contribution of -- the year ago in 2023, saw a contribution of $23.8 million. There was a substantial pickup in the last 4 months of 2023 because of the initial contribution of the ePension part of the business. Going forward, we expect that -- yes, we will see further growth. In April '22, almost 2 years ago, we actually gave a guidance in terms of group targets for our overall Hong Kong business. We gave a guidance in terms of revenue targets as well as targets on profit before tax. We gave a guidance for 2023, 2024 and 2025. So our 2023 numbers, we show that we have achieved our revenue targets in 2023, and we have exceeded our profit before tax target for 2023. So now that we have crossed into a new financial year in 2024, so we are actually giving a bit of updated guidance. In essence, we are maintaining our targets for [ private debt ] at profit before tax. So the next slide. Yes. So this particular slide on the left-hand side, we show the original guidance that we gave. And then now the updated targets [indiscernible]. In essence, as far as the profit before tax are concerned, we are maintaining our targeted PBT for 2024 and 2025. But as far as revenues are concerned, we have actually brought up the target across and net revenue 2024 and 2025. The reason for bringing down the targeted revenue is because on the wealth management side of the business, the Hong Kong has gone through a very tough 2 years because China market has performed very badly. The China market tend to affect Hong Kong bond, and the country of Singapore, Hong Kong and Malaysia. So because of that, we are assuming lower contribution in '24 and '25. The other reason for the reduction is the revenue target is because there are some timing differences, timing delay for the eMPF part of the business. But timing delay, essentially, mainly the fact the pace of onboarding rate, the pace of onboarding, but reducing the revenue. Our expenses have both also been brought down because since there's some delay in terms of the onboarding time table that the ramp up in expenses has also been brought down or pushed back in terms of timing. So on the whole, then our PBT target has not changed. So that's on Hong Kong. Moving forward. Next slide. Yes. So just to elaborate a bit more on the top point I was making at introducing complementary services. Sometimes I say services [indiscernible] yes, our overall platform, of course, our core business of wealth management and digital banking. So this is, as I mentioned, the bond business is one example. Our vision is that eventually we would like to bring to the individual investor, right, an improved bond transaction capabilities. I think the experience of transacting or trading in bonds is still way off compared to experience of transacting in stocks around the globe. The answer really is having a digital solution. To be able to do that, usually, this actually means having something that is close to being a bond exchange, right? We're not calling our bond exchange, but we're essentially trying to build something like a bond exchange. And to be able to do so, we need a license called the Recognized Market Operator license. And we -- in January, we actually were officially given a [indiscernible] approval for this RM license [indiscernible] retail license, which allow us to run a bond marketplace in Malaysia. So even though the license is in Malaysia, but the way we're running a business, you actually benefit our investors from the various countries we're in. So the way to think about it is the bond marketplace -- so you think in terms of like U.S. stocks, right? So the Singaporeans investing in U.S. stock. You don't need to go in U.S. to open account, right? You will transact through your local broker, a local broker who do a link up to the U.S. exchanges. So for the bond business where we have a bond marketplace in Malaysia, and there is going to be the Internet link [indiscernible] then our investors will benefit from the price transparencies as well as being able to execute on some [indiscernible] directly [indiscernible]. So that is essentially what we are working on, and we target to officially launch this in the second half of 2024. Yes. So as a group, we always felt that in order to make sure that we remain relevant in the long run of being able to ensure that we can grow in the long run, then I think the business model need to progress. I used to be in the stockbroking industry in the '90s. Back then, there's no Internet. In order for the investors to know that the share price and to call out the dealer or adviser, the things were done on that basis, and commission rates were regulated and so on. But today, it's a completely different environment. So financial sector business environment change all the time. I think in order to stay [indiscernible], we need to [ bring ] the business model as we move on, and that essentially means trying to add on more value to investors. So these are part and parcel of the overall thinking and ongoing [indiscernible] as a group. Yes, next slide. Yes, this slide is regarding our bond business, just showing how the volumes have grown. I think in [indiscernible], you find that in the last 2 years, the volume has grown quite significantly. The increase -- the high interest rate environment have actually made things more interesting because you find that even if you're buying a bond, U.S. Treasury, for instance, right, then you can get your 5% return and so on for something that's very [indiscernible]. So government bond, investment-grade bonds are to become interesting for [indiscernible] investors as well. So that actually moves the overall volume for our bond business. And I think going forward, we'd like to have the Bondsupermart, the bond marketplace to [ cap ] enhance the overall experience for investors and have for our businesses. Next slide really is a summary of our outlook. So we're essentially expecting that 2024 should see robust growth in revenue and profitability compared to 2023. In 2024, we're doing a [ 5 ] ePension division in Hong Kong, will be an important growth driver, while overall wealth management platform is expected to continue showing healthy progress. Our Singapore wealth management platform, for instance, have generally been able to quite consistently grow even though there's some market volatility. And yes, so that ongoing healthy progress of our wealth management platform, we expect to continue to see. But In addition to that, we upbeat that going forward in 2025 and beyond, then the iFAST Global Bank will start to become an important driver for the overall group. And yes, so this is -- part [indiscernible] quite exciting for us for the next 5 to 10 years. That's how we see our overall growth business. So with that, I'll stop here, and we'll be happy to take on any questions. So yes, [indiscernible].

[Operator Instructions] So perhaps we can start with our physical attendees first.

Congrats on your results. I'm [ Joey ] from [indiscernible] Singapore. Okay. So just a few questions here to start. I know that [indiscernible] target of $100 billion is extended from [ by 2020 year ] in the last quarter, to between 20-year [indiscernible] [ 30-year. ] Can you tell us a bit more about this transition? Does this forecast rule out any further special catalysts in your existing markets? And also does it rule out any entry into new markets?

Yes. I think we -- internally, we still want to shoot for the [ 2020 ] year for the $100 billion. But I suppose last 2 years, things have grown more slowly because of the [indiscernible] market conditions. So we essentially knew that -- yes, at this point in time, it will be good to look at that target in terms of the reach being 2028 and 2030. To keep that in 2028 year. Looking at CAGR of 36%, to keep that in 2030 and look at CAGR of 26%. I think, yes, 26% to 36% or 37%. So that's the current range. Yes, so this is an update of -- yes, actual number as we take to account [indiscernible].

[indiscernible]. So from the ePension division in Hong Kong, you see this will be [indiscernible] growth driver by 2024 and 2025. Can you just walk us through how much the entire project has really been in operation from December 31 currently and by end of February.

So what we saw in recent months really is -- especially the -- still at the initial phase of other [indiscernible] That's taken the various [indiscernible] by getting ready for the [indiscernible]. The actually onboarding hasn't actually officially start, but starting in [ second quarter ] of this year and you can -- the volume and by end of 2025. That's -- so as an onboarding ramp up, that's when you see the [ important ] contribution.

Sorry. Two more [indiscernible]. So 2 questions on dividends here. So could you just provide from color [indiscernible] dividend for this year because ETFs has surged the most year-on-year over the past 5 years? And also, what is your payout ratio for FY '23?

We have kept the dividend unchanged because we look at the overall payout ratio for the year as a whole. So for 2023, the dividend that we've paid out look up to a payout ratio above, just over 50%. That's why we kept the dividend unchanged. So the previous year, in 2022, even the profitability was negatively affected. We [ retain ] the dividend. So in 2023, in a sense, profitability is catching up. Going forward in terms of 2024, we expect to be raising our [indiscernible] operation. I think we essentially balancing between the ability and the intention to reward shareholders, to pay up more dividend with our pretty strong ambition of building our overall banking business as well. I think in the overall context of the banking world, our current shareholders of [ 250 million ] is still a small number. So that's still the banking, the over time, we want the shareholders' equity to continue or grow. Yes. So for 2024, our dividend, for sure, will increase. We don't think that we'll be paying up [ 15% ] in terms payout ratio [indiscernible] it should be less than [ 15%. ]

Perhaps we'll start with a few questions from our virtual attendees. So we have a question from [indiscernible]. Yes, okay. For Hong Kong, the revenue targets are lower than what you mentioned earlier that you have maintained your PBT targets. How will this be achieved? Are you expecting significant reduction in OpEx? Or is it something else that will allow you to achieve the same PBT numbers?

Yes. So the PBT is a function of revenue and cost, certainly. So the reason why the revenue targets have been reduced is partly because the pace of ramp up of the onboarding has [indiscernible] Yes, slower. It is going to be slower in the initial 1 year. But since the big ramp up is slower than the pace of how fast we build up our human resources to do the work required is also being reduced. So that's why the projected increases in cost also have been brought down. So because of all that and the PBT number has not changed.

Okay. We have a similar question for our Hong Kong ePension business from [ Shaw Han. ] For Hong Kong ePension, are there onetime project fees that will [ fade off ] once the implementation is over? If yes, how much are these fees? What is the revenue level of HKD pension business when fully ramped up beyond 2025?

The -- yes, if we go back to 2022 and initial part of 2023, there were some one-off implementation fee, but those numbers were actually quite small. So for us, the main revenue really will be always service fee that we have started to see for the last 4 months of 2023. So this part is not one-off. It's recurring and it is still in fact going to increases on boarding rate growth. And that's why we expect that we see more in 2024. And then, in 2025, we'll grow compared to 2024. Beyond that, we still expect some growth as well. That is for -- it is plus 7 years. But beyond 2025, the growth won't be as substantial in terms of percentage, but it won't drop off because of overall service for -- will continue [indiscernible]

Perhaps can I just follow up with a few other Hong Kong key question and also related questions from [indiscernible]. Thank you for the recent results and for questions. Since we are now in 2024, could management provide guidance for the eMPF ePension revenue and PBT targets for 2026? Any updates on the ORSO ePension services? What is the status of this at present?

The ePension revenue and target for 2026, we haven't pinned down an exact number. We probably won't be giving an exact number, but we would expect that there still will be some growth in 2026 compared to 2025 and likewise for subsequent [ few ] years, but the growth would be [ aspect ] in terms of percentage. Right. Any updates on the ORSO ePension part of the business? For this part of business, we are expecting that there will be some initial contribution in the later part of 2024.

Okay. So [indiscernible], I think we have already addressed your question 3, so we will proceed to the fourth question. Noted that the loss of [indiscernible] banking stood at $8.6 million for 2023 compared with $5 million for 2022, losses have increased despite revenue rising to $12.3 million for 2023. What is management's confidence that breakeven can be achieved by 4Q 2024 despite that the losses seem to be higher year-on-year?

So losses have gone up, to a large extent, because the cost have increased as we launch our new division, as we increased our resources to launch a new division in segment the launch of this new division, the digital transaction linking this personal banking, et cetera. So that's exactly the key reason for that. In terms of how we expect to achieve profitability, I think we're, in a sense, counting on just a simple formula that banks around the world have used all along, which is net interest income. So net interest income will ramp up as the deposit base ramp up, and we're able to deploy that into assets that give us some margin, right? So we just need to achieve 1%, 1.25%, and the net interest income will ramp up. So the expectation in terms of being able to reach breakeven end of this year, it's on the basis of what we're expecting in terms of the ramp up of the deposit base. So this -- yes, nothing too complicated then. Yes?

Just a follow-up question on [indiscernible]. Let's say, we're trying -- we're paying for the customer [indiscernible] pay [ 4% to 5%. ] What are your [indiscernible]? And since you can get [ 5 ] or [indiscernible], is there any limit to [indiscernible] past result [indiscernible]? And also, [indiscernible] kind of how savings. So there's a mismatch of the [indiscernible] of your asset environment agreement.

Yes. So the question on what the competitors pay. So the competitors are -- you could say this is about the traditional bank, right? Because of all deposits [indiscernible] Generally speaking, you have to give an account where you can take the money off any time, overnight money and can use it for payment, like the [ pay down ] in U.K. We call it FPS services, faster payment services. For that, they generally pay [indiscernible] in Singapore, right? I still use [ DBS ]. I'm guessing I'm getting [ 0.05%. ] At -- on iFAST fee, we have a cash account. Cash account pay 2% now, right? At 2%, we're actually making a comfortable margin. So imagine at 0.05%, EPS certainly is making a huge margin on that. So banks [indiscernible] pays very little on this part of it. And they pay very little. It's not they can't afford to pay very little, and money still remains with them. That has been the way the banking system works. It continues to be the case. I've always said that the banking system, banks -- banking industry, from our perspective, is the least competitive part of the financial sector, simply because you don't have too many new players coming in. And of course, the traditional bank and so on, they still have a lot of legacy systems and processes where that sort of discouragement from paying more higher interest rate for retail customer because if you -- there's administration costs. But in our case, we can pay out [ 4.25%. ] Yes. So that's the current situation. Technically, I think in Singapore, I think if you can actually just -- I think [ Transbank ] is really paying in a higher rate. And is -- I'm sure they're attracting lots of money. [ Transbank ] is a new bank. They look at the number, they say, okay, we can make good money by paying 2%, and chances are the other bank will [indiscernible] substantially. Your question on how big can that be? For bank [indiscernible] the ability to ramp up the volume, there are few considerations that one of consideration really is a risk. So you're taking deposits, where do you place it in, right? Because you need to earn the interest income. So if you're lending traditionally, of course, back to organic. In our case, we haven't started our lending business. So what we are doing is mainly -- yes, giving a central bank and we buy investment grade [indiscernible]. That's what we're doing. So if you take the part where we pass our money to central bank, that essentially is something where the capital cost is effectively rated at 0, almost 0, right, [indiscernible] investment group on business the risk rating for the assets. You can place a central bank that's rated at 0. So in theory, you could say that we can raise $1 billion, $10 billion and so on, and just make a 1% spread. And we can just keep ramping that up, that [indiscernible]. That's technically, right, the [indiscernible] Yes, so that's the way we see it. Yes. So that's why we can do that. That's why I typically say banking is actually the less competitive part of business. And high-end margin business [indiscernible] higher margin. [indiscernible] is still a consideration of having to have the capital and so on and so on. So in our case, we see ourselves as a wealth management group, but adding banking to it. We're a management group. It's potentially a business where fee base. We don't need to ramp up the capital too much at the volume growth. Banking will be accommodation of certain parts where capital requirements are so high value, but other parts we need to increase the capital [indiscernible]. So it's just managing the right balance. Is there another part of that question?

Just one more is -- the difference [Indiscernible] investment and [Indiscernible].

Yes. So certainly, I think all this is part of [Indiscernible] in terms of doing so. So in our case, the part that is sitting on overnight money that for this part, we put -- as of now, the majority of it is timing, so there is that exact match. Then there is the other part where it's coming in, in the form of fixed deposits between 1 year to 12 months or even 24 month deposits. So for that, then we take that by investment reform, mainly and average surety for us is actually quite short, less than 1 year. So that is a relatively good match.

Okay, we have now 2 more virtual questions from [Kevin]. Congratulations on your good results, can please share more about the institutional customer transferring their equities, which resulted in lower net inflows for 4Q?

Yes. That actually is related to one company, the stockbroking business who use us for access to Singapore Exchange. So they started around -- the business in Singapore by routing through us since we are SGX member. But as the volume built up then they go directly to the SGX exchange. And that's why there's some transfer of that. That's essentially actually what happened. Traditionally and the bulk of our AUA are actually coming from financial advisers for some banks and insurance and [Indiscernible] and things like that. But I suppose increasingly, there's a group of customer or in the stockbroking side of the business. So they also use us on the B2B basis. Yes, so that's the [Indiscernible] effect that you actually seen. We saw -- yes, we gave the breakdown in a sense also to show that the overall platform that we have, that the inflow is actually quite healthy on an overall basis. So this is one-off kind of the effect that you actually see.

Okay.

So just to go back on the bank. So suppose 1% [Indiscernible] help the bank [Indiscernible] present by fourth quarter. So even after the new [Indiscernible] grow profitability from next year onwards. You mentioned loans earlier, you currently have the appropriate license, start issuing commercial loans?

Yes. So we actually -- so historically, we talk about our AUA. So we have a unit trust and AUA, [Indiscernible] and so on. So we receive cash that's the form AUA [Indiscernible] in the form of money market fund because [Indiscernible] on cash account, take Singapore for instance, where it's not on our balance sheet, but we take that is in our trust account and pass to other banks. That's how AUA [Indiscernible] going back, so there's cash coming in the bond deposits. So that we see that as [Indiscernible] AUA as well for us, except that this one we pick on [Indiscernible]. Picking on our balance sheet as advantage and disadvantage, advantage really is we're in a position to attract it, a lot more to simple product. We can just say [Indiscernible] than the big [Indiscernible] process, higher margin, right? So if you look at our [bond business] traditionally, our revenue in terms of, let's say, recurring revenue as a percentage of AUA have tended to be about 3.6%. So we have cash [Indiscernible] particularly 1% of credit. So we see the FD as something that -- is like AUA that we have been able to grow that and that we will then able to consistently grow it over time, and that will give us the increasing recurring revenue and [Indiscernible]. So that's how we see this [part of] business. In a sense, there's some that even the buying investment [Indiscernible] bond technically, we're lending to -- lease the company, obviously. It's some of lending, but it's a quite efficient [Indiscernible] go to other individual [Indiscernible] time by my client, et cetera. We expect our cost that -- as we move on, there will be some loan that we give. The initial service that we have paid out about [Indiscernible] on the budget financing, which is something that as a wealth management platform is only natural. So we'll make some margin there, so that will grow. And then as we move on, then we'll look at what [Indiscernible]. But we don't think we need to line up the majority, will be really conservative and also not [Indiscernible] issue, yes. But -- so the short answer to your question is, yes, we look at it AUA then we [Indiscernible] main spread on that.

But the budget balancing is for the group, right? It's not specifically from the Global Bank.

It's [Indiscernible] Singapore, Malaysia, Hong Kong since the clients are there, but we bring in the bank [Indiscernible].

Just welcome to this [Indiscernible]. So in the [Indiscernible] licensing requirement of U.K. bank to [Indiscernible] deposits of overseas [Indiscernible], when will you see the margin will [Indiscernible].

Deposit is a full [Indiscernible] so you can take deposits from anywhere around the world where the local resident or people from Hong Kong or whichever country, as long as [Indiscernible] do our money -- anti-money laundering checks properly, so there's no restriction. In terms of loan, there is some safeguard that we watch over, typically we are looking at -- [Indiscernible] individual and so on [Indiscernible] actually the 3 million.

We have our next question. How you ensure proper KYC of depositors from 60-plus countries around the world? What is the risk of [Indiscernible] clients to the bank?

Yes. I think the KYC rule, anti-money laundering measure and so on are part and parcel of the business of any financial institution. In fact, not just the bank in the various country that we're operating and that has always been the case. Say for instance, we have 200,000 customers in Singapore. And for each and every one of them, we have to do our KYC on the client at the point of boarding as well as on an ongoing basis. That's part and parcel of what we need to do. So it's something that we are actually quite used to. And Singapore also has clients from various countries as well. There's no restriction in terms of not being [Indiscernible] overseas customers. So this -- yes, it's being done in Singapore. And likewise, our U.K. bank that has to be done. The most banks tend to prefer not to have -- open account for overseas customers unless the customer brings $2 million, $3 million, et cetera. That's why most banks are actually not doing it. But we see the retail business as being a segment of business that [Indiscernible] competitive. We essentially need to ensure that we can do our administration, our checks and different power processors efficiently. The KYC onboarding, et cetera, there's certainly quite a bit of work at the point of onboarding, as well on an ongoing basis. And of course, to help ourselves manage some of that better then there's the online KYC that we are actually using for customers on a number of different countries so that we can process the onboarding, a lot of efficiently where some of this, will check on services that will help us to ensure that the compliance checks and so on can be done a lot more efficiently. So it's about the processors and how we can actually manage that well. So -- but essentially, yes, the business is there for us to do. Many banks choose not to do because we prefer to focus on the high level in the region. In our case, we find a high net worth individual is actually a more competitive [Indiscernible].

Okay. Next we can address a few questions on our Bondsupermart. I would like to find out more about to recognize market operator license from Malaysia, [Indiscernible] license change [Indiscernible] doing right now with Bondsupermart.

I suppose one way to look at it is to -- so you think in terms of buying stock on the SGX. So you see -- you can see the actual price today, but going forward then -- but okay, so you have level 1 data [Indiscernible], you have level 2 data, the market debt, et cetera. To be able to do that, you basically need to be a marketplace for an exchange where the clients can put in the bid and offer quotes into the system, right? Today, as a dealer, we cannot allow clients to put in [Indiscernible] into the system, and then match the order rate [Indiscernible] them. To be able to allow the client [Indiscernible] offer for different bonds and then allow the others to be matched, then you need a RMO license. Yes, so that's why we need a RMO license -- so it's like something close to exchange. Essentially, that's what it is. So from a client perspective, then going forward, you will be able to see the price. They can see the bid offer price and some volume on the bid offer for the different price, and they can transact [Indiscernible]. Today, it's typically more of a request for quote, the way the business is done in the industry. You will request for a quote. And then, of course, it's given to you then [Indiscernible], and then you go through that manual process. So you want a system whereby you can see the price, then you just hit it right by yourself and transaction is done.

Just to confirm, so how you tend to assume that Bondsupermart [Indiscernible] Malaysia? So the [Indiscernible] we see banks from Singapore and the other countries and where will it be [Indiscernible].

So the way the business will be done, that's why I gave an example of a U.S. exchange, right? So today, the investors in Singapore you're buying U.S. stocks, but you don't need to do anything in the U.S. We as a broker -- we actually are doing that. And in fact, U.S. exchanges having business from all over the world because there's demand for U.S. stocks. So that is a highly scalable business model essentially. So for bonds, we are looking at a similar kind of model. So to start off, we are looking at countries that we have already in Singapore, Hong Kong, Malaysia where there are various investors and partners that are already using us. That will be the starting point. But as we move on, you can imagine that there are different intermediary, different -- [Indiscernible] firms that we can work with in different countries that can have a similar arrangement. So that is something that allows us to scale. Now of course, Singapore itself increasing, but so targeting global customers. So if you have a client coming from Hong Kong, China, Malaysia as a [Indiscernible] account of iFAST Global Bank in U.K. and then we decide to transfer some money to our Singapore account and then they buy. So we are able to serve global customer to Singapore. And then when you buy the bond from Singapore, then the order will appear on the RMO in Malaysia. So that [Indiscernible] is actually already there.

Information that you also try to provide margin trading services via the global bank. So it will be done on the FSMOne platform -- can you give update on the FSMOne platform.

Yes. So in Singapore, for instance, recently, we actually launched our budget financing services. So because in Singapore, we are not a bank. So we want the funding support from other bank. So actually we moved other bank in Singapore. By the same time, we also have a across global bank that can also directly lend to the [Indiscernible].

So there would be [Indiscernible] cost is 4.5%, so if you do margin trading, it will be [Indiscernible].

Yes, that is starting, so a different currency at cost. As of today, we are probably -- okay, yes. So the cost and how competitive we are then is something that we have different levels of readiness as we grow, but because when it's within the group, it's also easier for us to manage because there's no need for duplication from margin.

Can you also comment about your stockbroking profitability so far -- better than your peers? Are you performing [Indiscernible] in your own understanding?

Yes. We -- the way we look at our business, we look at it as an overall wealth management platform, so [Indiscernible] make sure -- we look at it as an overall wealth management platform. You are really trying to see the core product, but stockbroking, bonds, ETF that's [Indiscernible]. And in stockbroking, what comes is the cash account. So because we don't do [contract business], so clients put money in the cash account, and we [Indiscernible] from that cash account. So we see the business from that perspective, somewhat different from what the other players in Singapore that we look at it. Where we are today, we -- yes, we are clearly not a leader in Singapore. But in terms of the model that we're doing, in terms of overall service we deliver to any client, we are actually happy that we are able to deliver [Indiscernible].

There are couple of questions for our Hong Kong Wealth Management business from Benjamin. Core Hong Kong Wealth Management business PBT is flattish over the last 2 years, what is the fair assumption for core Hong Kong PBT growth from hereon.

Yes. I assume that [Indiscernible] our historical business of wealth management. I think, yes, so if you [Indiscernible] ePension then wealth management part of that business last year wasn't too exciting. In fact, I think there's some reduction in profitability of the debt. A key reason for that really is the extremely poor market condition for China stocks. So that actually affected the volume very substantially. The fact [Indiscernible] to some extent, so. On an ongoing basis, we still expect that will grow, I think -- but to be able to grow in healthy [Indiscernible], the situation where market doesn't keep dropping price [Indiscernible] so as long the market doesn't keep dropping, you have a balance up and down [Indiscernible] time that we are in a position to grow the wealth management platform [Indiscernible].

From [Ryan] what portion of the revenue guidance [Indiscernible] Hong Kong Wealth Management business [Indiscernible] versus ePension having delays. And when the ePension product is on-boarded, what level of quarterly revenue is contracted?

On the first part of the question, I don't have the exact percentage offhand in terms of what level of -- I think both side contribute to that. Second part of the question is...

What level of revenue should we expect from the Hong Kong business -- sorry, you have already addressed this. When ePension product is fully on-boarded what level of quarterly revenue is contracted?

Yes, we're not able to give the exact detail in terms of the actual revenue for the [Indiscernible] because of some confidentiality requirements, which is why we have given, but in order to [Indiscernible] investors in the [Indiscernible] that's why we look at it -- and in terms of the overall [Indiscernible] for the Hong Kong business. So we view [Indiscernible] to have investors [Indiscernible].

Okay. From [Indiscernible] for the new guidance for the PBT numbers, is also earnings expected as well?

Yes. Well, the initial part of the [Indiscernible] business have been taken into account. Of course, beyond that, we hope to have even more business. Yes, so if we can go that well, then that can...

Okay. We have 2 more questions on operating leverage and operating expenses from [Indiscernible]. Is there any time lines to obtain operating leverage? When do you expect operating expenses with regards to the ePension division to peak?

I think the -- the mid ramp-up release in 2024-2025, going to 2026, there could still be some increase in expenses together with some increase in revenue, but the phase at which it grows is not so much. In terms of operating leverage, as well as a group, we are seeing some operating leverage. Now which is why the ramp-up in profitability in 4Q 2023 has been backward even though the revenue didn't wrap up so well because in the last 2 years, we launched new services, we bought the bank. So we have [Indiscernible] expenses before the revenue and [profiting] our revenue will ramp up more than [Indiscernible] operating expenses. So as opposed to 2024-2025, you'll see more of that impact [Indiscernible].

Okay. From [Andrea], other OpEx was particularly higher in 4Q. Can we have some color on which components drove them up on this increase to breakdown other OpEx included [Indiscernible] operation of ePension and then impairment loss allowance on investments and debt securities. And what does the impairment loss allowance on investments in debt securities [Indiscernible] how much of this...

This question, [Ziwei] or David, do you have any comment on the other OpEx...

One of that, I will say during [Indiscernible] ramp-up of the [Indiscernible].

Yes. So [Ziwei], our CFO was mentioning the 2 factors there. One is some additional expenses as we ramp up our U.K. Bank activities and so on. And the other one is that there was some provision because since 2 years ago, we also did some China bond even though that at that time, it looks like it's a very strong company. So it shouldn't be an issue. But I suppose in the last 2 years, [Indiscernible] strong company [Indiscernible] has been brought on. So because of that, we need a full impairment on that reform.

So we have one more financial-related question. What was the rationale for the drawdown of bank loans in the quarter?

I'd say few -- 3 main reasons. One is we started a bit of our margin financing business. But the way that's done is we take loans from other bank, and then we sort of extend that up to the end client. So you see that in the books. Second reason is we injected additional capital into the bank. As a group, the numbers are very healthy and so on, but in terms of -- at a different level of our subsidiary, for -- we released a drawdown [Indiscernible] loan and then we inject in the form of additional equity into the bank. Third reason is, yes, the ramp-up of the activity for the ePension business, some ramp-up in terms of initial capital expenditure and ramp-up expenses and so on. So that ramp up first before the actual payment -- actually get received for this initial period. So that's why there was some of that ramp-up. So a combination of these many reasons.

One last question relating to the Global Bank. So just on how to inspire both relatively new -- how to inspire customer put money in bank and do you do marketing activities to promote more deposit gain, and have you [Indiscernible] Singapore is [Indiscernible]. And can we know that [Indiscernible].

It's open to customers globally, including -- yes, Singaporeans who want to do so, even though we're not exactly targeting Singaporeans as a main customer. I think Singapore [Indiscernible] for foreign currency, particularly, we actually give pretty good attractive rates. So we actually make sense even though Singaporeans are not [Indiscernible]. In terms of the marketing, we have done some of that. Not in a big way yet. Partly to social media, partly to liaising and U.K, et cetera. We have not ramped up in a big way because of services also in a process of rollout, and as we rollout more and more services, then we'll ramp up our marketing more and more. And already, even with just limited amount marketing, advertising, I think you'll find that customers actually come in quite readily. Our bank in the [Indiscernible], there is that deposit insurance as well. So that is something that's been buying from the customer. So in U.K. is GBP 85,000 per person, right? So technically, you could say that GBP 85,000 is [Indiscernible] you buy a guaranteed product in sterling is 4.25% or 5% -- I think we [Indiscernible] 4.9. U.S. dollar deposit 4.29%. Technically, it's guaranteed from the perspective of a client, and [Indiscernible] that is safe and easily understood. So that's why it's a very simple -- it's a simplest form of [Indiscernible] that's why it's quite easy for clients to [Indiscernible]. That's why we're actually confident in the years ahead this can make a big difference as we ramp our marketing further as we roll out [Indiscernible]. Okay. I think that brings us to the end of our results briefing in the Q&A session [Indiscernible] thank you very much.

Thank you.