Oversea-Chinese Banking Corporation Limited (O39) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us virtually this morning for our 2021 full year results briefing as well as the fourth quarter 2021 results briefing. On our panel today, we have our group CEO, Helen Wong; our CFO, Mr. Darren Tan; as well as our group Global Treasury, Mr. Kenneth Lai. We will start today's session with our CFO, Darren taking us through the slides. And there after we will have our CEO, Helen Wong, going through her presentation, and we'll take questions after that. Thank you.

Great. Thank you, Ching Ching. Good morning. Thank you once again for joining us. So I'll start with the page of the full year 2021 result presentation. For the full year of 2021, OCBC Group achieved a net profit of SGD 4.86 billion. This is up 35% from the previous year and close to the pre-pandemic level of financial year 2019. Growth in noninterest income was strong, although the momentum has slowed in the second half. Interest income had remained soft amid a low interest rate environment. With general expectation of higher interest rate, we should see stronger net interest income in 2022. Expenses have risen in tandem with continued investment in systems and headcount. And with better economic outlook, significantly less allowances were set aside for the year. With a strong common equity tier 1 of 15.5%, the Board had proposed the final dividend to be raised to SGD 0.28 per share from SGD 0.25 per share in our interim dividend. This will bring the full year dividend for financial year 2021 to SGD 0.53 and back to the financial year 2019 level. Now I cover our results in greater details in the following slides. Moving on to Slide 4. As I mentioned, our group net profit at SGD 4.86 billion for financial year 2021 had returned to pre-panamic level. Consequently, our return on equity had also rebounded 2 percentage points to 9.6%. Our operations continue to be well diversified with relatively stable contribution geographically from the year before. Now moving on to Slide 5. For the full year 2021, our 3 business pillars continue to deliver reasonably good results. In terms of banking operations, our net profit for financial year 2021 of SGD 3.93 billion was 41% higher year-on-year with strong loan growth of 8%. Our wealth management income rose to a new high of SGD 3.92 billion, while our insurance business continued to deliver strong results. Now on Slide 6, you will notice that our funding, liquidity, capital position remained strong, putting us in a very comfortable position to support our customers and pursue our long-term growth. Slide 7. The group's full year net profit of SGD 4.86 billion was 35% higher than a year ago. This was mainly driven by higher fee and insurance income as well as lower allowances. For the fourth quarter, net profit was SGD 973 million, 14% below the previous year and 20% lower than the last quarter, mainly as a result of higher allowances that we have conservatively set aside for impaired assets in the quarter. Now moving on to Slide 8. Our banking operations net profit was 41% higher at SGD 3.93 billion, mainly from an increase in noninterest income and lower allowances while Great Eastern net profit contribution also rose 17% to SGD 932 million. I'll move on to Slide 10. Net interest income for the full year was lower year-on-year at SGD 5.86 billion as a result of the 7 basis point compression in net interest margin. For the fourth quarter, we were able to maintain net interest margin at 1.52% from our continued efforts to refine our funding compositions and costs. Moving on to Slide 11. In terms of noninterest income, for the full year, it was SGD 4.74 billion, an increase of 14% as compared to the previous year. Wealth management-related fee income as well as stronger insurance income accounted for the [indiscernible] growth. Moving on to Slide 12. Consequently, total wealth management income for the full year rose 11% to SGD 3.92 billion and now constituted more than 1/3 of the group's income. The group's total wealth management AUM, asset under management, which comprised wealth management segment like Premier and Private Banking, delivered consistent growth over the 5 -- past 5 quarters to SGD 258 billion. Moving on to Slide 13. For the full year, fee income rose 12% year-on-year to record SGD 2.25 billion. Our strong Wealth Management franchise, as shown in the previous slide, continuing to be the biggest driver of our fee income with wealth management fee surpassing SGD 1 billion for the first time, although the pace of growth has slowed in the fourth quarter on the back of a more subdued financial market. Slide 14, you will notice that our trading income of SGD 763 million for the full year was below that of SGD 863 million in the previous year, largely as a result of lower noncustomer-related flow and trading income. Now moving on to Slide 15 on operating expenses. Operating expenses rose 7% to SGD 4.76 billion. The increase in expenses for financial year 2021 were largely due to staff-related costs arising from higher headcount to support our growth in wealth management business, continued investment in technology, and also lower job -- government job support grants that we received in the previous year. Adjusting for the grants, the year-on-year increase in expenses would have been lower at 4%. Moving on to Slide 16. For the year, we have provided lower total allowances of SGD 873 million, given the improvement in economic outlook. However, additional allowances of SGD 317 million was set aside for the fourth quarter. These allowances for impaired assets was at SGD 387 million, and it rose from loans to a few project financing deals that were affected by supply chain disruption in Greater China and in international market. The write-back in allowances for non-impaired assets of SGD 70 million were largely from movements to impact categorization. Moving on to Slide 17. Total cumulative allowances were lower at SGD 3.9 billion for the quarter as we wrote off more impaired assets, mainly in the oil and gas offshore support vessel space. This reduction was more than the additional allowances for the impaired asset that we set aside for the quarter. While we prudently classified more secured loans as nonperforming, the lower loss history of such loans necessitated a lower amount of allowances to be provided. Consequently, the coverage ratio for our nonperforming assets was lower at 90%. Moving on to Slide 19. The quarter-on-quarter increase in a few in the new nonperforming assets was because of the difficulties faced, as I mentioned earlier, in a few project financing loans that had delayed arising from the supply change problems that they face. Now this were offset by increase in recoveries, upgrades and write-offs that were mainly from the oil and gas offshore support vessel space and transportation sectors. Moving on to Slide 20. Our loan growth grew 8% to SGD 290 billion from SGD 267 billion a year ago, driven by growth in Singapore, Greater China and our international network. By industry, the increase was led by growth to building and construction sector as well as professionals and individuals. Moving on to Slide 21. Our loan portfolio remained well diversified, with building and construction housing sector as the largest segment at 28% and 21% of total loan, respectively. The group continued to expand its green and sustainable finance portfolio, increasing 66% year-on-year to SGD 23.3 billion and now accounted for 8% of our loan book. Total relieved loans amounted to 1% of total loans, down from 2% in the previous quarter. Moving on to Slide 22. Liquidity remained ample. We had grown our customer deposit by 9% for the year to SGD 342 billion. CASA deposits saw a stronger growth year-on-year at 14% to SGD 217 billion, resulting in a higher CASA ratio of 63.3%. On the final slide, Slide 23, the Board has proposed a final dividend of SGD 0.28. There's a 12% increase from the interim dividend of SGD 0.25. This will bring the total dividend for the year to SGD 0.53 per share back to financial year 2019 level and represented a payout ratio of 49% against our group net profit. The Scrip Dividend Scheme will not be applicable. Now I'll pass the floor to Helen. Thank you.

Thank you, Darren, and good morning, everyone. I'm pleased to be here today to talk to you about our financial results for the last quarter and for the past year. But looking back, I think for the last 2 years, we have been managing through the uncertainties brought about by COVID-19, and the pandemic has always asked us to look at how we actively serve our customers and support the community and also keeping our own people safe. So I'm referring you now to the slides. And with the year-end review on Slide 3. So during the year, we improved our financial returns, advanced our sustainability agenda and also accelerated our digital transformation. Darren already mentioned that our profitability is back to 2019 levels. We would have communicated during the mid of the COVID-19 in 2020 that we may expect to take 2 years to come back to the profitability level of 2019. So I'm pleased to report a strong set of results for 2021 that already bring us back to 2021 net profit just shy of that year's record earnings. We also restored our full year dividend to 2019 levels with a payout ratio of 49%. On the sustainability, it's a big topic. I think this is the subject that is most discussed between us and our clients and government authorities and regulators. We continue to make good progress in our sustainability agenda. We secured more than SGD 34 billion in lending commitments for sustainable financing. And we set a more ambitious target to double the original target to reach SGD 50 billion by 2025. On accelerating digital adoption, we increased digital penetration, and we continue to bring immediately accessibility and simplicity for our customers. Looking at the future, I think we have to say we expect economic recovery momentum to carry on. Asia is expected to be among the fastest growth region. This would drive growth trajectory for OCBC. We see potential increase in interest rates to provide a gradual interest income uplift. Guidance for 2022 on 3 things: We expect NIM to be between 1.5% to 1.55%, but with a potential upside as interest rate -- if interest rate is uplift faster. We expect loan growth to be in mid- to high single digit, and we want to provide a credit cost guidance maintained within 20 to 25 basis points with a real debt recovery to continue in 2022. But I would say that I am forecasting that it will be on the lower side of this range. Of course, we want to remain watchful for potential headwinds and do hope that Omicron is the final disruptive phase of this pandemic, and COVID-19 evolves into a livable endemic. Other issues to navigate include inflation, geopolitical tensions, supply chain disruption, rising energy prices, et cetera. I'd like to share on the following slide, the SMS phishing scam. I think we've talked to the media in the past, how it happened, but we just want to provide a bit more details. This is how we have been addressing the phishing scams over -- in particular, over the month of December leading to January. The scam was first detected on the 8th of December with 3 cases. During those periods of time, this is much lower than the normal average of 18 daily cases of other scams, particularly job camps. The number was thus not significant. The cases increased from the 15th of December and similar trend as other scams. The surge to double-digit came on 25th December and grew aggressively until the 30th of December, which is during that period, we have seen a surge -- a 40% surge in customer cost to our contact center. The attack was unprecedented and is well orchestrated and highly coordinated. We canceled training, we canceled leave of staff, and we called [indiscernible] staff to cope with the cost. And of course, we took immediate steps to raise public awareness during the period in December, and we intensified the efforts of communications from mid-December. We also actively blocked and took down phishing sites. At one point of time, it was more than 200 sites that we identified. We expedited additional security measures such as the cooling off period for 2FA activation. We lowered daily payment limits, and we stepped up monitoring for transactions, and we flexed multiple transactions for same beneficiary for monitoring and tracing. This helped to stem the cases from the 31st of December, and there are no new cases in early January onwards. We decided on having goodwill payout actually very early in the -- when we look at this scam because the circumstances are very different from other scams. And the amount provided for the payout is under the expenses in the fourth quarter 2021. And of course, we implemented MAS and ABS security measures announced on the 19th of January, and that is applicable to the whole industry. Just this month, we rolled out the emergency kill switch, which offer customers a choice, an option to stop the reserve being scammed and stop the account being used for further payments. And we continue to work with the industry, MAS and other government agencies, to put in place more fake apps on a coordinated basis. I'd like to now switch to Slide 9, where I would like to talk about a 3-year refreshed corporate strategy to drive growth and reinforce our strength. I'm pleased on the progress so far. This doesn't start today. We have been actively looking at our strategy. I think in previous discussions, I talked about the global trends and in particular, the trends are in Asia, and that Asia -- now trend is more within Asia. And that, together with our focus on our core markets, and our strength in Greater China and ASEAN, we've been identifying a lot of opportunities. So the strategy comes from that direction. And we are looking at 4 growth pillars and another 4 pillars to reinforce our strengths. So on Asian wealth, which is the first pillar we talk about, we will strengthen our hub capabilities across Singapore, Hong Kong and Dubai and London to continue the growth. We want to extend our global wealth platform. This is across all customer segments from Bank of Singapore to OCBC Premier customers, that was built and started to run across all segments in 2021. We are accelerating the building up of relationship bankers to capture growth and we want to deepen cooperations of financial institutions, particularly in China and in the regional banks such as Ping An Bank. The second pillar talks about trade and investment flow. And we will grow Chinese cross-border business, deepening coverage of technology, trade and logistics and service value chains in China, ASEAN corridor. We continue to build Greater China division and enhance capacity. We just increased personnel in the China business that's in Malaysia as an example. Then the China business office is not just in Singapore and Malaysia, we also have built it up with coverage on the whole ASEAN countries that we have a presence. We continued our partnership with Bank of Ningbo. I mentioned FIs. That includes Bank of Ningbo obviously, the industry we are in and also Bank of Shanghai, China Guangfa Bank, China Citibank and Ping An Bank, where we have already signed up a relationship and cooperating agreements. On the third pillar, we talk about the new economy. We will deepen penetration in the high-growth industries. We developed new target segments for renewables and also we explore opportunities in rapidly evolving world of digital assets and currency, things that we look actively would be tokenization and also how we offer trading for our customers and digital assets. The fourth pillar is a very important one on sustainability. We unveiled a 5-year climate strategy last year. And we -- with this newly developed climate strategy, these are our 5 pillars there that is led by the members of the Management Committee of the Bank. We doubled our target of sustainable financing to SGD 50 billion by 2025. It was previously SGD 25 billion by SGD 25 billion. We now doubled it to SGD 50 billion. And we also target to achieve carbon neutrality for OCBC's banking operational emissions this year in 2022. When we say we have 4 pillars to grow our business, we also want to reinforce our strength to excel. So we talk about -- we want to talk about the 1 group approach where we deepened the management talent pool through -- last year, we continued to deepen our management pool. We appointed a Group Chief Operating Officer. We appointed the Head of Global Wholesale Bank, who will join us in the coming months and the Head of Greater China. We formed Greater China division by integrating the operations of OCBC Hong Kong branch and Wing Hang Bank. And the Greater China divisions will cover our operations in Hong Kong, Macau, China and also Taiwan. We rolled up our matrix accountability and refined our operating model across the group. We also scale up collaborative product capabilities and distribution across group to capture synergies. We have also talked about speeding up transformation and digitalization, and that started also -- accelerated actually since the end of 2020. So last year, we see quite a bit of investments to check up expenses, but in preparation for increased digital penetration of our customer segments and deliver a superior customer experience. If you go back to my first page of presentation, we did show some numbers regarding the digital efforts so far and how we bank online with our customer to have a stricter processing on the loan application and also on account opening. We continue to execute our transformation agenda. We have appointed a Chief Transformation Officer, and we want to also strengthen our risk and controls and modernize our bank for a digital world. On people, I talk about organizational structure change of new appointments, but we also will look at continue to groom our talent, hire, retain and trained. So we intend to transform also our HR processes to attract and retain the best talent so that we are ready for the future growth. Last but not least, the last pillar, it is about capital and risk management. This is to allow us to deliver sustainable growth through franchise expansion with robust capital base and also prudent risk management. I do want to mention, we have set some targets for ourselves on this 3-year plan. We are targeting both banking income and banking profits to grow more than 10% CAGR. We're targeting loans to grow more than 10% CAGR. We'll manage our liquidity accordingly. Our CASA has been growing satisfactorily, but we'll manage our funding with a wide range of liquidity to support this growth. We also will tightly manage expenses in line with the revenue growth. And last but not least, I think it's a little bit early to talk about ROE, but we do expect that the group CET1 will fall slowly over the 3 years in supporting this organic growth and the RWA growth in that sense. And we are also -- there are also moving parts costs because interest rate, is everybody's guess, it has been changed rapidly. And as I also mentioned, the headwinds that is still around that we need to manage. But we will also look at inorganic growth where the opportunity arise. That will be on business that supplement our strategy as I laid out just now and also to, in particular, on the 4 pillars, the growth pillars that I mentioned. So I would like to stop my presentation on these slides. And thank you very much. We will now move on to take questions as you may have.

Are there any questions from our media friends? Goola, you are up for your first question.

Yes. Also, I guess, thanks for the increase in dividend. So for rising interest rates, could I ask on a more granular note, what is the impact on your net interest income, say, if the Fed raises rates by 1% this year and some of the investment bankers are expecting and at 25 basis points for each cycle? Do you want me to continue? Or do you want to take them one by one?

Helen, do you want to take that question or Darren?

Yes. I think I'll take the question on the interest rate rise and what's the impact on the bottom line. In general, a 1% raise across the year will increase our LIM by about 18 basis points. And that would translate to close to SGD 700 million of income.

And then on the funding cost side, are you comfortable with -- I mean is the plan to continually increase CASA because if interest rates are rising, you want to keep the funding costs as low as possible. That's one question on the funding side. And other subsidiaries in Hong Kong, Indonesia and Malaysia, are they locally funded, are they locally funded? Or do you have to do that, as in how it works?

Yes, our subsidiary are all locally funded. And we have been growing CASA very satisfactory over the years. And as you are right. And as interest rates go up, we -- I just mentioned, we also want to balance our liquidity sources. So it's not entirely rely on deposits, but we've been happy to grow CASA. I think one important thing about growing the bank to serve our customer regionally is to be able to continue to invest in how customers open account with us and maintain their operating accounts with us. So one emphasis is on our transaction banking capabilities where we have been -- over the last year has been winning a lot of mandates. And when we talk about handling investments and trade flows between Greater China and ASEAN, that is actually one important investment we do because it is for the clients as they do business across this corridor, they would have to handle their operating accounts. And this is important, we'll be able to serve them as one group, so that they can bank with us and manage their transactions across one banking platform.

Then, okay, so the next question is I just wondered if you could remind us what your management overlay is. And also, what are the thoughts on the outlook for credit costs and write-backs? Was there some -- there was some SP -- were there some SPs from Indonesia and Malaysia in this recent quarter? And were the NPLs, like from Greater China, were there -- as what Darren said, those project delays, and what exactly -- what projects were they? Just wondered on that.

I think I'll take the last part of your question before passing on to Darren to talk about the overlays. In the fourth quarter, we have conservatively looked at some of the project financing that we have taken over the years. Those project delays are regarding to construction. So we do know that over COVID, there has been difficulty in certain projects around the world. And that is like they are short of manpower or the -- some of the logistic arrangement that has been causing delays. And we're taking a conservative view on this delay in the projects and thus leading to putting some provisions on some of the project financing deal that we have entered into earlier on. So in the last quarter, we're talking about 3 more chunky deals that this is not a systemic and we are quite happy the way going into 2022, as I talked about earlier on that we project a credit cost of SGD 0.20 to SGD 0.25. But with some of the more -- some of the provisions that we have already taken that we are expecting at the lower end of this guidance I just provided on the credit cost. Darren, you want to pick up on the other part of the question?

Yes, Goola, now if I can refer you to Slide 17 because it's easier to have a pictorial representation in front of us. You can see that essentially in terms of allowances, there's a combination of what we call regulatory loss allowance reserve, which had been reduced from SGD 874 million to SGD 444 million. In a way, it's not overlay in the sense of allowances that you might have defined, but one way to look at it, this is somewhat of a macro overlay as well. But if you were to define the allowances in the form of ECL 1 and 2, which, in a way, you will notice that is the light blue portion of the bar itself. You will notice that the -- at this point in time, in terms of macro overlay is less than SGD 100 million that we have set aside. The reason is because we are progressively built into some of the scenario into our ECL model as well.

What about the ECL model? I mean because it relies on the macroeconomic variable market, [Audio Gap] that model because that seems to be -- what everybody seems to be concerned about is inflation and higher energy costs. Does that impact you?

Yes. I'm guessing your question, Goola because your question didn't come through very clearly. But essentially, if you look at the ECL model, it's a mean variance model. Meaning, it's a history -- it's a sort of a model that capture what happened to credit losses historically and how that credit losses could vary. And to calculate the -- how the credit losses could vary, you need macro economic variable. Now macroeconomic variable will be a function of essentially GDP growth, inflation, property prices, factors that essentially affect the credit quality of our loans. So to answer your question, yes, so the ECL model would have taken into consideration the outlook in terms of both growth as well as inflation.

Okay. So would this -- I mean do you have an idea of how product inflation could be this year in the developed market?

Well, I mean the inflation and oil prices, specifically that you're referring to is one component of what goes in. So in that sense, the higher inflation would have increased the amount of the allowances that we have to set aside. But it really depends on the geography. And also if you think about it, there are other factors that come in as well. For example, the tightening in terms of activities in the property space that would be other factors that would somewhat also affect the entire model. So it is quite a bit of a technical discussion.

Prisca from Straits Times.

Can you hear me now?

Yes.

Okay. I have a question about the bank's outlook on interest rates in the light of what's happening in Ukraine. Does OCBC expect hikes to perhaps delay given the crisis and also how it will affect trading income given the market volatility? Then my second question is about dividend fee, and if interest rates rise and 1 basis point increase leads to a SGD 700 million increase in income, as Helen mentioned, how does it affect the bank's dividend policy going forward? And my third question is about OCBC's expenditure. I think Helen mentioned just now that the plans could tighten expenses. So could you give some color on how the bank expects to do so. And also does it expect higher expenses intact in view of the measures it is taking to combat phishing scams and other type of scams?

I want to clarify the third question before I pass to Ken on the first one and then Darren on the second one. The third one is expenses, and you want to talk about specific related to controlling scams?

Yes. So the first part is on how we plan to tighten expenses in general. So will it be hiring -- reducing hiring a bit this year to keep expenses under control? And secondly, specifically to tech expenses because it's taking holistic measures to improve its scam control capability. So how would this affect its expenses on tech?

Okay. Shall we start with the first one then. Maybe I'll ask Ken to talk about interest rates and outlook and how does that actually affect trading income?

Our outlook is that the rates will continue to go up. I think yesterday, after the comments on the Fed as well that given the Ukraine -- Russia-Ukraine crisis that they wouldn't deter from their interest rate hikes. The question really is whether you'll see a 25 basis point hike of 50 basis point hike in March. The market is already pricing in about 6 hikes for the year. I think the speed and how fast -- how much they front-load the hikes really now depends also in terms of the equity markets, right? I mean, if you look essentially the equity markets and bond markets, the previous corrections in the markets are really due to the inflationary pressures and the hikes that were coming on stream. But of late, recently, in the last weeks or so, the Ukraine crisis is now starting to take a toll in the markets, and we're starting to see some deleveraging of risk there as well. So yes, we believe the hikes will continue because I think the Fed is behind the curve on this. Whether you'll see 6 hikes this year or not, that's the question that remains to be seen, obviously, taking into account how badly the equity markets sell off, and whether there will be some sort of consideration or support to equity markets, yes.

Now on the question pertaining to dividend, just want to highlight that the approach that we adopt towards a dividend policy has not changed. And if I may kind of remind our media friends here is that we adopt one of being progressive and also sustainable in terms of how we essentially hold the quantum of our dividend on a upward trajectory. And that's obviously otherwise mandated as we saw in the financial year 2020 and essentially targeting a payout ratio of 40% to 50%. So in response, if we -- when we see earnings grow along with the strategy that Helen has just presented, we'll progressively obviously revise our quantum of dividend as well.

Thank you for the first 2 questions. And then the third one is about tightening expenses. When we say tightening expenses obviously is to watch how we invest in people and in digitalization mainly. And we have -- as we said, we have the plan to grow and of course, we'll continue to invest. But we should be -- I would be happy to say we make quite a few appointments last year. And also, we have strengthened the teams in the front line to prepare ourselves for the growth. So this year, yes, attention will be put on looking at the headcount to see whether we have indeed been hiring enough and that we are retaining the talent. And we would also look at some of the expenses perhaps will not be -- there will not be new expenses like for example, we did integrate Hong Kong branch and Wing Hang. We have some integration expenses there incurred last year. So expenses will be watched on many fronts, but indeed, we'll be looking at what are the investments that bring out with the growth and the results that we hope to see coming in the next 3 years. And we also invest quite a lot into our training. We want to build, what we call, a future-ready staff base as well. So as to the scam, I mentioned that we have a view on the amount. And we have a very good view by the end of the year because we have stopped -- effectively stopped the scam that we have provided enough in December. And the numbers we have been advising the market on what we expect the numbers to be. So we have already expensed that. As to the measures, a lot of the capabilities we already have, it is to switch it on. It does not require a lot of investment in that sense. For example, when we say we do our kill switch, we have the capability to develop in a very short time without having to need to wait for huge investments or expenses to be put in to make it effective. So these are the things that I think that, yes, going forward, working with the industry and regulators, obviously, we want to be able to prevent scam and to stop it as early as it happened but we are also very watchful because the scammers, they can change their MO, and it is really more into preventive. And there will be a strengthening of the surveillance systems, et cetera. But I'm not expecting a big expense -- a big amount of expenses to be spent on the scam prevention.

Okay. Next up will be Faris. Faris from Bloomberg.

You can hear me, right?

Yes, we can.

Okay. Just a few questions. If Ms. Wong can elaborate building up on the earlier question about the project financing delays. How much of the delay are we talking about? And whether it means going forward in the subsequent quarters of FY 2022 the bank will set aside higher allowances because of this reason? The second question I have is, Ms. Wong, you mentioned late last year that the bank is interested in setting up a crypto exchange. I'm just wondering what is your position on that now given MAS' tightening in the space? And the last question is I'm just -- the U.S. has imposed sanctions on Russian companies, including banks. And I'm just curious and wondering whether OCBC has any dealings with Russian banks?

Thank you for the questions. I'll take that one by one. On the project financing that we took some provisions on, you are asking how the impact of the delays is going to evolve. I think the delay of the constructions of some of the projects, I did mention 3 in particular, it is very much due to COVID slowing the logistics and also causing staff and equipment delivery, et cetera, are not being able to be affected in the time frame that was originally planned. But with the world moving on with -- living with COVID, living with endemic and economy continues to open up, I think these issues that was caused during the last 2 years should be -- gradually be recovered. And so we expect the sponsors to continue to provide support to the project. But as we said, we have taken a conservative approach to look at how this financing has been impacted. But in a way, I also do not -- we should not comment on individual projects and what customers are actually involved. So I'll stop there, but remain optimistic for the economy to open -- continues to open further in 2022 and for economic activities to pick up much better in speed. The second one is about crypto exchange. I think last year, I did say I will look into it. I think I need to correct in saying that I did not talk about setting up one, but we are actively looking at all the opportunities arising from when I call this new economy, this is exactly it into how we help our customers in trading and in investing in crypto assets. I talked a bit earlier on about we are actively looking into crypto tokenization, whether we can use the technology to actually affect some of the products that are related to actually real world assets, but we actually can develop products through tokenization. So these are things that we're actively looking at, and it suits into our strategy. I hope we should have more to discuss in future discussions with the media. Thank you. On the Russia imposing sanctions, we are looking at that. You do know that our business is predominantly in Asia, in our 4 core markets. And our international branches serve mostly our network customers. We are watching and assessing what the sanctions is going to be like. What is the impact? Preliminarily, I do not see the impact as big, but obviously, continuous instability in that region would have impact on the financial markets, which we again need to watch closely and to advise our customers accordingly. Maybe I'll ask Ken to provide a bit more insight as to how financial markets could be impacted?

Yes. As I alluded to early on, particular to your question -- the earlier question on Russia-Ukraine, the impact on interest rates, we believe the interest rates will continue. The Fed will continue with its plan to hike interest rates. Obviously, the market is pricing 6 and how fast and furious post that is a big question. It all depends on the impact of this Russia-Ukraine in terms of the equity markets and the bond markets. So if the markets were to sell off too fast and too drastically, then they might toned down a bit on the rate hikes or there might be some sort of intervention in that space. But initial reactions, the markets are already starting to react. I think we are seeing a bit of derisking and expect further derisking to continue. For the time being, we think yield curves have flattened and will continue to stay flat. Again, how the crisis pans out also will -- will also kind of lead the way in terms of how quickly the QT will happen. Again, we believe that the -- what you're seeing in the rates markets today aren't really fully pricing in the continued tightening. And I think if that were to happen quickly or by the end of the year, you might then see yields curve steepen a lot quicker.

All right. Thank you, Ken. Can we move to Kelly. Kelly, you're next. Thank you, Faris. Sorry.

Sorry. I just have got 1 follow-up question for Ms. Wong. I just want to clarify on the crypto exchange bit. Does that mean that, that is not an option that the bank is studying right now? If, let's say, you can expand a bit on this because in an interview with Bloomberg in last November, you did say that you were studying setting out the crypto exchange. So I just want to clarify the bit on that, whether is there an option that the bank is still looking at or whether the bank is not going to look at that anymore?

Okay. Yes. Thank you for the question. I thought I missed one part of it. But we are looking at the [indiscernible] about crypto assets all in a whole. I wouldn't say we will not look at an exchange, but I'm saying that we do not have a lot to disclose at this point. But we are looking at propositions more on the products we can offer and how we actually help our customers to trade. But it's one option, but I just want to say I do not have more to report on that front.

Can we have Kelly from Business Times, please?

I have some questions on the phishing scams. So although MAS has said, and I think Helen reiterated that earlier that the recent goodwill payouts are one-off. I think many are still saying that it will set a precedent. So just wondering what the bank's preferences would be in resolving future scams in this regard? And as scams become more rampant, would banks have to start provisioning for such chaos?

Thank you for the question. We make a decision to make a one-off goodwill payout for this scam because of the speed that it has happened and the circumstances leading to what has happened. And indeed, it is through spoofing of the MS -- SMS. And we feel for our clients because they trust us. They click into the link that is supposingly coming from our bank. And they hit on the website that was very well designed. And so we make that decision based on this. But in a way, I think education across the whole industry and the community is very important. We continue to see scams happening every day. Job scams, impersonation of a friend and so it is very important that we continue to make sure that our customers and consumers understand the risk. I think to prevent scams from happening, it is all efforts, and I think, indeed, it is the focus of our government, is a focus of our regulators in -- for our industry and it's focus of our whole industry. And we have a lot of discussion among the banks to tackle scam in this area. So we do think some of the measures that continue will have to prevent. I think the key thing is about prevention. And the key thing is about whether -- customers, they also have a responsibility to safeguard their own money and to safeguard their own banking credentials. I think the discussion is also along that line that we want to have a discussion on how we handle scams in the future. But I hope that with a lot of discussion and focus so far and that there are effective ways of stopping scams that I'm not seeing the need of big provisions for scam payments. But it does take time and understanding, and I want to recap again, I want to call upon consumers, customers as well, please look at all the communications from your banks, look at what is the risk, what are the scam that is happening, and then also continue to safeguard your own credentials and your moneys.

Okay. Thank you, Helen. Can we have Anshuman, Anshuman from Reuters.

Hope you're able to hear me?

Anshuman, yes, we can hear you.

Yes. So Helen, I want to check with you in terms of -- overall in the statement, you said you're cautiously optimistic about -- that the operating environment will improve. What are 1 or 2 things that is behind this cautious optimism? And secondly, the markets are a bit concerned in the last few quarters about OCBC's dividend policy or the exposure to the legacy clients, which have led the shares to underperform. And also there is a one-off -- there is a higher operating expenses last quarter. Do you see this as a one-off in terms of operating expenses? And what would you tell analysts and investors about OCBC's underperformance over the past year compared with the peers?

Thank you for the question. The first one about why am I cautiously optimistic? What are the basis behind that? The first one have to be about COVID. And I did say I hope Omicron would be the strain that have an impact, but indeed, even with this, with a lot of governments decided to opening up the borders, decide to bring life [indiscernible] more to normal, I do hope that this big thing that has been nooming over all of us for the last 2 years is beginning to recede. So I believe that in that sense, that is one of the big factors that support me being cautiously optimistic. And other things are we do see Asia continue to be most likely the outperformer in the economic recovery. And with our strategy focusing on Greater China and ASEAN, and with wealth continue to grow, we see the [indiscernible] population continue to grow in Asia that leads us to shape our -- refresh our strategy in this direction. So with that, and that is another fact that caused me to be cautiously optimistic but still need to be cautious, right, because we do talk about inflation, we still talk about commodity prices rising, we are still seeing geopolitical tensions across the world. So these are factors that we always look at very cautiously. And no strategy is the right strategy unless you remain agile and to continue to shift and be able to allocate resources to where opportunities are. As to the exposure to legacy clients, I would say that we -- I think we have done enough on the legacy portfolio in the past. And we do not -- as I said earlier on, we look at the fresh year. I'm quite optimistic about controlling credit risk. And I do not see massive credit costs that we have to build in. If you look at last year, our credit cost is 29 basis points. And in the new year, we are looking at a lower amount as well. As to operating expenses, yes, we have been investing in people. We have been investing in systems. We have been doing a bit of organizational change, meaning we have put in more -- a few more senior positions, building teams to effect our growth. Those expenses, of course, once we have the people in, of course, those expenses will continue. But again, I'm not expecting a high speed of growth on expenses going forward. And we need to build our strategy so that we begin to see the growth that comes in, and that will support the expenses going forward.

Just 1 last point. When you talk about the cautious optimism and all, on the financial results side, financial performance, is it fair to say that the worst -- that do you think the worst is over in terms of what you've gone through? Full year profits are at a 2-year high, pre-pandemic levels. So overall, on the other side, would that be a fair assumption?

I never use those 3 words, the worst is over. I don't look at our business with that manner. I look at the business on, are we doing the right things, capturing the right opportunities and managing our risk and capital in the right manner. I'm actually happy to say -- to see 2021 generating the profitability levels back to pre-COVID. I think COVID has always been a big factor affecting the economy, affecting our customers and affecting some of the credit worsening, right, because of disruption in supply chain because of COVID, we are actually seeing customers having reservation in expanding the business and all that. So when -- as we look at -- if we can say that we can live with COVID-19 as an endemic, we continue to look at economic recovery. Yes, I'm optimistic in that sense. And I think we have a strategy to bring us to higher growth. So for -- as I said, for some of the legacy position, we have done with that. So that's why I am optimistic. But I'll never say I would not -- when I say I would not say worst is over because I just don't use those words. I'm not looking at our business like that.

Can we -- because we're going to end at just 10:30, but we will take another last question. And for the other journalists with your questions, not to worry, we'll follow up with you, and we will be able to come back to you with responses. But can we have Takashi, please?

We acknowledge OCBC continues to strengthen Greater China operations, but the Chinese economy is expected to slow down in 2022. What is your short-term and medium-term outlook for the Chinese economy? And some Western financial institutions are moving their stacks from Hong Kong to other parts of the world, including in Singapore. Does OCBC have any plans to reduce the number of staff in the Hong Kong office or to move some of the functions of the Hong Kong office to other countries?

Thank you for the question. For China, if we look at our China operation of our Greater China operations, we have a bigger presence in Hong Kong for our acquisition of Wing Hang Bank in the past. It is a full-fledged bank operating in Hong Kong. Our China operations comparatively is smaller. And should we say, the opportunities for us for China is linking China or Greater China with ASEAN. We continue to see Chinese companies wanting to establish in ASEAN. We see quite a continued inflow into Vietnam and more into Malaysia on the advanced manufacturing front. And as you can see, I think the China's Plus One strategy is still there. We also see some of the multinational companies are also establishing more in ASEAN as a second base to China. So I do see as a particular niche where we can win business, but we can serve our customers better. So if you look at the China, we talk about economy slowing down, yes, there are sectors that is under more pressure, but there's also sectors that is continue to grow well. And no matter how we look at economy slowing down, it is a very big economy. So economic growth of 4%, 5% is still a very, very meaningful to the world. And as China continue to trade with the world and more, indeed more within Asia, that is the opportunities I talk about. So the essence is to look at what are the -- where are the sectors that we can do more business with. And as we integrate our Greater China business tighter, and as we improve our processes, as we grow our regional coverage team looking at this corridor flow of business, I'm optimistic we will be able to continue to grow business. And just have to say that we are not a very big player yet, but I think there is still market share that we will continue to gain and business to build.

Thank you, Helen, and thank you for the panel for the Q&A this morning. I'm afraid we'll have to end our session right now. But for journalists with questions, not to worry, the team will be following up with you and we'll be providing you with the responses. Thank you, everyone, for spending time with us this morning. Thank you.