Oversea-Chinese Banking Corporation

Morning, everyone.

Okay, I'll run through our results very quickly. There's a bit of an echo because of this cubicle we're in. I'm not sure whether you can hear us reasonably okay. Yeah, because I hear myself quite well. Okay, anyway, I'll refer you to slide three. So despite the pandemic, we ended the year reasonably well. Fourth quarter, we delivered a net profit of S$1.13 billion, and that's an increase of 10% on a quarter-on-quarter basis. Full year, we reported a net profit of S$3.59 billion, 26% lower than S$4.87 billion in the previous year. You can see that the performance once again demonstrated the strength of us having a diversified portfolio of businesses. And specifically, if you look at the net interest income, it rose 1% from the previous quarter to $1.44 billion, underpinned by a two-basis point improvement in terms of net interest margin as we worked very, very hard to manage the cost of our funding. Fee income and trading income were up 3% to 4% on the back of improved market sentiments and economic activities. And in particular, if you look at the Bank of Singapore, the AUM rose to a new level of US$121 billion, supported by both inflow of net new money as well as positive market sentiment, which led to the valuation of the assets under management. Great Eastern total weather news sales and new business embedded value rose strongly as well, 22%, 72% respectively. , we continue to remain vigilant in terms of expenses, operating expenses, although an increase of 2% on a quarter-on-quarter basis was 4% lower for the full year. NPL was relatively unchanged at 1.5%. However, the true impact of the crisis would become more apparent subsequent to the roll-off of the various support measures, so we have continued to preemptively set aside some additional allowances to question potential credit deterioration. Consequently, if you look at our allowance coverage of MPA, it increased to 115%. Our capital ratio was higher at 15.2%. The successful transition of OCBC-Weng Hang to IRB approach for risk weighting its assets and also accumulation of earnings accounted for the 0.8% increase in terms of CET1 for the quarter. The Board has proposed a final dividend of 15.9 cents, bringing full dividend for the year to 31.8 cents. Payout ratio will be 39%. No discount to the script will be applied. I'll now highlight some of the key financials, starting from slide seven. Net profit for the fourth quarter was $1.13 billion, 10% higher than the previous quarter. Against the previous year, net profit was 9% lower. Moving on to slide 9, for the full year, the group net profit was 26% lower at $3.59 billion. The unprecedented economic impact brought about by the COVID-19 pandemic has affected us in several ways, starting from slide 12. You will notice that net interest income declined 6% to $5.97 billion from $6.33 billion a year ago. This was mainly due to the 16 basis point decline in net interest margin as a result of lower interest rate from the aggressive rate cuts by central banks globally. In terms of non-interest income, slide 13, non-interest income for the full year was $4.17 billion, 8% lower as compared to $4.54 billion in the previous year, largely from lower fee, trading and insurance income. Our wealth management business did reasonably well despite the pandemic. Total wealth management income for the full year was $3.37 billion, slightly below 2019's and constituted one-third of the group's income. Private Banking rose 3% year-on-year and 4% quarter-on-quarter to US$121 billion, supported by net new money inflow as well as higher market valuation. For the full year, our net fee income fell 6% year-on-year to US$2 billion, mainly from lower loan-related and credit card fees. Customers' activities fell during the first half of the year when movements were restricted. We did observe some pick-up in activities in the second half of the year after the reopening in some countries, but these activities were still below 2019. On the other hand, wealth management fee increased 5% year-on-year to $998 million. A low interest rate environment coupled with positive risk sentiment had resulted in an increase in investment activities amongst our customers. Consequently, customer flow trading income increased 12% to a new high of $668 million for 2020. On the cost front, on slide 17, full-year operating expenses decreased 4% to $4.44 billion from a combination of lower staff costs as well as discretionary expenses. We continue to exercise strong cost discipline in line with income expectations. Moving on to slide 18, total allowance of $2.04 billion for 2020 increased significantly from $746 million a year ago. Given the downturn, we took prudent steps to set aside higher allowances for impaired assets, as well as additional allowances for non-impaired assets. As a result, allowance for impaired assets increased to $1.18 billion. This included the allowances set aside for loans to a Singapore oil trader. Additional allowances were also made for NPLs of the remaining oil and gas offshore support vessels. In addition, $864 million in allowances for non-impaired assets, which largely comprise $244 million in terms of macroeconomic variable adjustments, and $405 million in management overlay, were also provided. As a result of the increased allowances, total MPA coverage increased to 115% from 86% a year ago. Now on slide 20, you will notice that the overall credit quality of our loan portfolio remains reasonably sound, with NPR ratio at 1.5%. As at year end, non-performing assets were $4 billion, 3% higher than $3.8 billion a year ago. One thing that is interesting is that net NPA formation was actually lower by $325 million despite the pandemic. However, with the roll-off of the relief measures, we would be watchful of our exposures under the moratorium. Moving on to slide 22, loan growth continues to be muted, ending the year relatively unchanged at $267 billion. Our loan portfolio remained well diversified by industry, building and construction still represented the largest segment at 27% of total loan. Oil and gas constituted 4%, including 2% in the OSV sector. Specifically, our OSV's exposure net of specific provision, in this case, ECL3, were now about 0.2%. Our exposure to commodity sector was about 5%. Transportation sector loan to shipping excluding OSV was 2%, of which aviation sector remained at less than 1%. As part of our ESG agenda, the group continues to expand its green and sustainable finance portfolio as we transition to a low-carbon economy. Moving on to our custom deposits, As at year-end, customer deposits were $315 billion, up 4% for the year and 2% for the quarter. Coupled with a muted loan growth, our LDR, loan-to-deposit ratio, was lower at 83.7%. As we shifted our funding from fixed deposit to CASA deposit, you will notice that the CASA ratio has increased from 48% to 60%. On slide 25, the final slide, the board proposed a final dividend of 15.9 cents per share. The script dividend scheme will be applicable to the final dividend. Shareholders can elect to receive all or part of the dividend in script. However, there will not be any discount to the issue price of the new shares. To conclude, OCBC capital liquidity and funding position remains strong. This would enable us to support our stakeholders and to capture market opportunities. So with this, I'll pass the floor to Sam. Thank you.

Well, once again, good morning to all of you. And welcome to our briefing session. First of all, we are still in the first 15 days of the Chinese New Year. Happy Chinese New Year to you. And hope you have a happy, healthy, and very successful year of the AUKUS going forward. I also hope that you like our refreshed and renovated meeting space over here, which are now able to cater more people with proper social distancing. I would like to welcome Helen to join this session. Helen actually has been on our briefing sessions in the past few quarters, but because we have no meetings, so you were not able to see her. Unfortunately, because of her recent travel, she is not able to join us physically, but she is on the screen there. And Helen is attending this session in a new capacity as my successor come April the 15th. So in that sense, this will be the last quarterly results briefing session with all of you. Before we go to Q&A, maybe I'll just talk about some overview about the 2020 results. And I will not be focusing on the quarter, but I'll be talking about the trend, the underlying fundamentals, and what is happening as drivers for our economy. First of all, I think financial year 2020 demonstrated the value and the power of our diversification. And when we talk about diversification, we're not only talking about geographical diversification, but also the segmental diversification. You have previously heard me say that our corporate strategy has got three business pillars. We've got banking, we've got insurance, and then we've got wealth management. This time, it really showed the power of our diversification. Our wealth management fee income made for the whole year last year was close to $1 billion, $998 million. This is up 5%. Our AUM under the private banking unit hit a new record high of $102 billion. Our insurance business, which is the third pillar that we have, our embedded value of the insurance business is up 12% to $17.4 billion. As you know, insurance business is not only measured on its profit, but also measured on its embedded value, because insurance business is a long-term business, so you really have to look at the long-term value of this business, and we use something called embedded value across the insurance industry to measure it. Great Eastern's embedded value for 2020 was up 12% to $17.4 billion vis-à-vis that of last year. This is business pillar diversification. Geographical diversification. Our expansion into Greater China about eight years ago has really reaped very good results. As a matter of fact, Greater China contributed 31% of our profit before tax for the group. primarily because the provisions that we need to take in some other countries are because of COVID and the possible pressure on our portfolio is not strong in the Greater China region at all. So as a result of that, our profit after allowances contribution for Greater China is now up from last year's 20% to this year's 31%. Again, evidence of the importance and the value of diversification. I will talk about the performance trend. Fourth quarter is the third consecutive quarter of our net profit increases. And this is not only from the banking side, it's also from the insurance side. Our fourth quarter insurance total weighted new sales and new business embedded value created. These are again the two good measurements for insurance business hit a record high in the fourth quarter. It's a quarterly high throughout the past many years for an insurance business. So from a trend perspective, it is very positive. Our NIM on the year-on-year basis was down by 16 basis points, but if you analyze our NIM on a quarterly basis, it has stabilized in the second half of last year. As a matter of fact, our fourth quarter NIM was up by two basis points, primarily through the management of our funding cost and our funding profile. We also made record wealth fees and fee income from the customer treasury flows. expense management continued to be good. On a year-on-year basis, our expenses were down by 4%. On the 4Q versus last year's 4Q basis, our expenses were down by 11%. So from a trend analysis perspective, it is also very positive. From a risk management perspective, the concern that we had at the beginning of this crisis was the impact on the portfolio and whereas we are extending relief program to our customers whether they will be able to exit from the relief program in a smooth and orderly manner. I have enclosed in my enclosure in the CEO update that our exit from the relief program actually has been orderly, very well managed, and it is better than what we had originally expected. Just to give you some numbers. At the end of September, which is at that time, none of the countries have exited from the relief program yet. Countries like Hong Kong, Indonesia, Malaysia, Singapore all have government orchestrated relief programs. Less so in Indonesia, but there is also some directions from the regulators. At the end of September, that was the time that the relief program is already in place, but the relief program has not started to exit yet. Malaysia was the first country to exit from the relief program. At that time, September 30th, our total loans under the relief programs were 9%. by the end of last year, which at that point in time, Hong Kong and Malaysia has exited from the relief program, it is down to 4%. At the end of January, which is past the financial year that we are now discussing, it was actually down to 2%. So, particularly for Malaysia, because it was on an opt-out basis, the participation in the relief program when the relief program was enforced was 53%. And by the end of last year, it was down to 7%. And by the end of last month, it was down to 6%. And the majority of these exposures are secured. And a majority of those exposures, even for those who are under the second relief program, the performance ratio is over 90%, meaning that they are able to meet the requirements of repayment under the second relief program or an extension of the relief program. Over 90% of them paid according to the original schedule. So on the risk management side, the exit from the relief program has been very good. And I will attribute it to the coordination that is done around our different countries, particularly in Singapore, which is handled very well between the banks as well as the regulators. It is also due to OCBC's client selection and customer engagement. We do make sure that we engage the customers early on so that we can advise them that you need to preserve the cash flow for your future requirements. As Darren has said, our new NPR formation continues to be very stable. NPR ratio at 1.5%. Our NPR coverage ratio has been increased to 115%. So this is a very high coverage ratio. And our total credit cost for last year was 67 basis point. 67 basis point is well within our original expectation of 100 to 130 basis point for two years, 2020 and 2021. We expect that this crisis is going to impact our portfolio in terms of credit quality for two years. So first year was last year 2020, 67 basis point. We expect that for the two-year period, we will end up with a credit cost which is at the lower end of our forecast range of 100 to 130 basis point. Then we talk about the fundamentals of our banking business. We have a very strong balance sheet now, if you look at the way that we have provided for the NPL's 115% coverage, with a very strong capital, as Darren mentioned, at 15.2%. Our technology investments that we have made over the past many years have been able to prove of their value, of their use, and the customers are utilizing it. When the customers utilize the technology investments that we have made, for example, in digital, it means a lot to us. It means that we don't have to put up as much human resources to support the customers because they're able to do the transaction digitally. It also means that we can be able to apply straight to a processing. than if it's a paper-based or a counter-based transaction. So that's very important for us. And we are starting to see the results and reaping the benefits of those investments. We continue to pay dividend as guided by the MAS on the maximum percentage that we can pay. But we have decided, whereas we are putting in the script dividend, there will be no discount offered this time. And we have no M&A plans under review at this current time. To conclude, I think 2020 is a testament to our strong crisis management through this crisis. All the fundamentals are even stronger than before the crisis. Our capabilities build up in risk management, in customer engagement, in portfolio protection, in liquidity and funding continues to be strong and will serve us well going forward. Looking forward, We believe that most of the countries are exiting from the trough of this crisis, although the recovery continues to be sectorial. We will continue to be cautious. We believe that a strong recovery will probably not be seen until towards the end of this year and stronger into next year. We are aware there continue to be socio-political events that's happening around the world, and we hope that those will die down. If this were to die down, I think the recovery will even be stronger. It is very important for the U.S. market also to pick up, not only from a China-U.S. trade perspective, but U.S. is a very strong consumer market. And if that market can recover as is now expected with the proper policies put in place, we have high hopes that the recovery will be stronger than what we even expect right now. But at the present time, we believe that the recovery indicators will probably be stronger only in the second half of this year and even stronger by next year. So with that, I will conclude my overall remarks and will take any questions that you may have. Yes, Chania.