Oversea-Chinese Banking Corporation

Good morning everyone. Welcome to OCBC's results briefing for our first quarter. So we have, I know this is audio, you can't see us, but we have our Group CEO Helen as well as our Group CFO Darren with us. We will have Darren take us through the slides on our results and Helen will be giving some of her remarks before we take Q&A. Darren.

Okay, morning everybody. today. So I'll start with slide four on our first quarter 2022 financial statements. So you will notice that for the first quarter of 2022, we reported a net profit of $1.36 billion Singapore dollars. This is an increase of 39% from the previous quarter. And if you were to compare versus the strong first quarter of last year, net profit was 10% lower. Total income was 4% higher for the quarter, driven by a combination of an interest income higher trading income as well as life insurance profit. Allowances for the quarter were significantly lower with the improvement in economic outlook and with the strong quarterly performance, our analysed ROE rose 3.1 percentage point to 10.6%. I'll move on to slide five. You will notice that essentially our three business pillars continue to hold up. Our banking operations net profit rose 50% from a quarter ago and 4% from the previous year to $1.17 billion. Customer loans and deposits continued to grow, backed by a strong network. And the group's wealth management under management were lower as a result of the negative market valuations, while our insurance business continued to maintain healthy sales growth. Moving on to slide six, the strength of our diversified franchise, as you can see in the chart here, continue to provide us multiple income stream and across the various business lines as well as job increase. On slide seven, our balance sheet fundamentals remain strong. LDL ratio was 83.3%. And if you look at the under liquidity and funding measures, net stable funding ratio remains high at 118% and liquidity coverage ratio remains high at 151%. And in fact, if you look at the composition of our deposit and funding, the bulk of it, 81%, still come from our customer deposit base. So the strong funding, liquidity and capital positions put us in a comfortable position to continue to support our customers and pursue our long-term growth. On slide nine, The group's first quarter net profit, as I mentioned earlier, was $1.36 billion, 10% lower as compared to first quarter last year. The combination of higher net interest income, lower allowances were more than offset by the lower non-interest income and higher expenses for this quarter as compared to the first quarter last year. On the other hand, if you look at first quarter of this year, net profit rose 39% as compared to the previous quarter, and this is from a combination of higher non-interest income a decline in operating expenses and also allowances for the quarter. On slide 10, as I mentioned, again, the net profit of $1.36 billion was 10% lower year-on-year and 39% higher vis-a-vis the quarter before. And on slide 11, you will notice that specifically on our banking operations, net profit grew 4% from a year ago and 50% from the previous quarter to $1.17 billion. The quarter-on-quarter increase was mainly driven by essentially a 70% rise in operating profit and also a significant drop in terms of our allowances for the quarter. Moving on to slide 13, the interest margin for the first quarter expanded three basis points to 1.55% after staying relatively flat at 1.52% for the past two quarters as a result of the loan yield increases that outpace the deposit cost itself. with improved net interest margin and together with the 1% asset growth, net interest income grew 1% from the previous quarter and from the last quarter to $1.50 billion. Now moving on to slide 14, non-interest income for the first quarter was $1.14 billion, 23% lower year-on-year and 8% higher than the previous quarter. The prior year's non-interest income was supported by strong customer and investment activities whereas against the previous quarter, the increase in non-interest income was driven mainly from higher trading and insurance income. Now, if we move on to slide 15, fee income for the first quarter of 2022 was more subdued at $522 million. As explained in the previous slide, we had a strong first quarter last year. As compared to the previous quarter itself, in this year, our financial market related fee drivers like wealth management, brokerage were higher. but this will actually offset by lower credit card loan and trade related fee. Now moving on to site 16 in terms of trading income, the quarter itself we reported 225 million. This was from a combination of higher customer as well as non-customer flows. Now moving on to site 17 on our operating expenses. Operating expenses remain well managed and declined 7% quarter on quarter to 1.20 billion. The quarter-on-quarter fall in expenses were largely attributed to the lower one-off operational charges made in the previous quarter, if you were to compare them on a quarter-on-quarter basis. Now, moving on to allowances, slide 18. Given the improving economic environment, our credit expectation has improved. Consequently, a total allowance of $44 million was set aside for this quarter, and this constituted about a six basis point in terms of credit costs. and in terms of total cumulative allowances on slide 19, the coverage ratio for our MPA was largely unchanged at 91%. And on slide 20, you will notice that our room book remains sound with MPL ratio lower at 1.4%. And slide 21, continuing on the asset quality that we have, you will notice that in terms of new non-performing assets formation, was also significantly lower as compared to the previous quarter at $296 million. Now again, moving on to customer loans on slide 22. Customer loan grew 1% from a quarter ago to $294 billion, led by growth in Singapore and other international markets. Our loans continue to be well diversified across geography and industry. Building and construction housing loans remain the largest segment at 29%, 21% of total loan respective. Moving on to site 23, customer deposit rose 2% from a quarter ago to $348 billion and mainly led by higher fixed deposit for this quarter. However, the liquidity remained ample and you can see that the CASA represented 62.7% of our total customer deposit. And moving on to the last slide, site 24, our common equity to one ratio remains strong at 15.2%. slightly lower than 15.5% in the previous quarter, mainly as a result of higher credit risk with assets associated with loan growth and also a decline in terms of fair value reserve arising from a fall in devaluation of debt securities in our banking group. With this, I will pass the floor to Helen.

Thank you, Darren. Good morning to all. Let me be brief. I think Darren has already gone through our first quarter financial results. I just want to highlight that I think it is a balanced performance across our three business pillars and this has continued to allow us to deliver resilient earnings in the current operating environment. We also continue to maintain a strong capital base, funding and equity positions. Our overall loan portfolio remains sound. I think you would have quite a lot of interest in how we actually look at 2022 Our views is Asia's growth remains resilient. There is indeed further opening of travel borders and also relaxation of COVID measures in Singapore. So we're seeing a lot more activities in F&B, retail, aviation, tourism-related sector. So there could be some upside for these sectors this year. Malaysia and Indonesia are two other core markets. have been starting to show stronger growth. Of course, this is supported by the reopening and also by higher commodity prices and revival in domestic demand. Of course, we continue to see near-term outlook clouded with headwinds. We talked about global inflationary pressures expected to continue to trend up alongside the rising energy and commodity prices. we see rapid rise in inflation. The Fed Reserve is expected to accelerate tightening of monitoring policy and raise interest rates in a more rapid fashion. So this should further deter consumption and investment growth. So I think on the investment side, the first quarter results have really demonstrated that, amid also the volatility of the financial markets. China lockdown in certain cities have indeed affected output and caused some disruption to the supply chain in the global economy. But I am of the view that China is managing this and we're seeing signs of opening up in the next couple of months. An important piece is, of course, on our portfolio, our loan portfolio. We continue to closely and proactively monitor that. I would say we are resilient. We have a resilient credit quality in our boat. Exposures to Russia and Ukraine are minimal. Our business, of course, as you are aware, predominantly in Asia. And our international branches overseas serve mainly our network customers. For China, even with some of the lockdown in southern cities, there is no disruption in our provision of banking services, as most of our colleagues continue to work effectively at home. Of course, we remain watchful and continue to proactively manage the risks arising from this volatility. At the AGM last week, I talked about the group's refresh corporate strategy we talk about pursuing our strategy to excel for sustainable growth. So amid the volatility, hopefully that is shorter term than longer term, I think we are well supported by our strong capital base, our healthy funding and equity positions, and our continuous investment in digital technology and talent. So we hope to be able to capture the opportunities arising from the transforming and fast-growing Asian markets. So I'll stop here. We're open for questions. Thank you.