Oversea-Chinese Banking Corporation

Good morning, everyone. Thank you for joining us on our earnings call for our first quarter 2021 results briefing. So today, we have Helen, our Group CEO, with us, as well as our CFO, Darren. And we will be letting Darren take us through the slides. Thereafter, Helen will share with us her thoughts, as well as take a Q&A. So I will pass the time now to Darren, please.

Thank you, Qingqing. Morning, everyone. Thank you again for joining us. I'll take you through the slides and I'll refer to the pages so that it's easier for you to follow. So I'll move on to slide three. For the first quarter 2021, we reported a net profit of 1.5 billion Singapore dollars. This is an increase of 33% from the previous quarter. If you look at the details of our performance, you'll notice that across the of our franchise, and that will help us continue to essentially generate balance and resilient growth. Now, in terms of total income, we grew 70% on a quarter-on-quarter basis. The low interest rate and environment continued to weigh on our net interest income. However, our non-interest income, comprising fee, trading, and insurance, delivered a strong performance amid an improving operating and market environment. Now, with the strong quarterly performance, our annualised group ROE, we cannot agree, rebounded to 12.4%. Now, I would point out on slide 6, in terms of our balance sheet, you will notice that our balance sheet remains strong with ample liquidity and funding. Specifically, if you look at our CET1 capital, it rose to an even stronger level of 15.5%, mainly from the strong earnings that we registered for the quarter. Moving on to slide 7, total income rose 17% quarter-on-quarter and year-on-year, largely from the rise in non-interest income. Allowances were also lower against the previous periods, mainly from an improving credit environment. Now I'll move on to slide 10 on our net interest income. For the first quarter, net interest income was only slightly above the previous quarter at $1.44 billion. following sharp contraction in tandem with global interest rate, our net interest margin has stabilized, albeit at a lower 1.56% over the last three quarters. Now on slide 11, you will notice that non-interest income rose strongly at 40% from a quarter ago and now contributed to about half of the group's total income. The non-interest income growth was broad-based across insurance, wealth management, and are reflective of the strong diversified franchise that we have built over the years. On slide 12, you will notice that our wealth management income flows to $1.21 billion, driven by a combination of the rise in customer activities and market performance. And if you look at slide 13, net fee and commission income also highlight the same story. Essentially, net fee and commission on an upper trend for the last three quarters rose to $585 million, with wealth management fee reaching a new high of $321 million. On slide 14, we also continue to see strong customer activities, and that lifted our trading income to $316 million for the quarter. Site 15, operating expenses were 2% higher quarter on quarter at 1.15 billion. The staff costs increased in tandem with improvement in performance. Meanwhile, we maintain discipline in terms of our discretionary spending. Now on slide 16, on our allowances, given the improvement in economic outlook, a lower credit cost of 22 basis points was booked for this quarter. Allowances of $161 million, comprising mainly allowances for impaired assets, were set aside. Roughly half of the allowances for impaired assets was for the remaining oil and gas exposure that we have on our book. Now on slide 17, you'll notice that with the added allowances, our coverage for MPA rose to 118%. Now, in terms of asset quality on slide 18, you will notice that our loan book remains sound with NPL unchanged at 1.5%. And if you look at the details on slide 19, new non-performing assets of $375 million were roughly offset by an equivalent increase in recoveries and upgrades. And this increase in upgrades and recoveries were mainly in the oil and gas offshore support vessels and also transportation sector. Now, moving on to slide 20. Our loans grew 1% to $271 billion, mainly outside of Singapore and to our network customers in China and in the United Kingdom. and in terms of the details of our customer loans slide 21, loan portfolio remain well diversified. Building and construction still represented the largest segment at 27% of our total loans. Oil and gas constituted 4% of our loan book, including 2% in the oil and gas support vessel sector. Specifically, our OSV exposure net of specific provision now represents about only 0.1% of our loan book. We continue to grow our green and sustainable finance portfolio, increasing 9% quarter-on-quarter to 15.3 billion. Slide 22, on our loan relief program, total relief loans now represented 2% of our total loans. Although, as you can see in the details, the quantum has reduced from 5.7 billion to 5.1 billion. 92% of these relief loans were secured, and most of our customers indicated that they did not require further assistance beyond this program. On the final slides on deposit, you will notice that our liquidity remained ample, CASA continued to grow 3%, in this case, to $195 billion. Correspondingly, our CASA ratio rose to 61.8% this quarter. We continue to emphasize fixed deposit, and also our customers prefer the flexibility arising from current accounts and savings accounts. Now, with this, I'll end my presentation and pass it over to Helen.

Thanks, Darren. And good morning, everyone. Thank you for dining in for our first quarter results. I have met some of you, but hopefully with the pandemic situation continue to improve for the mid-year, we'll be able to see you in person. So I'd like to just cover a few points. And since Darren has talked about the numbers and the results in full, I just want to highlight a few points regarding our business performance for the first quarter. I see the first quarter performance as exceptional. I think this is due to market conditions that is inducive. And we have had very strong earnings across key markets and businesses. and indeed we also see diversified earnings and that rests on the strength and resilience of our three pillars of our business which is wealth, insurance and of course banking operations. Also seeing a stable loan bulk and then with some growth in Greater China and network customers in the UK as Darren has mentioned. Happy with the CASA ratio which is now at 61.8% and it grew from something like 51% a year ago in the first quarter of 2020. Also see a stable NIM at 1.56%. And lastly, a lower allowance of 161 million, which is in general commerce, transport and manufacturing. So with that, I also want to touch on the market conditions We are seeing strong recovery in global output and trade in 2021, led by revival of economic activities in the U.S. We are well aware that U.S. growth is driven by monetary stimulus and also fiscal spending. Another important economy, obviously China, has seen an accelerated pickup in exports and also a very strong domestic demand. Economic recovery is also expected to be strong in our core markets of Singapore, Malaysia, Indonesia and China. However, recovery is not broad-based yet. We see actually this is very much due to emerging variants of COVID-19 and also slow roll-out of vaccination in certain countries. So a true return to normal, I guess, will take time and perhaps longer than we think in this year. So we'd like to focus on dimpling our network to support our customers and also to capitalize on science of sectoral recovery. So, and with our strong balance sheet and capital position, I'm happy that we are focusing on a lot of the business momentum based on the recovery. So on the outlook, I will look at our loan growth as having momentum to lead to faster growth in the rest of the year. And I'm thinking about a mid to high digit, single digit growth in our loan book. and we will be focusing on the large Singapore corporates, Chinese business diversifying banking relationship in ASEAN, the activities of the SMEs across our core markets as the economy recovers. And we are also already seeing a momentum of demand for loans in infrastructure, logistics, transportation, real estate and also a lot of demand from private funds that is managing the wealth in the region. So on the provision side, the allowances size, I do not expect huge amount in the next three quarters. The relief program has seen healthy repayment trends since they start leaving the relief period. We stay with our guidance of 100 to 130 basis points for two years for our allowances, but we believe that it will be on the low side. So I would end here and we'll open the floor for questions.