United Overseas Bank Limited (U11) Earnings Call Transcript & Summary

Hello, and welcome to UOB's Full Year 2021 Results Briefing. This morning, we have Mr. Wee Ee Cheong, UOB Deputy Chairman and CEO; and Mr. Lee Wai Fai, our CFO, to present the results. A few house rules before we start. [Operator Instructions] We would like to remind those in the room with us to keep your mask on at all times and to keep a safe distance with one another. Please also put your mobile phones to silent. For those of you on Microsoft Teams, please put yourself on mute for now. Without further ado, I will now pass the time to our CEO, Mr. Wee, please.

Good morning, and thank you for joining us. We hope everyone is staying safe and healthy. As we enter the third year of the global pandemic, the operating environment is stabilizing. We believe the worst is behind us. In Singapore, we see market recovery and improving consumer sentiment. In Southeast Asia, green shots of recovery are strengthening. Last year, global FDI, foreign direct investment surpassed pre-COVID levels, especially for flows into ASEAN. Our decision to acquire Citigroup's consumer business in Indonesia, Malaysia, Thailand and Vietnam, affirms our confidence in the long-term potential of ASEAN. This deal is a strategic fit at the right time. We are buying a quality franchise, 4 target markets at one go with a complementary base of customers, people and capabilities. A powerful combination that will accelerate our growth ambitions. And we are confident that this deal will further strengthen and deepen our regional franchise. We are glad that we are in a position of strength to do this deal. Our strong balance sheets allow us to seize this opportunity and to put our capital to good use. We will have revenue synergies from scale benefits. Now let me share our full year results. With a pickup in customer activities, the bank recorded a healthy performance in 2021 with broad-based growth. Net profit after tax increased by 40% to $4.1 billion. Loans registered double-digit growth of 10%. NIM was stable at 1.56%. We achieved record fees up 21%, mainly from wealth and loan-related activities. On the back of disciplined spending, our CIR improved to 44.1%. Our portfolio is resilient with stable asset quality, and our total credit cost declined to 20 basis points. We are grateful to shareholders for their support in the past year. And we are pleased to share that the Board has recommended a final dividend of $0.60 per ordinary share. Now together with the interim dividend of $0.60 per ordinary share, the total dividend for fiscal year 2021 will be $1.20 per ordinary shares, represent a payout ratio of approximately 49%. Let me now share how we are progressing in our business strategies. My CFO, Wai Fai, will go through later the detailed financials. Last year, Group Wholesale Banking income rose 8% on the back of continued diversification across geographical sectors and products. This strong performance is powered by our customer franchise and regional connectivity. We saw continued loan growth from large corporates, top global property funds and financial sponsors in Singapore, Hong Kong and developed markets. Fee income from loan and investment banking deals also registered strong growth. The business momentum is expected to continue as economies recover. We also see refinancing opportunities as clients transition to sustainable financing. Within more cash and trade, client mandates has increased our transaction banking revenue, and we will continue to deepen client engagement to capture the entire working capital cycle. Cross-border revenue grew 10%, and now accounts for about 1/3 of Wholesale Banking revenue. We recently increased our capital commitment to China, and we see upside potential from trade and investment corridors between ASEAN and China. ASEAN plays a prominent role in global value chain and will continue to attract manufacturing FDI. Since 2011, our FDI team helped more than 3,500 companies connect across Asia. In the last 3 years, the companies we have supported are projected to invest about SGD 34 billion and to generate nearly 160,000 jobs. And we will continue to diversify our revenue stream. Growth outside Singapore was 10%, while nonloan income rose 7%. During the year, we continue to meet our clients' needs through progressive solutions. For example, in broadening our digital payment and trade capabilities, we continue the rollout of UOB Infinity across the region and partner IMDA to digitalize cross-border trade flows between Singapore and China. And Bloomberg recently affirmed our leadership position in capital markets across Singapore and ASEAN. Our retail strategy remains on track. We continue to tap the rising affluence in Southeast Asia by acquiring customers using our unified digital banking platform, UOB TMRW and serving them through our omnichannel approach as their needs grow. The Citi acquisition subject to regulatory approval is a game changer. With this transformational deal, we will accelerate our ambition by 5 years and become one of the largest retail banks in the region with an expanded customer franchise, more touch points and partnerships, a greater market share and a stronger team to serve our customers. Our focus in the coming months is to work closely with the Citi team on integration and to fully realize synergies from the acquisitions. With our regional infrastructure and standardized systems, we are confident of executing this deal across the 4 markets in a phased approach. We have established work streams for the integration and had a joint townhall with the teams earlier this week. Beyond building scale, we will continue to deepen our digital capabilities. Our award-winning of UOB TMRW positions, position us well ahead of digital banks emerging across the region. Speed to market is key. Since 2018, we have acquired nearly 800,000 customers digitally across our key markets with accelerated momentum last year. Now with the Citi acquisitions, we expect the numbers to ramp up. UOB TMRW is being rolled out progressively across the region. It will help us to build scale and reduce cost to serve. Another key pillars in our retail strategy is to serve the growing affluence client base in this region. We set up a private well group last year to better serve our high network clients with our holistic advisory capabilities and one-bank approach. We will continue to beef up our team and capabilities. In 2021, we made substantial progress in our sustainability journey and received industry recognitions for our efforts. We exceeded our 2023 target of $15 billion of sustainable financing and 2 years ahead in advance. Our total AUM in ESG-focused investment grew to SGD 9 billion. In terms of impact, we continue to support our clients' efforts to reduce greenhouse gas emissions. And in addition, we became carbon neutral for our own footprint through continued focus on energy, efficiency and the purchase of renewable energy and carbon credits. Looking ahead, we aim to achieve new sustainable financing target of $30 billion by 2025 and enhanced disclosure in line with global best-in-class standards. We will continue to explore pathways to support the decarbonizations of our finance emissions and support our customers in the transition to a lower carbon economy. For this year, our guidance is for mid- to high single-digit loan growth backed by strong pipeline in corporate and institutional loans and mortgages. For margins, we expect 4 to 5 basis points upside the rate hike; double-digit growth in noninterest income driven by loan-related wealth and credit card fees; stable cost-to-income ratio, excluding Citi-related integration costs and; credit costs to normalize back to about 25 basis points on the back of our resilient portfolio. In summary, we are optimistic of ASEAN long-term potential and are well positioned to capture opportunities arising. We stand ready to support our customers with our strong fundamentals. We will continue to invest and to deepen capabilities in connectivity, digital innovation and sustainability, areas of growth in Asia for years to come. Subject to regulatory approval, we look forward to integrating Citi's quality portfolio and welcoming its team and to creating value for enlarged base of customers, employees and other stakeholders. The acquired business, together with our regional consumer franchise, will form a powerful combination that will scale up UOB's business and advance our position as a leading regional bank. I also want to take this opportunity to thank all my colleagues for their candor and dedication. Thank you, too, for your support. I will now hand over to Wai Fai to elaborate on our financials. Thank you.

Thank you, Ee Cheong, and good morning, once again to everyone for joining us today. Our full year's profit increased 40% to $4.1 billion. Despite a weaker trading and investment income, our operating profit grew 10% to $5.5 billion. This good performance is the result of a healthy loans growth in business activities and consumer spending as the operating environment and customer sentiment improved. Fourth quarter profit was 3% lower than the previous quarter at $1 billion, largely due to a lower trading and investment income. Quarter-on-quarter, NII was up 5% on steady loans growth and improvement in margin. Fees income was stable, while trading and investment income declined due to a softer market sentiment towards year-end. Asset quality remained resilient with NPL ratio at 1.6%. Total credit cost on loans is to 12 basis points this quarter due to write-back of general allowances as we have better clarity and confidence of the recovery path. Our capital and liquidity position remain strong with CET1 at 13.5% and NSFR at 116%, respectively. Retail did especially well as fees and customers' AUM soared to record level, coupled with pickup in credit and card activities which cushioned the impact from margin compression. Wholesale saw robust growth, led by strong demand for financing advice, structuring and funding opportunity from large corporate and institutional clients. Global Market operating profit was lower due to higher gains from bond sales last year. Wholesale, as Ee Cheong said, continued to register strong performance driven by diverse growth engines. Our comprehensive ASEAN footprint, sector specialization and deepened product capabilities has enabled us to capture the growing cross-border opportunities. Cross-border income grew 10% and now accounts for 30% of our Wholesale Banking income. Loans and trade-related fees rose 28% as customers increasingly leveraged our sector, especially insights and solutions. Our Global Financial Institution Group registered 21% income growth in banking, property funds and financial sponsors, serving them with our strong structuring capabilities. The acceleration of digital adoption by our corporate customers had also facilitated increased transaction volumes. We continue to build scale and deepen capabilities in our retail business. Prior to our recent acquisition, we had digitally acquired around 800,000 customers in the region since the fourth quarter in 2018. In fact, the pace of new customer acquisition has increased significantly with close to 300,000 customers onboarded in 2021. The pace of our customer growth will be accelerated with UOB TMRW, alongside our regional ecosystem partners and further augmented by the Citi acquisition. Our recent introduction of UOB TMRW was well received by customers with the app receiving the highest rating among key banking apps in Singapore. Our rewards program on UOB TMRW, where customers can view, track and redeem rewards registered a 44% growth in number of users. As a trusted bank of choice of our clients, our assets AUM increased 4% year-on-year to a new high of $139 billion. Total card billings in Singapore rose 17%, underscoring the recovery in the consumer sentiment. On the back of economic recovery, growth is similarly seen across our key markets in Singapore, North Asia and ASEAN. The developed markets saw significant improvement in 2021 as our customers invested into these countries giving rise to funding opportunities. While the recovery in ASEAN was slower, we managed to still show a 2% year-on-year increase as there are still pockets of economic activities. I have summarized the overall performance earlier, but just to recap the key highlights. Strong business flow helped grow total income by 7%, while disciplined cost measures contained cost to 3%. This resulted in a positive jaw where operating profit grew 10% for the year. I will now go through some of the key drivers in the next few slides. Interest rate. While interest rates stayed low through 2021, we managed NII growth by 6% to $6.4 billion due to 2 key reasons: First, in a year where market was very competitive for good credits and mortgages, we managed to grow loans 10% year-on-year. Second, we managed to hold NIM stable through proactive balance sheet management. If the interest rate is expected to be higher in 2022, interest income is similarly expected to grow. With the economic recovery and strong customer franchise, 2021 fees income is the highest ever seen at $2.4 billion, a 21% increase over the previous year. Wealth management fees reached a record level with returning investor confidence. It achieved a double-digit growth of 16% to $823 million in 2021. Wealth sales was seen across most investment products, especially in investments and bank assurance. Customers continue to entrust us to help grow their investments, resulting in the 4% AUM growth. Corporate fees also has seen very good performance in 2021. E-commerce recovery gave a boost to revive trade and investment transaction. We're able to capture these flows as our past investment to enhance product capabilities and to provide customers with solutioning spending across industry and countries start to show results. Loans and trade-related fees grew to record level in 2021, surpassing the $1 billion mark. Customer-related treasury income also reached a new high year-on-year with a growth of 10%. On the other hand, noncustomer trading income decreased year-on-year on the exceptional high gains on sale of bonds last year. Expenses. Expenses grew 3% year-on-year as we continue to invest into building for the future. As a result of new investments coming on stream, technology-related costs rose by 10% over the last year. With the investment in our people over the years, together with the addition of the Citibank talent, we now have the confidence to face the challenges that has disrupted the industry. Our overall asset loans portfolio remained resilient. NPA formation was higher this quarter from a few secured corporate accounts. This were well within management expectation, and we have adequately set aside provisions for them last year. NPL ratio rose marginally to 1.6%. We know that there are ongoing concerns on some countries they have extended their relief programs. We have accessed the residuaries of this portfolio and believe that the impact on credit costs or NPAs will not be significant. Our general allowance set aside is more than adequate to absorb the losses, should they materialize. Total credit costs eased to 20 basis points for the year as credit outlook stabilizes. Based on internal portfolio assessments and improved economic outlook, we are confident that the general allowances are more than adequate. We have hence reduced our general allowance for this quarter. We expect credit costs for 2022 to stay within the 20 to 25 basis point guidance range. The group total allowances were at $4.9 billion for the year, of which $3.3 billion was general allowances. NPA coverage at 96% or 239% after taking collector into account. And more important, the performing loans coverage at 1%, they all remain strong. With the strong reserve coverage, we are confident that our general allowance is sufficient to see us through this downturn. I think loans momentum sustained well. We grew 2% for the quarter and 10% for the year. Growth was mainly from Singapore, North Asia and the Western world as economic and investment opportunities pick up for our corporate and institutional customers. The strong deposit growth from last year carried into 2021. We continue to see strong liquidity flows, in particular, in Singapore. As a result, CASA to deposit ratio grew to 56.2% at the end of last year. Our liquidity position remains strong with the quarter LCR at 133% and NSFR at 116%, both well above the minimum regulatory requirements. We ended the year with CET1 ratio healthy at 13.5%. With a solid balance sheet and adequate general allowances, we are comfortable with our current CET1 position. We had mentioned previously that on a pro forma basis, the Citibank acquisition will bring our CET1 down to 12% -- 12.8%, a level we are actually very comfortable with. Like Ee Cheong said, the Board declared a full -- a final dividend of $0.60 per ordinary share in appreciation of the support from our shareholders. I think with that, I conclude my presentation, and I'll pass it back to the moderator, Kelly?

Thank you, Mr. Lee. We will now move on to the Q&A. [Operator Instructions] Can we have the first question, please? Can we have Prisca from Straits Times?

And congrats on the good results. I have a question about what are some of the lingering uncertainties or headwinds that the bank continues to see? For example, on the impact of inflation on its customers as well as the rising interest rates hinder spending by its customers as well and bookings of loans. Also the question about the requirement that MAS announced yesterday for improved surveillance capabilities among banks. How does UOB expect that this will affect its expenditure on tech?

Well, I think the concern about inflation, the concern about interest rate, I think this is not something unique. This is a global -- this is a global scenario. And I trust all the central banks, they are on top of things, right? And I still remain fairly positive. It's still too early to tell. I hope the situation is manageable. Now regarding the scam situations, I think, this is something that is a price that we all have to pay being -- trying to digitalize the whole economy. But I think it's something that we are very mindful. I would urge everyone, the banks, the consumer as well as the other ecosystem, we all have to play a part. You are as strong as your weakest link, okay? I think this is timely that we should set up some measure to how to address the confidence. And I being the Chairman of ABS, I think, we are already in the process of a joint committee together ABS, together with MAS, to see how we can look at the whole industry as a whole to work on some of these solutions.

Okay. Next question. Can we have Goola from The Edge.

Congratulations. Can I ask perhaps a bit more granular on the interest rate front. What's the impact on your net interest income, assuming the Fed hikes like 25 basis points, 4x a year, for this year? That's the first question. And the second question, specifically, how does inflation and these higher interest rates impact your MEV model and the outlook for your -- well, general allowances? And does your credit cost outlook of 25 basis points include this impact on inflation and higher interest rates? And also, will the Citi acquisition have any impact on the model? And just could you give an update on your management overlay? And then the last question is on the funding part. I'm just wondering, are your regional businesses self-funding? I mean you did announce an increase in CASA, but are there plans to increase CASA sort of regionally because I think that your net profit -- your operating profit from the region is like more than 40%. So that's an important -- funding is important part.

Ee Cheong, I'll take that question. So that's a whole series of questions. As to -- your guess is as good as mine, when Fed will raise hike, whether it's 4x, 6x, 5x, and what's the impact to our earnings. In fact, we all know, increasing interest rate is positive to commercial banks like ours, okay? And like Ee Cheong said, every 25 basis points, you assume that each rate hike is 25 basis points. That probably translates to -- if you look at absolute profit, $150 million to $200 million to NII in absolute dollars. So you just have to test on an annualized basis. You just look at how many times and just take your own computation. Whether it will, in fact, affect credit costs. Okay, I think that's the second question. Whether inflation, with the increased interest rate, will be a burden for customers in that environment. I think this we take comfort as we look at some of the regulators trying to balance that. We think that increase will be on a marginal store level rather than a onetime hike. I think everybody got excited because of the high inflation indicators of the 7.5% shown by the U.S. And I think you really look at some of the reporting whether that will continue or whether that's the result of the supply chain disruption. And when stabilized, will it be a lower number? So I mean, my view is that it will be gradual rather than -- although a lot of it will be front-loaded, but I think it will be gradual because I think all of us are still trying to look at the long-term impact. But needless to say that it will be positive because when that translates to the low end, our margins will increase and will be positive. So we don't think that credit quality will be significantly affected. As for management overlay, which is the next question, I think we have enough and we are confident. We disclosed previously that we have over $1.2 billion in there. And that -- we have kept majority of it that we have not added because we are confident that it won't get worse. We have not added mainly because we are holding back because of the regional recoveries. So if there are some concerns that some of the NPAs will come true, but my credit cost is buffered. Okay, so hence, we are really confident of guiding the 20%, 25% credit cost on the long-term basis. Now last question is on Citi portfolio. I think Citi portfolio is no different from us. You look at where they are, there were some concerns that are they under higher risk unsecured. But we have seen their credit model. And I think the COVID was the best test. You look at what happened over the last 2 years, they managed that portfolio well and the credit cost was manageable. So that gives us a lot of confidence on the quality of the customers and their credit process. And so we don't think that it will affect us significantly in the Citi portfolio. And hence, we are not changing any of our guidance that we talk about. I hope that answers your series of questions.

Talk about the funding cost as well. How will you keep your funding costs down? In the region -- is your -- are your regional business self-funded?

So I think the regional countries itself, local have to be self-funding because there's no way that we have. The foreign currency impact, which is not a big portfolio, okay, in the various countries. If you look at Thailand, Malaysia and Indonesia, there's a small portfolio that might need help, and we can actually help fund that, but it's actually a small portfolio. Where we are looking for the domestic supply chain growth is really the local currency. So there are plans that we have. And I think the good news is that as we roll out our wholesale capability of Infinity, et cetera, into the region, that helps the supply chain in the countries itself. We are also trying to increase our retail portfolio. So we are very hopeful and confident that with the Citi acquisition, that gives me another 2 billion of customers that we think that we can tap into and will help us stabilize that as well. So we're actually confident in there. And in the short term, if we need some market funding, we will do it, but it won't be a significant part of our needs.

I think, Goola, let me just add, because the acquisition is for the customer base that we are looking at. In terms of balance sheet, we are talking about $9 billion cut across 4 countries, right? So actually, it's very small. And you have a deposit base of $13 billion, right? So -- as you said, right? So we can always tap on -- in fact, our TMRW, our digital bank, we are all set on to see how we can continue to increase our CASA as well as we can actually go to the market and give some wholesale funding if required. So this is not a really big strain to us, but it's a customer base that we are acquiring, right, that will put us -- you look at the consumer side, the credit card, Malaysia, we'll be #2 in the whole country, right? In Thailand, we'll be #3, right? This is where the customer base will allow us to cross-fertilize right, cross-sell a lot of products to the consumer.

Okay. Thank you, Can we next have Takashi from Nikkei.

For the rest of the year, the fees income increase from wealth advisory business contributed an increase in revenue and a profit from -- of the 4 UOBs. So for this year, how much room is there for further growth in wealth advisory business? To what extent will the acquisition of Citi's retail business strengthens the wealth advisory business and which countries and regions have the most potential for growth in the wealth advisory business?

I think the fee income will continue. If you -- in my speech, we are still targeting about double-digit growth for fees, right? That come across wholesale as well as retail, right? Now your second question is with the acquisition of Citibank. That will actually improve our fee generating business. Which country is more attractive? I think if you look at the 2 countries that we acquired, the Malaysia and Thailand, that form the bulk of the activities, okay? But Indonesia, Vietnam is still has a long-term potential given the size of the population. So I would say 4 countries are equally attractive, but the immediate will be Malaysia and Vietnam that I think we have to -- and Thailand, that I think will be the -- in terms of people that we have, in terms of the number of customers we have, that itself should be able to generate immediate benefits.

Okay. Can we next have Kelly from Business Times.

So I have 2 questions. On the CASA trending upwards and in view of a rising rate environment, is there a possibility where the bank will wind up like paying higher interest to customers, but not being able to loan as much? And then my second question is actually on the emerging blockchain and crypto space. As you know, a lot of the banks in the region have sort of like planted their flex in this space. I'm just curious what UOB's stand is on this? Like are there any plans to also establish a foothold here and why or why not?

Okay. The first question -- the first question is on CASA. Basically general questions on funding, okay? I think do I fund ahead of lending? That's always a challenge. And that's why we are not rushing, okay? Because we knew interest rate is going up, how much it translates to a short end? How much I can reprice my loans because there's still a very competitive market in there? So there might be 1 or 2 quarters of track if you're not careful. But like I say, generally, it's positive that the specific details is where we actually will debate at LCO where we see the impact on the interest rate, should we do that. But generally, we hope that CASA is less rate sensitive. There are some fears whether interest rate goes up or take it out of that low cost and do investments or shift it to FT, there might be some. But if you really look at the focus that we have on CASA was that people who use us as a primary account, hopefully, with our transactions, with our friendly capabilities, they will keep the money with us. And that's probably what we are hoping for rather than they look at it as interest rate sensitive. There might be some, but hopefully, it's not significant. Your second question on blockchain, you want to take it, Ee Cheong?

Yes. Well, as far as the bond change, yes, this is an area we are looking at. In fact we are actually focusing on CBDC, that is the Central Bank Digital Currency, tokenization of assets as well as using blockchain in trade finance and supply chain. And this is something we are actually working on. What we need to monitor is -- the crypto space will be something that we are monitoring. We think it's still quite speculative. But the rest of it, like Central Bank Digital Currency, the tokenization, in fact, we are really working on it. So it's a question of how to convince customer to be more actively using some of these initiatives.

Can I just quickly follow up? So CBDCs, does it mean you are working on anything with the MAS?

Yes. Also with some regional central banks.

Next, can we have Leslie from finews.asia.

I had several questions. I wanted to find out what was the net new money in the wealth management? What was the reason for the large drop in Vietnam operating profit? And can you give more color on the sensitivity of earnings to interest rate hikes? I mean perhaps on a per basis point basis?

Your last question on sensitivity to earnings, I think we have addressed that earlier in 2 ways. In terms of basis points, Ee Cheong already mentioned, maybe 4 basis points for every rate hike of 25 basis points. I mentioned that in dollar and cents , it's $150 million to $200 million translation to our profit. So that's the last question. Your second question -- your first -- second question on Vietnam itself. I think Vietnam is a small book, okay? A lot of the drop was because of some of the margins because as we go in, we look at that and we compete in there, but it's actually a very small book. Okay. You look at the absolute dollars, it's actually less than $10 million. But it's an important market for us, it's growing. And our medium-term plan, together with the Citi acquisition, was to try and target that consumer growth as the country evolve.

What was the amount of net new money?

What was the...?

The amount of net new money?

Okay. So when we look at it, I think the net new money is actually positive for us in that sense. That's why the AUM actually, actually goes up. So I think in the consumer PFS side, we are probably seeing positive a few billion, I can't remember the actual number. But it's actually positive in the sense that when the sentiment improved, okay, people are actually now investing. We always had this debate whether wealth will drag deposit, okay? Whether it can buy us deposits. And actually, we have seen over the last few years that it doesn't. People have many secret reserves that they are just taking out in the various form of investments and probably wealth. Once they are positive to the sentiment, the money will come back, especially in the higher private banking space.

Okay. We'll now move on to the next question, Farish from Bloomberg.

Farish from Bloomberg. Just 2 questions. The Citi deal was UOB's first major M&A in 16 years. And I'm just wondering whether are you looking at more acquisitions within Southeast Asia or even within Asia? And which areas are you zooming in? And the second question that I have is, there has been chatter during the past year about Singapore exploring wealth taxes. Given the expansion in your wealth business, how much of a concern do you have about wealth taxes and the possible impact on your clients and wealth management business?

Well, I think we have not digested the Citi acquisition yet. I think it's a bit too early, too premature to say that we're going to make a second acquisition. So let's focus -- our key job is to focus on our integrations, right, to make sure it's successful. So that is your first question. What is the second question?

The impact of wealth tax.

The other one -- the wealth tax. Well, I think Singapore is already has a wealth tax. I don't know what is the definition of wealth tax. We have property tax. We have all kind of taxes. The fact is, I believe, the government, while the budget is coming this Friday, the minister will look at Singapore, he will consider holistically, right? Singapore has a status as a financial center and innovation hub. So I think whatever we do, I think, it should not impact, right, especially the wealth side, the family offices coming to Singapore, right? We are no different. We -- Singapore as a country, we want to attract as many people to come in to maximize the revenue. So I think this is something the government will consider all this. But there are already all kind of wealth taxes imposed in Singapore, right?

Okay. We'll now move on to the next question, Trao Pao Chien .

I have 2 questions. One question is, do you provide guidance on dividends moving forward, any plans to review the policy? And secondly, I have noted that the group has set a new sustainable financing portfolio target. How would you achieve -- how do you plan to achieve this target? Any particular area or market that you'll be focusing on?

Okay. Your first question on guidance on dividends. I think we have mentioned that we are confident of keeping that 50% payout ratio. And we are confident that so long as we stay within above the 12.5% to 13% range because today, we are already having -- because when you have too much CET1, it's a drag on ROE. Now that we have the Citi acquisition, we are utilizing that to better effect. The earning capacity of it will allow me to pay out 50% because we think that the return on RWA will be higher. So there is -- we are not planning to change that at this point in time. We are sticking to that 50% dividend guidance. The second question was on sustainability target.

I think generally, we take a more holistic approach in the whole sustainability initiative, right? We -- as a bank, we cut across the whole region. We want to be the catalyst as well as enabler, right? And that we are working together with our customer. And we -- obviously, we are not in a position. We will select a few sectors that has a better impact on sustainability, and we will work with them. Hopefully, that will give us a multiplier effect. And that is the long term, right? And as an organization, I think we like to achieve at least 80% of our own buildings, our own activity. We want to be as cover neutral as soon as possible. And if any details that you think that you want to further indulge in, I think I have a sustainable officer, you can. I'm sure he's more than happy to give you the whole initiative of the bank, what we plan to do.

Okay. We have time for one last question. Can we have Chloe from The Edge in the room.

Hi, I'm Chloe from The Edge. I just want to ask a little bit more about your strategy towards digital assets, especially with more and more movements towards like decentralized finance?

Well, this is a new initiative. Strategy is one thing. I think we have to work together with customers. Because when you talk about tokenization, it's the acceptance of customer. It's no different than that in the old days, right? You do a syndication, right? The question is, if we want to sell these assets, I can tokenize it. But some people -- some customers prefer to deal with the bank on a wholesale basis. Some prefer to say, I want to sell it in a piecemeal basis. So it's a lot depending on the philosophy of the customer. So -- but the one is actually ongoing, okay? You may not see a big traction. This is something that we have to work on. Because when you talk about financing of all these tokenized assets, one thing you have to make sure that the asset is sustainable and is of high quality, right? Can you imagine if you have a problem, how are you going to have so many tokenized customers to deal with, okay? Some customers would still prefer to work with 1 or 2 wholesale banks to work up the solution. So it's something that is a journey, I would say, but we have a team of people within UOB to look at some of these initiatives. We cannot ignore it. And as far as the Central Bank is concerned, this -- what you call that the focus on CBDC, that is an area we have to work with Central Bank. We have to make sure that we have the treasury capability to make sure that we are using the blockchain for trade finance and supply. And this is something that the bank has itself. We do have a powerful regional cash management system to make sure we are able to complement some of these initiatives. To answer your question, yes, we are staying on top of it, but it's a level of acceptance. Because you talk about Central Bank, it's Chinese renminbi, whether the customers still prefer to use renminbi or still prefer the U.S. dollar, this is something I cannot control.

Thank you, Mr. Wee. That's all we have time for today. Thank you, everyone, and we wish you a good day ahead.

Thank you.

Thank you.