Oversea-Chinese Banking Corporation

Thank you for joining us on On The Line. And today we have with us our Group CEO, Helen Wong, our CFO, Darren Tan, our Deputy President and Global Wealth Management and Consumer Banking, Mr. Chin-Wei Hong, and we have our Global Treasury Head, Mr. Kenneth Lai. We will have Darren take us through our presentation slides, and thereafter, we will take a Q&A after Helen say a few words. Darren, thank you.

Thank you everyone for joining us. I'll move on to slide 3 if you have the slides in front of you. First half 2021, net profit rose 86% year-on-year to S$2.66 billion. Correspondingly, our analysed ROE was also higher at 10.8%. Net interest income had remained stable. While non-interest income had moved in tandem with market, For the quarter, non-interest income was 17% lower quarter to quarter. Allowances, although higher for the quarter, were substantially lower compared to the year ago. Given the resilient performance, the board had to approve an interim dividend of 25 cents. I'll move on to greater details in the following slides. Starting with slide five. For the half year of 2021, our three business pillars continued to deliver good results. in the previous year at $2.1 billion. Our private banking franchise remained a strong growth driver. Wealth management income rose 25% to $2.14 billion in the first half of 2021. Asset under management increased 11% to $125 billion. Great Eastern Insurance net profit contribution more than doubled to $565 million from a year ago. Total with the new sales and new business and beta value grew 57% and 43% respectively. Now moving on to slide 6 on our balance sheet. Funding, liquidity and capital positions remain strong. In particular, Common Equity Tier 1 capital adequacy ratio was higher at 16.1%. The increase was largely driven by retained earnings for the period, strong participation in our final year dividend, in this case, in the form of Scrip, and also partly from the partial release of the Regulatory Loss Allowances Reserve, or call it the RELA from here. Now, moving on to the details of our group performance. For the first half of 2021, the 86% year-on-year increase in net profit to $2.66 billion was driven by higher fee, trading, insurance income, as well as lower allowances. For the second quarter, net profit was $1.16 billion, as I mentioned earlier, although it's a 59% higher on the year-on-year comparison, was 23% as compared to the relatively stronger first quarter. Now on slide 10, in terms of net interest income. For the first half of 2021, net interest income was low year-on-year at 2.9 billion, reflecting the impact of the lower interest rate. Net interest margin had contracted 11 basis points from a year ago. However, the net interest margin had been relatively stable in recent quarters and expanded two basis points quarter-on-quarter to 1.58% on our continued efforts to optimize our balance sheet. Moving on to slide 11. Non-interest income for the first half of 2021 was 2.58 billion, an increase of 29% from a year ago, driven by higher fee, trading and insurance income. And if you were to look at slide 13, in terms of the breakdown of the fee income, for the first half of 2021, our net fee income rose 70% to 1.15 billion. Broad-based growth across all key fee segments. Now against the strong first quarter, Second quarter, 21 fee income was lower. Financial market related activities such as wealth management and brokerage reverted to a more modest level. However, fee from loans and investment banking were higher, mainly from loan growth as well as increased underwriting activities. Moving on to slide 14. In the first half, trading income grew 54% from a year ago to $528 million. However, second quarter was more subdued as compared to the first quarter of this year, reflecting the more moderate customers' activities and also lower market gain from Great Eastern. Now, moving on to slide 15 on our expenses. Operating expenses remain well managed and rose 3%. The cost-to-income ratio improved to 41.7% from a year ago. at 43.3%, as the income growth has outpaced the increase in terms of costs. Now, I'll move on to slide 60 on our allowances. For the first half of 2021, allowances for all ECL stages were substantially lower as compared to the previous year. Total allowances were 393 million as compared to 1.4 billion last year. Our allowances made in the first half of 2020 were largely for a number of corporate names in the oil and gas sector, and also macroeconomic variable adjustment and management overlay to reflect the deteriorating operating environment then. Now this year, with the improvement in economic outlook, The ECL 1 and 2, expected credit loss 1 and 2 allowances for non-impaired assets were substantially lower. There were positive macroeconomic variable adjustments made to reflect the better economic outlook. However, with the recent situation in our Southeast Asian markets, we have prudently set aside allowances in the second quarter to buffer against potential credit deterioration in the region. ECL3 allowances for impaired assets were also comparatively lower. The $283 million set aside were mainly for various corporate accounts in Malaysia and Indonesia in the second quarter. Moving on to slide 17, cumulative allowances were lower than the previous quarter, largely from a reduction in impaired allowances as well as the release of $430 million RILA to retain earnings within regulatory requirements. Consequently, our MPA coverage ratio declined to 104%. Now moving on to asset quality on slide 18, MPR ratio has been stable at 1.5% over the last three quarter. MPA non-performing assets were 4.08 billion. This was mainly attributable to a rise in new MPA from loans originated in Malaysia and Indonesia. Moving on to slide 20, as you can see in the charts, our loan grew 3% to $275 billion from $268 billion a year ago, driven mainly by growth in Singapore, Greater China and United Kingdom. In terms of industry, the increase was led by higher loans to the building and construction sector. And on slide 21, our loan portfolio remained well diversified, building and construction and housing sector remained the largest segment at 27% and 22% of total loans respectively. Now on slide 22, you will notice in terms of loan moratorium, total relief loans were 4.5 billion and 90% of this was secured. We do expect to see an increase in relief loans in Malaysia and Indonesia in coming quarter as we continue to support our customers there. On slide 23, customer deposits rose 3% year-on-year and 0.4% quarter-on-quarter to $370 billion. Current accounts and savings accounts deposit continue to grow as we proactively optimize our funding base and reduce our fixed deposit. As a result, our CASA ratio rose further to 62.5%. Now, finally, on the slide 24, given that MES had left the dividend cap for Singapore-based banks, the board has approved an interim dividend of $0.35 for 2021's interim dividend. This interim dividend of $0.35 was at the same level as the interim dividend in 2019 and represented a payout ratio of 42% against our group net profit for first half of 2021. In determining our dividend, we have taken into consideration in their distribution of capital so that we remain in a strong position to support our customers. Now, with this, I conclude this presentation and I'll pass the floor to Helen. Thank you.

Thank you, Darren, and good morning to all. Very nice to talk to you all, albeit it is on audio because of the restriction together. I think Darren has actually presented the financial situation of our group. I just want to make a few comments. First thing is we do see a strong set of results for the first half of 2021. This is coming off from a very exceptionally strong first quarter, but our second quarter results were resilient against a backdrop of COVID-19 resurgence in Singapore, Malaysia, and Indonesia. Our banking, wealth management, and insurance businesses all deliver robust performance, and we continue to see momentum from an improved operating environment despite the tightened safety measures. This actually reflects the investments we have made to grow our businesses, particularly in digitalization. I give you a few examples of that. For the first half of the year, 98% of our commercial banking accounts were open digitally, online. And we see actually comparing year to year, first half, we have more than two times of digital investment sales compared to last year. And indeed our consumer payment transfer is 3.4 times compared to the same period last year. So this also reflect our investment in British China. We see strong franchise across our core markets and the synergy within the group to capture flow business between British China markets and ASEAN markets. Looking forward, we talk about a lot about global economic growth. We do see that happening in 2021 and we expect economic growth to continue in 2022 with improved macro fundamentals. This should continue to drive growth trajectory for OCBC. Government support measures will continue but potentially saw gradual move away from dovish monetary policy, accommodation and meet economic recovery. Short-term rates, we see that will remain low in the next few quarters. Inflation risks expected to be mostly transitory. Yes, there is indeed uneven recovery in OCBC's key markets. We do expect the government to act fast to protect economic growth, including achieving higher recination rates across our core markets. On the loan book, I think Darren has talked about it. I think just relating to that comment, once we affirm that, we expect LIM to be within current levels and loan growth to be mid-single digit towards the end of the year. The loans growth, obviously, we see a long-term trend. We remain stable, and this will continue to drive our loan growth. China flows, wealth flows, et cetera. And we are also seeing good momentum on our consumer side, in particular in Singapore, where we actually see housing sales increasing, and then we have a good momentum on our mortgage book. I also want to emphasize on the deposit size. Our CASA actually now stands at 62.5% of our total deposits, and that compared to 56.7% the same period last year. We have raised the interim dividend to 25 cents, as Darren has talked about. And the last bit of my comments, I want to actually reaffirm our strategy. We have made changes to the management team. We have appointed Group Chief Operating Officer to drive our next phase of transformation. Our core strategy has served us very well, growing the three pillars, banking, wealth management and insurance in our core markets of Singapore, Malaysia, Indonesia and British China. And we have built strong blocks in digital and tech, talents and robust risk management. Any refinement of strategy will be announced at an appropriate time. But I just want to mention that we continue to execute our strategy on opportunities arising from the trends, from the macro trends. So the first one being what we call China Plus One, the center of trade to shift to ASEAN and China. Southeast Asia will continue to be one of the strongest gainers. We see this huge opportunity as we see the continued two-way trade between ASEAN and China growing rapidly. comparing to British China with the rest of the world. We also see continued growth in the aphorisms in Asia leading to further demand on wealth management that is reflected in the wealth management growth, the fees growth, and also our AUM growth. And sustainability, again, a big trend that we are pursuing aggressively. And if you look at our loan book for the growth this year, actually more than half of it is in sustainability financing. and then we are moving beyond digital. So we hope to serve customers beyond banking into lifestyle platforms and ecosystems is another big trend. So I'll stop there and we're open for questions. Thank you.