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

Thank you very much for joining us this morning. We will start our results briefing for our third quarter results. And I will pass the time to Chin Yee.

Good morning to all. Thank you for joining us at OCBC's Third Quarter 2024 Results Briefing. We reported a strong set of results for the quarter, and I will now share the highlights. For the third quarter of '24, we recorded net profit of SGD 1.97 billion, up 9% year-on-year and up 2% quarter-on-quarter. Total income for the quarter climbed to a record SGD 3.8 billion. Net interest income was generally flat at SGD 2.43 billion. Noninterest income surged 41% from the previous year to SGD 1.37 billion. Buoyant wealth management activities boosted fee and trading income. Insurance income was also up. Cost-to-income ratio improved year-on-year to 38.5% on positive operating jaws. Loan growth momentum was sustained. Our loan portfolio expanded 4% year-on-year on constant currency basis. Deposits were broadly stable. Portfolio quality remained benign with NPL ratio at 0.9%. We continue to set aside allowances mainly for non-impaired assets. Nonperforming assets coverage ratio increased to 164%. MAS' final Basel III reforms came into effect on 1st July 2024. On a transitional basis, common equity Tier 1 ratio was 17.2% as at end September 2024. On a fully phased-in basis, CET1 ratio would be 15.6%. Our strong third Q '24 performance contributed to a record group 9-month group net profit of SGD 5.9 billion, up 9% year-on-year. I will elaborate more on the performance of our key businesses in the following slides. The 3 main engines of our diversified franchise continued to deliver resilient funds. Banking operations net profit for 3Q '24 was SGD 1.72 billion, up 3% year-on-year. Our Wealth Management business performed well, reflecting our continued efforts in growing the franchise. Group Wealth Management income grew 15% year-on-year to SGD 1.29 billion, accounting for about 1/3 of group total income. Assets under management grew to a record SGD 284 billion from net new money inflows and improved market valuations. Profit contribution from Great Eastern rose 72% year-on-year to SGD 254 million, driven by better underlying insurance performance and stronger investment results from its shareholders' fund. Our operating profit is well diversified across businesses and geographies, providing long-term earnings stability. Our capital funding and liquidity positions remain robust. Our financial strength places us in a good position to pursue growth opportunities, navigate uncertainties and increase shareholder returns. Moving on to details of our group performance trend from Slide 9. Net interest income was largely stable throughout all 3 quarters of 2024. For the 9-month period, NII increased 2% to SGD 7.3 billion. This was underpinned by the 4% rise in average assets from customer loan growth and a 10% increase in other high quality assets. As part of our ongoing balance sheet positioning to manage NII amid declining interest rates, liquidity was deployed to high-quality bank placements and debt securities. These assets were income accretive but lower yielding than customer loans. Overall, 9-month 2024 NIM narrowed to 2.22% as the increase in funding costs outpaced the rise in asset yields. For the quarter, NIM was 2.18%, and exit NIM for September was 2.16%. Taking into consideration the recent Fed rate cuts in September and November as well as our house view on rates for the remainder of 2024, we expect full year NIM to be around 2.2%. This is in line with our previous guidance of coming in at the lower end of our NIM range. Noninterest income for 9 months of '24 grew 23% to a new high of SGD 3.76 billion, driven by higher fee, trading and insurance income. For the quarter, noninterest income was up 41% year-on-year from broad-based growth. I will go into more details of our fees and trading income in the next few slides. 3Q '24 fee income rose 10% year-on-year to SGD 508 million, the highest level for the last 3 years. The improvement was largely driven by a 25% increase in wealth management fees. We saw robust customer activities during third quarter driven by higher demand across wealth products, including bancassurance, unit trusts, structured deposits and private banking. Investment banking and loan-related fees were also higher. We recorded strong trading income growth for the quarter and 9 months from record customer flow and higher noncustomer flow income. 3Q '24 trading income more than doubled year-on-year to SGD 508 million, while 9 months trading income surpassed the $1 billion mark for the first time. The rising customer flow trading income was underpinned by both corporate and wealth segments. The increase in noncustomer flow treasury income was led by higher mark-to-market valuations and gains in our global markets portfolio and Great Eastern shareholders' funds. We continue to put in targeted investment to support the goal of our businesses. Operating expenses for the quarter were up 9% year-on-year. This was mainly driven by higher costs associated with increased business volumes as well as technology expenses linked to our ongoing digitalization initiatives. Cost to income ratios for each quarter of this year were below 40%. 9 months '24 cost-income ratio was 37.8%, marginally below the previous year. Our loan portfolio quality remains sound, with NPL ratio improving from a year ago to 0.9%. Total NPAs dropped 10% year-on-year to SGD 2.8 billion. Compared to a quarter ago, NPAs were 4% lower as higher recoveries, upgrades and write-offs more than compensated for new corporate NPAs. New corporate NPA formation in third quarter was mainly attributable to the downgrade of one corporate name in Hong Kong, which relates to real estate and is largely secured. For the 9 months, total credit cost was 17 basis points on an annualized basis, lower than 20 basis points a year ago. Total allowances for the third quarter were SGD 169 million These were mainly SGD 132 million in general allowances taken largely for credit portfolio changes. For example, in Hong Kong, we have taken prompt actions to watchlist accounts when necessary, given the headwinds and weak real estate market sentiments. This is in line with our prudent and forward-looking risk management efforts. The group's NPA coverage ratio continued to trend higher to 164% as of 30 September 2024. Our loan portfolio continues to be well diversified across geographies and industries. Group loans expanded 4% year-on-year to SGD 305 billion. By geography, this was driven by Singapore, Malaysia, the United Kingdom and Australia. By industry, the growth was largely from mortgages and nontrade corporate loans. We supported customers in the student accommodation and built-in -- I'm sorry, build-to-rent asset space. We also supported new economy industries within technology, digital infrastructure like data centers and the new energy sector. One of our fastest-growing segments is our sustainable financing loan volume, which expanded 31% from a year ago to SGD 47 billion. This portfolio is now made up 15% of our group loans. Loans to the commercial real estate office sector comprised 11% of the total group loans. These are largely secured with an average LTV of 50% to 60%, 2/3 of these loans are in our key markets of Singapore, Malaysia, Indonesia and Greater China. Consumer deposits were SGD 369 billion at end September, steady from a year ago and SGD 1 billion below previous quarter. Group loans-to-deposit ratio increased to 81.6% on the back of loan growth. Importantly, the change in deposit mix reflect our proactive balance sheet management. Compared to the previous year, higher-cost deposits were reduced by SGD 1 billion. On the other hand, we grew lower-cost CASA balances by SGD 8 billion year-on-year and CASA ratio increased to 48.4%. Closing on my final slide. We maintain our strong capital position. CET1 ratio increased quarter-on-quarter to 17.2%, mainly driven by a significant drop in risk-weighted assets after the adoption of final Basel III reforms. The Basel III reforms are being progressively phased-in until 1st January 2029 and the transitional decrease in risk-weighted assets will reduce over time. Assuming our portfolio as of September 2024 was subject to the full application of the final 3 reforms, which will take effect on 1st January of 2029, CET1 ratio 15.6% on a fully phased-in basis. With this, I end my presentation. And will now pass the floor over to Helen. Thank you. Helen, please.

Thank you, Chin Yee, and welcome to our office again. Chin Yee has given quite a detailed presentation on the third quarter's results and the 9 months numbers. So I'm not going to repeat most of what she said. I have prepared only two very simple slides, but perhaps we'll give a bit more view about on how I think the business is progressing and also some of the new things that we are doing, right? So first, I'm happy to say that, of course, this is another record result for the bank -- for the group and this is 9 months. And again, powered by our 3 franchises, banking, insurance and wealth management. Also, our total income was SGD 11 billion for the first time. Happy about that as well. And supported by higher NII and record non-II as well. So cost-to-income ratio improved and we're operating -- we have a positive operating jaws for 9 months. So I think a lot what we do this year, in preparation for interest rate peaking and coming down, is to how we look at our net interest margin and also our net interest income. So we embark to defend NII. And there are a few things that we have done right. The first thing is, indeed, to drive volume growth. You need to bigger volumes to counter for the dropping NIM and so that we continue to bring more NII in. And we also put our liquidity to work to invest in high-quality assets. So that may have some impact on NIM, but we protect our NII, which is protecting the income. The second thing is we grow our fixed rate mortgages and particularly, quite successfully in Singapore. And then we put in some cash flow hedges and that was when interest -- catching interest rate at a higher point. And lastly, manage our funding base. I think in the past, I talked quite a lot about how we grow digitally in SME account opening, in the consumer account opening. And I think we have seen some fruit. And with more of these accounts open, we're able to actually build our CASA and then face up some of the higher-cost fixed deposits. And if you look at how our CASA were, it has been trending up. It's now close to 49% of the total deposits. And we hope we'll continue to be able to do it in that same momentum going into next year. So on our non-II also have a rather broad-based growth, which adds on to show how our franchise have worked. Chin Yee mentioned about AUM. We reported AUM, which is a record high of SGD 284 billion, and this is contributed by Bank of Singapore, contributed by our premier private client segment and also premier banking segment. I just also want to mention one more number that for 9 months, these segments together reported about SGD 12 billion net new money inflow. For third quarter, it is close to SGD 5 billion. So we do see a bit of increase over along this year. So seeing some of the results that we have invested in people, invested in products and also invested in the capabilities to serve our customers using our capabilities. So some of the trading income that we've seen also reaching quite actually good record is really about serving our customers. So this year in particular, I feel the growth is very much customer-driven, which is good. Yes, because this will be a long-term growth for the group in particular, and thus reflect -- when we announced we have growth plans and various initiatives to bring the one group together to serve our customers in more geography and more products, this is seeing some results. And that is why if you reflect on what we announced last year, we said we want to -- based on all these initiatives, we want to have incremental income of SGD 3 billion in 3 years. So last year, we reported SGD 500 million, of which we made. And this year, our target is SGD 1 billion. I'm quite pleased to say that by end of 9 months, we are close to SGD 1 billion. So probably this year, we'll overachieve. But it's good to overachieve this year because next year, the market will be perhaps a bit more uncertain as to how loans will grow, whether interest rate will still stay higher for longer, right? So these are the things that we will actively manage. I just mentioned trading income is robust, crossing SGD 1 billion. And again, solid momentum in customer flow. I want to say that our sales and trading work hand in hand together and working with our corporate side and also with our retail side to bring a lot of customer-driven income for this good trading number. Loans expanded SGD 9 billion from the end of last year. I think this is on track for us to achieve our full year loan growth guidance. And we have successful capture flow. I think Chin Yee talked about what area we're focusing on and she also talked about we continue to have our plan to transition into net zero. And indeed, sustainable loan financing, outstanding is SGD 47 billion, as Chin Yee mentioned. And our commitment, including -- I mean, those that is not [ drawn ] yet is about SGD 63 billion -- sorry, is about SGD 65 billion as at the end of September. So asset quality is at NPL ratio of 0.9%. We will remain prudent. Prudent meaning that we know the market is uncertain and we are closely monitoring because of geopolitical tension will remain especially with -- after the U.S. election results has come out. And of course, there is ongoing wars and conflicts in various parts of the world. So we will continue to actively do stress testing and manage our portfolio. So that would get us to -- in a way, we will refine our full year credit cost guidance to trend to a range of 20 basis points, 20, which is -- we did say last quarter that we expect to be low end of 20 to 25. So now I also want to say this year. So on Page 2 of my slide, we said we are firmly placed to deliver this 2024 target, which includes the NIM around 2.2% and then single-digit loan growth, low single-digit loan growth, full year credit cost in the range of 20 bps, and then ROE about 14%, yes. So I just want to touch on -- I talked about the initiatives allowing us to build faster growth and improve income, right? I also want to say some of the things that we have invested over the last 2, 3 years is how we are seeing bearing fruit, and we continue to want to do more of the first-to-market initiatives. For example, I think some of you do see and cover that in October, we launched our OCBC MyOwn Account for teenagers, young teenagers and older children between the age of 7 to 15. We see very good interest from the parents. This is more about financial literacy, teaching young people how the money is coming in and going out, but giving parents the controls over the ceiling of each payment, for example, and teaching and working with the young children to manage their money. We got some interested since we launched in October, I think we are only like about 2 weeks into it. We have opened quite a few thousand accounts already for children and teenagers. And I think this goes hand-in-hand with some of our ESG initiatives as well that we really want to -- the community to be a lot more financially literate and also this will be able to help children or young people to understand some of the anti-scam efforts that the industry is putting in. We have also set up the first comprehensive financial and personal wellness program for property agents. So property agents, we are working on to treat them, give them more, in a way, give them more attention so that they would work with us also closer. So we have a program that we launched for property agents. And also we have, just this week, announced we are working with a real estate, a government-owned company, government body to pilot a blockchain-based conditional payments for construction projects. As you know, payments for construction projects is a very tedious process, tracking construction process, getting certificate, launching a lot of -- getting a lot of documents in place and then drawing down the loans and making payments, et cetera. So if we use blockchain, that means everything will be tracked in a very safe environment and everything can be tracked along the blockchain, which makes things a lot more transparent and easier for those who are involved. And also we are, in October, the first bank with enabling intraday institutional lending capability. This is to use a platform to lend cash intraday to an external counterparty by accepting tokenized assets. And again, using blockchain technology and all that. So we're quite excited. We are doing a lot of these. Some certainly help to make sure that we onboard more clients, some make sure that we protect the process as we do with clients. Some are more effective to generate more funding channels, for example. So all this is based on the very active period of digitalization investment, and we will continue to do that. So we also want to report some of the corporate development this year. So we completed the merger of PT Bank Commonwealth into OCBC Indonesia on 1st of September. And our stake in Great Eastern, so after the VGO, that ends in July, that was 93.32%. But you remember, we report that is Section 215(3) of the Companies Act that allow our shareholders to continue to sell the shares to us based on the same price. And as of the end of this 3 months, which is 23rd of October, our stake in Great Eastern is now 93.72%. So we gathered another 0.4% of the shares. So looking ahead, I would have to say that we're still confident about the ASEAN market to remain resilient and we are also thinking there are other growth opportunities as well. So outside of Singapore, countries like Malaysia and Indonesia should continue to benefit from the global repositioning of supply chain. And one of the things that we do, again, as we say, we want to onboard more clients, is we are also becoming more active to cover some of the bigger MNCs as they continue to use ASEAN more for the supply chain, and we could be taking more risk on the MNC as we finance the receivables of the supply chain companies. So this goes also hand-in-hand with our increase of supporting, in particular, Chinese companies coming to this part of the world or even Korean companies, Taiwanese companies coming to this part of the world, where we can help them and also provide them feasible financing as well as part of it, but also gaining the capital account with us, meaning the working capital account, which is a part of the growth of our CASA. So I think if economic activities and sentiments for China improve with the implemented stimulus measure, then this could also provide more win in the sales. So to wrap up, I think we are on a firm footing to deliver on 2024 targets. And our well-diversified franchise again shows that it works. If you look at our insurance income and our wealth income as NII become quite flat in terms of growth the last quarter. And I think our strong financial position also will allow us to continue to capture growth and give us confidence in generating shareholder returns as well. So I think I'll stop here and pass it on to Q&A and Chin Yee.

Okay. We also have a few of our media friends online. I'll start with [indiscernible] first with us.

Yes, just to continue the theme of this earnings, since you have very high excess capital, could you stay on fully phased-in CET1? How much excess capital do you have? And what's your plan on capital management? Since your 2 rivals already mentioned capital buyback, is it something on the cards at OCBC? Second question, I would like to get your 2025 outlook that includes profit, NII, NIM and wealth fee growth.

You want to take that?

Yes. I'll take the capital management question. Yes, you mentioned the fully phased-in, capital, CET1 then fully phased-in is 15.6%. With that being said, we don't really -- we don't unveil excess capital. But suffice to say that we have always been saying that over the medium term, we want to have our common equity Tier 1 at about 14%, minimally 14%. And why 14%, is really because that was the expectations that our rating agencies has conveyed to us for AA rated banks. We want to definitely maintain our AA rating. Yes. So 14% is minimally what we want to do over the medium term. And talking about capital planning. Capital planning to us, fundamentally, the most important is to be able to have enough capital to support our franchise growth, right? As outlined in our corporate strategy, we do have a lot of growth ambitions and a number of exciting plans in the pipeline on how we can use capital. Secondly, navigating uncertainties. As we can see today, there are really quite a lot of uncertainties like what Helen has actually highlighted as well. And finally, providing capacity for us to be able to capitalize on any inorganic opportunity that pop up on and off again, right? And we do have small bits of that in the form of PT Bank Commonwealth, which we announced in 2023 and then just completed merger in September '24. And then there's also AmMetLife that our Great Eastern subsidiary has outlined. And of course, not forgetting our exercise for Great Eastern, right? So these are areas of usage of capital, and we do have quite a fair bit of this because we are really excited about the future and providing enough capacity for Helen to go shopping. We particularly like portfolios bolt-on part of acquisition. So these are areas that we have in our plan, what we wanted to do, right, in the future. Now you also have a question like, okay, how about share buybacks, right? So share buybacks is indeed share buybacks and canceling the shares, it's indeed one of the capital management tool that can be used alongside delivering dividends, okay? Now it's not that -- maybe I should rephrase. For us, looking at share buybacks really depends on the situation as well. Currently, we do have share buybacks, but we don't cancel the shares, it's to meet our employee share plan. And why do we buy back shares to meet our employee share plan is because we don't want to issue new shares to fulfill such employee share plan although we do have the mandate, right, that is refreshed every year at our AGM to do so. Now why do we not do that, it's because we don't want to dilute our existing capital base, right, by issuing new shares. Now on the share buyback, to cancel shares, it depends pretty much on the situation. As of now, whenever we have, let's say, share trading or share price above price-to-book of 1, my preference would be not to do share buyback and canceling the share, but to deliver more in terms of dividend. And also, of course, fundamentally, in capital planning, we really take into consideration the usage of capital, the usage of funds that we have. And I've already outlined the exciting prospects in relation to debt that we have. So I'll stop there. In terms of share buyback, yes, it's something -- it's a tool that can be considered, but not at this moment for us.

Just to understand your comment on valuation a bit better. You said share buyback with cancellation depends on situation. At current PB ratio, which is just above 1, you'd rather do dividend. I know you have said it already.

You have a second question, which is asking me to tell you a lot of things for the future outlook. We will have a more -- a better guidance by the time we go into the final results announcement in February. But just have some discussion on what you asked. Of course, we are all projecting interest rate to further come down. And indeed, last night, it's another cut of 25 basis points. Although the results of the Trump administration may throw different light on the interest rate environment. But before that, we're still thinking that with interest rate coming down and with the way we grow our business, we do feel that the growth of non-II should be in double digit again next year, which should be able to counter the fall of NII, right? NII also would be mitigated by higher volume as well. So if you ask me, given the original scenario where the market generally talked about further interest rate cut, we're still thinking that we expect profits to be quite stable for next year, stable compared to this year. I mean this is because of a lot of the growth initiatives we were talking about, right? But I'll give you better guidance when we come to February. So I'm just saying that, that means that our wealth fees, we're expecting wealth fees to do better. And with the AUM that has increased and with the hiring that Bank of Singapore has been doing, remember, Jason mentioned he want to build to a 500 number strong in RM. This year, he added quite a number of RMs already. So hopefully, we can put, of course, some of the net inflow of funds. And if the interest environment is coming down, our customer will be a lot more active. As you can see, actually, the last quarter, wealth fees has been growing really well. So that is on the non-II. For NIM. It also depends on whether we can grow loan faster as well. But with interest rate coming down, of course, NIM would always have pressure. Pressure doesn't mean that it is exceptional pressure. It's just that you will indeed see that we will be able to protect NIM to an extent of building more CASA, right, lower cost CASA. As we said, SME account opening, consumer account opening and more account opened with us, then we would have more CASA coming in. So this is to protect NIM. But again, volume is still important. So I do see that next year, loan growth have a bigger potential compared to this year. But I will tell you the whole year guidance in February again. So I think these are the few things I can discuss and disclose. Before you ask, I probably would just want to mention, Chin Yee talks about we have various plans, right? I do want to mention that -- there was a question about the Center, the property, right?

Yes. Whether you're going to agree to that?

Yes. So before you ask that, we did talk about exploring. And I just want to say we have made certain progress. So certain progress that may need us to have more to say by next year. But I can't disclose any details. But when we say more to say that if we do embark to redevelopment, of course, that need capital as well.

Is this fully -- is the plot ratio fully used? Or is there -- do you have excess?

This is the details I can't tell you because we are still planning, but I just want to say that we made progress.

We developed something like this in the past.

It's not the Center, right? You know we have I think Center East, Center South. Yes, I'll come back to you. We do have that number. Yes, but we want to preserve this building.

The people that are [indiscernible] hear today is our results.

Sorry, I jumped to say, but I thought you may ask, and I want to relate that to some of the things that we are doing.

I just want to bring back to the dividend part because when we had a chat, you and I, one-to-one, sorry, everybody. You said -- I mean, I got to ask and you said that you prefer dividends to share buyback at that time.

It's just like Chin Yee said just now, we still prefer that. We still prefer that. In a way, it's the same results, right? Meaning like doing shareholders' return, but I keep the capital base.

I have a question regarding the impact of the global minimum corporate tax on the profit. Which markets or which industry would you -- firstly, would this affect -- do you think that this will create some big impact on the profit? And then which industry -- yes, which industry and sector would be most affected?

Yes. Okay. This minimum global tax guidance take effect from 1st Jan of 2025. And typically, for countries which have tax rates below 15%, that's the minimum global tax rate now, 15%, right? The 3 countries that is relevant for OCBC, Singapore, Macau as well as UAE, right, UAE.

I think you mentioned that I think also it will be Singapore, Malaysia and Hong Kong. I think she is also talking also within our network, but our key markets would be Singapore, Malaysia and Hong Kong.

Macau, Hong Kong and Singapore because you get a lot of -- what is it called, tax rebates or something.

There are also some incentives in Singapore, depending on the sort of activities, right, where we have the financial services sort of incentive, right? But if you look at what's the impact on OCBC, if you look at our overall group even for this year, our effective tax rate are already quite close to like 15% because of the blend of our revenue in countries that we operate in. So when this take effect, the impact will not be overly for us.

So what causes some tax rates to go up? I mean what causes some tax rates for some banks to...

Yes, because we need to comply with this minimum 15% global tax.

When you do trading and all that, is it like tax-free or no?

No, it's not tax-free. But in Singapore, some of these could have the financial services incentive scheme where the tax is actually lower, can be 5% or 10%. So it also depends on the mix of our products that we get revenue from. Overall, on a blended basis, effective tax rate overall for OCBC group is I think [ 14-over-percent ] actually.

You mentioned the effective tax rate is already quite close. Are you able to disclose?

It's 14-over-percent, 14-plus. Yes. [indiscernible], do you want to?

Yes. So I think the mortgage rates. [indiscernible].

I think we have been quite competitive in terms of mortgages, right? So we have also increased our market share within the mortgage space. So I think right now, we are around quite close to [ 3% ] already, so up from last year.

I guess [indiscernible] is asking whether we are going to cut mortgage rates.

Yes, I was going to respond to those.

We will look at the market and we will adjust accordingly. It's not like somebody cut -- will definitely just cut immediately. It depends on how our pipeline is like, depending on how we -- our relationship with the customer is like. And I think the last 2 years, as we improve in the fixed rate mortgages, I mean, you know the life of mortgage hold with any bank is quite short. So we actively look at repricing and how we manage the book.

I think what we are saying is that we have grown our mortgage book very well.

Despite local banks pricing.

Coming back to the NPA that you mentioned, there's a new one from Hong Kong. What do you see coming? What's the outlook NPA?

Okay. This would be quite idiosyncratic. We don't -- we're not seeing it as like the whole industry or our book having big pressure, it's not like that. And for this particular one account, it is largely secured with LTV around -- actually with average LTV below 50%. But of course, we look very keenly at, in particular, the Hong Kong office sector because residential is a lot more stable. And when we say office sector, we started managing it actually much earlier. And I just want to share with you one data point. For Hong Kong, our office sector, we have reduced exposure by 50% over 1 year from last September to this September. This is due to our active engaging clients to advise them to deleverage much earlier on. And also that's the reason why we actually reduced our outstanding. And we will continue to help clients to how to read the market and to deleverage earlier than later. So hopefully, it will stabilize.

I think [indiscernible] has a question.

Yes. This is a very basic question. So I think back in August kind of you said the bank's house view is for 2 rate cuts by the Fed this year, which has so far materialized and possibly 4 to 5 next year. So does this still hold with Trump presidency in mind? And how much of an update on 2024 forecast was set prior to the outcome of the presidential elections this week? And has that changed anything? Finally, how are you preparing the bank for both maybe a falling rate environment, which has really been expected and maybe a longer rate [ cycle? ]

On inflation because we think that Trump will [indiscernible]. And inflation leads to interest rates staying higher. Okay. I think our plan has been on 2 to 3 rate cuts this year, plus 5 next year. I think that is what the industry normally would think as well. So if a lot of people are now saying that potentially, there's still rate cuts, but maybe stopped in March, right? Some people are saying that industry is changing their view. I would not be telling you now what views we adopt. It just happened last night, right, in a way. But indeed, if interest rate is -- reduction stopped in March, then it does provide potentially higher NIM for the rest of the year, right? But again, ASEAN currency is not directly linked with U.S. dollars. We have to always remember that. Different countries, currency interest rate respond a little bit differently. Of course, in general, interest rate will go down together alongside the U.S. Fed cuts, right? But they also actually acted differently. For example, Singapore interest rate reacted faster, quite fast in that sense. So I think we won't be able to say whether we will change the outlook from 5 cuts next year to 3. I think it's too early to say. We do want to -- we haven't even heard from -- the President hasn't sworn in yet. So to an extent, I think it's a bit early to tell. But I think by early next year, we'll be seeing what our plans are. We'll be able to give some more guidance on NIM for the year, our loan growth for the year and also for expected wealth fees growth for the year, et cetera.

Just a regular question. So with more [ changes ] expected, do you think the environment is now...

I think we always talk about the uncertainty, which we have seen happening, right? I think long before -- I mean, don't talk about Trump 2.0. But even before that, when Trump first -- in his first term, right, or whatever, when we refresh our corporate strategy, we are always talking about the flow intra-Asia. That, we're focusing on. I don't think that trend has changed or that trend has deteriorated because the more conflict, trade conflict there is, I think Asia do trade more with Asia in that sense. So it actually fits very neatly in our corporate strategy when we refreshed it in 2022, right? And the initiatives we talked about in growing wealth, the initiatives, we're talking about capturing more corporate clients or SME in the supply chain under China plus one, that is materializing as well, and we continue to see the flow. And nowadays, we talk more about [ China-plus-N ] rather than China plus one because Chinese companies are not just going to one country like Vietnam for low-cost manufacturing, right? Chinese companies are doing a lot more in the region. Some go to Indonesia, but everybody come to Singapore first to start a company before -- they always use Singapore as the center to manage the investments into Indonesia, Malaysia, Vietnam, et cetera. So that is how we have seen flows coming in and we're benefiting under our corporate strategy. So geopolitical tension will be more fierce, I think. It would be -- you cannot draw an equal sign. You just have to look at what's the impact of that and then how we capture opportunity. And I was just saying exactly, that would have an impact to cause Asia to trade more with Asia, right? And then with more shift of China manufacturing or investments coming out, then it does benefit a bank like us. And that is why we have been preparing ourselves by adding more China officers, in that sense, sitting in our various presence in ASEAN in order to be able to engage this. And we are seeing the China's plus one not just for Chinese customers. It is for the Koreans, it is for the Chinese, it is also for some of the MNCs, that have to actually reshape the supply chain by moving some of the supply chain in ASEAN. So I think that benefits us in that sense.

And on the flip side, do you see more need to derisk in China and Greater Bay Area because you have been quite bullish there?

Yes. When we say bullish about China, we were always saying that we are focusing on outbound. Greater Bay, we're focusing on outbound. China outbound, right? So if you capture well, the risk is not so much about that -- unless you say the full stop, otherwise, on wealth, I mean, we will not talk about derisking. But if we're talking about exposure to Chinese companies lending money to them, we are always saying that we have been serving Chinese companies outside more than within China. Within China, our exposure is more really to the SOEs and to leading companies. But our proposition is always helping them to come to ASEAN. And I think we used that sort of number before. Every $1 we lend in China, there will be at least $4 to $5 lend outside of China, which is very clear if you look at Page 17, Page 17 of few years back, right? We have a breakdown of the Greater China loan book, and Hong Kong is $32 billion, offshore is $23 billion, China is only $7 billion. So you can imagine $7 billion versus -- and if you consider Hong Kong part of China. But however you consider, meaning $7 billion versus offshore of $23 billion, that is already 1 versus 3-point something or 4. And of course, part of that is booked in Hong Kong as well.

Further on China's question about risk, right? And again, with Trump in the background of our minds here. I'm not sure how much data you have, but among the companies that have come from Greater China to set up shop here, are they only involved in business around ASEAN? Or are you seeing maybe them setting up JVs to enter U.S. like a bit of Singapore?

Interesting question. I don't think you can really -- you can really do it to say that because companies, you always look at the ultimate beneficiary owner, right? A China-owned company is a China-owned company. Not sure how we watch it in that sense. But when we say, are they only focusing in ASEAN, probably not. We do see some Chinese companies, especially in new economy. They would take Singapore as the international business headquarter. Some of them do. I have one client that has set up their international quarter in Singapore, but also focusing on the Middle East, not just ASEAN. But a lot of the companies that come now, I mean, the SMEs, they've been in ASEAN. And you do know that because Singapore, we are a very big commodity trade center. So the big POEs do trade using Singapore as a trade center, right? But we're seeing a lot more of what we call the new economy companies coming, a lot of them is logistics and -- I mean, fintech is already long here, right? And then you have other things like research, medtech, agritech, some looks at Indonesia on the e-commerce because Indonesia is going to be the fast-growing consumer market, right? And some look at linking up with, as I said, with the Middle East as well because we do see Middle East sovereign money more active in Asia as well and Saudi, for example. So I think these are all new developments that we think we can capture.

What about -- can I ask specifically about Johor as well? What are you doing in Johor, in the special economic zone? And there have been some incentives to set up more branches. I mean do you plan to do that? And do you plan to invest more? I mean, are your customers moving to Johor?

I think it is quite an early stage of the initiative. We're excited about that. We're excited because we've been in Malaysia as long as we are in Singapore in that sense. So we actually do have quite a good presence in Johor already. It doesn't mean that -- but that's under Malaysia, right? But we want to capture a lot of the initiatives that both governments are looking at, and we will be, I wouldn't even say tracking it, we will be actively involved in it, being, as we said, we are very old bank in Malaysia and also very old bank here. And we're going to support our customers as they develop their business plan for using the Johor economic zone.

And with the Johor companies, [indiscernible]. And there's also this initiative to set up something in Johor City. Would you look at that as well?

We consider all options at the moment, but it is -- I mean, you need some concrete planning exactly how to execute that, and we are at that stage. But we are big in Malaysia. I mean, we have big supporting Johor companies. I think just in Johor, we have 7 branches, if I'm not wrong, but I need to confirm that.

It's 7 branches.

So my memory is quite good. So 7 branches. So we are already supporting Johor. Actually, Johor is a very affluent area. So we're keen about Johor development.

So with these areas that we are looking at, I mean people are looking at like sustainable energy, right, trading, electronics, health care, data centers. So I think we are seeing interest from customers as well.

Yes. We'll move to I'm going to move to Ben from [ BT ].

Just a question, I guess there's a lot of focus on new net inflows, right? I guess a lot of it seems skewed to Singapore. You sort of see the mix being more [indiscernible].

Actually, we see new accounts coming in outside of Singapore, but domestically as well. When we say domestically, Singapore's SME is really quite vibrant as Singapore continue to capture the growth in the region. So the domestic companies are also growing quite well. And we're beginning to see quite a lot of what we call, serial entrepreneurs, meaning they continue to bank with us and not just in one particular sector. As they grow faster, they are involved in different parts or they may be in their own industry, they are in the whole chain in the industry. So they will open different accounts with us as well. So we grow quite a lot of accounts with domestic owners in that sense. But it's important, that is why it is so important we have to be very digitally prepared because most of the new SME companies, they're very digital, and they need it. They are smaller companies in a way and they cannot afford to have -- they cannot afford to do a lot of their own analytics or I mean they know the market, but we help them to shape the business plans. And the way we do have a service that actually we send them back how we analyze the dealing with us. We tell them your customer -- for example, F&B, as simple as that, an F&B shop, right? If we have a lot of the payments data. So if those clients are using OCBC card in particular, we can share your age group of your -- actually, your clients is actually between this age to that age. So we actually can have data analytics that we can help our customer. And we have used -- we have launched 2 years ago because we have enough data analytics that we know which customers, SME customers are doing better and on the trajectory of growth because we can use the data to analyze and we approve loans for some of these SMEs. So we already offered to them before they ask for it. And we have launched that in Malaysia last year. Response has been good. This is important because you speed up the way you serve your SME customers and you help them to grow. So a lot of many other things. Recently, we also launched, in particular, for women. So for women owners, we have launched something that we actually cultivate. We have -- I think we issued a press release to talk about some of the characteristics of female entrepreneurs. In general, they're more cautious. Yes, they're more cautious and we know how to deal with them also better in order to support female entrepreneurs. So there are many ways that we are doing to make sure that our SMEs continue to fare well. It's very important because if you look at our commercial banking, their contribute to deposits is about 20%. And these are mainly working capital account. Once they bank with you, they trust you, they don't move the money away. And this is the money that they use day in, day out to do business. The float is always there.

Because of interest of time, if any urgent -- maybe just one last question. One last question.

Your securities book interest rates. So the yields are so high now. I mean, are you going to reprice them now or what will you do? We think that if you reprice, if you reprice them now, what about your NIM?

We are talking about our debt. I mean we have been balancing that over the course of the interest rate cycle. And then if you notice what we call the FVOCI, fair value through other comprehensive income, it used to be quite negative when interest rates were declining so quickly -- rising so quickly during the low -- now the negative has sort of gone off. So the fair value through other comprehensive income, the sort of mark-to-market sort of losses has actually tapered off. And even within that portfolio, we have been [indiscernible] over the course of the rate cycle.

Among the banks, the LCR came off a lot. Was there a particular reason for that?

It's actually, above 140%. It's actually a much better sort of use of -- yes, the 140-something percent. It's actually much more. [indiscernible]

I wanted to go on, but we'll take it offline. All right. Anyway, thank you. Thank you very much for joining us this morning. Thank you.

Thank you.