Oversea-Chinese Banking Corporation

Thank you very much for joining us for our first quarter 2023 results briefing. So, we have on today's panel is Ms. Hemin Wong, our CEO, and Ms. Luo Qingyi, our CFO and Conductor, which is our Head of Investor Relations. So, on the line, we have Chania from Bloomberg and Ann from US. Okay, so we can start with Chini taking us through the slides.

Thank you.

Good morning, everyone. Welcome and thank you for joining us for our first quarter 2023 results presentation. We announced our results this morning and we are pleased to start 2023 with a record quarter. I will now share more details of our results.

Let's turn to slide four. For the first quarter 2023, Group Net Profit

reached a new high of S$1.88 billion, an increase of 39% from the same period last year and 44% above the previous quarter. Net profit from banking operations also registered strong growth to a record S$1.68 billion. Total income climbed 12% quarter-on-quarter to a new high of S$3.25 billion. underpinned by the group's diversified income streams across banking, wealth management, and insurance. Against the record level in Q4 2022, net interest income was 2% lower, largely due to a shorter Q1 2023. Wean was resilient at 2.30%. Cost-to-income ratio was 37.1%. the lowest level in above adapted. We continue to be prudent in risk management. Credit costs of 12 basis points were lower quarter on quarter and our loan growth was sound with NPL ratio improving to 1.1%. With our strong performance, return on equity rose to 14.7%. a multi-year high. Moving on to slide five, our banking operations net profit rose 28% from a quarter ago, and 43% year-on-year for record 1.68 billion. The group's wealth management business continued to perform well. Wealth management income increased 33% quarter-on-quarter, driven by growth across our wealth franchise. AUM grew to S$270 billion, underpinned by continued momentum in net new money inflows across all wealth segments and positive market domination. Net new money for the quarter was about S$10 billion. Total weighted new sales and new business-embedded value for our insurance business declined year-on-year due to lower single premium sales from Singapore. This was compensated partially from better performance in regular premium sales. NBEV margin improved to 43.4% from the shift actually met our insurance product mix. Moving on to slide 6. We continue to maintain a healthy balance sheet position with our regulatory ratios well above requirements. Our capital is strong and our liquidity positions are healthy. These provide ample buffer for uncertainties and allow us to pursue growth opportunities as they arise. Moving on to our performance slide starting from slide 8. As shared earlier, profit from both the group and banking operations were at record levels. Group operating profit before allowances rose 24% quarter-on-quarter, crossed $2 billion for the first time, driven by income growth and lower expenses. Let's move to more details on the drivers of our net interest income on Site 9. Against the first quarter last year, group net profit of $1.88 billion was 39% higher. The strong rise in earnings came on the back of the 56% increase in net interest income. Compared to the previous quarter, our 44% increase in net profit was from a combination of recovery in non-interest income as well as a decline in expenses and allowances. Moving to slide 11 on our net interest income. Net interest income for the quarter was $2.34 billion, more than 50% over last year. Compared to the record level in Q4 of last year, it was 2% lower, primarily because first quarter 2023 was comparatively shorter than the previous quarter. If adjusted for the shorter days' effect, net interest income was largely unchanged. Net interest margin was 2.3 cents, one basis point below the previous quarter. This was due to two reasons. First, while expected catch-up in our funding costs, which we highlighted in our previous results briefing. Second, loans-to-deposit ratio was lower as deposit growth outpaced that of loans. Our exit mean for the quarter was 2.31%.

Turning to the next slide.

For the first quarter of 2023, non-interest income was $1.01 billion, higher than the previous quarter. The improvement was met by a rise in our fee and trading income, as well as net realized gains from sale of investment securities. The group's insurance profit for this quarter was reported based on SFRS 17, , GEH adopted on 1 January 2023. Prior comparatives are not restated. With the implementation of SFRS 17 by GEH, insurance profit is expected to be less volatile due to the reclassification of insurance assets and liabilities to fair value to other comprehensive income, or FDOCI for short. in this will remove a significant portion of previously observed volatilities from the valuation of insurance assets and liabilities. More details on the impact of SFRS 17 and the restated comparative information will be disclosed in our first half 2023 announcement. Turning to next slide. fee income increased by 14% from the prior quarter to $453 million. This was mainly driven by a 37% rebound in wealth management fees, reversible declines observed over the last few quarters. There was an encouraging recovery in investment sentiments during the quarter. It increased sales across most wealth management product categories. Turning to slide 14, Trading income was $251 million, up 69% from the last quarter. The strong growth in trading income was a result of recovery with customer flow income and higher non-customer flow trading income from mark-to-market gains of our equities and debt securities portfolio. Next slide on operating expenses. Operating expenses declined 4% for a quarter ago to $1.24 billion, mainly from a decline in other expenses arising from the reduction of insurance-related expenses against insurance revenue following GEH's adoption of SFRS 17. Staff costs were higher, reflecting our ongoing investment in our talent pool to support business expansion. cost-to-income ratio was 37.1% for the quarter. Moving to next slide on allowances. Total allowances for the quarter were S$110 million with about half comprising general provisions and half in specific provisions. This was substantially lower than the S$314 million of total allowances fourth quarter of 2022, mainly due to comparatively higher general positions set aside last quarter. Total credit costs eased quarter-on-quarter to 12.6%. Next slide. Our NPA coverage ratio improved by 7 percentage points from the last quarter to 121%. From an increase in cumulative allowances, and declined in non-performing assets. Moving to slide 18 for more details on our non-performing assets. Our portfolio quality remained resilient. NPAs continued to trend lower as at March 2023. Compared to the previous quarter, total NPAs were 5% lower at 3.3 billion with declines across are the key markets of Singapore, Malaysia, Indonesia, and Greater China. NPR ratio improved by 0.1 percentage points from last quarter to 1.1%. Moving next slide in. For the first quarter 2003, higher recoveries and upgrades, more than compensated for new NPA formation. new MPA foundation was lower Q1Q across both the corporate and consumer bookings. Moving next to slide 20, loans grew 0.2% from the previous quarter and 3% from last year in constant currency terms to S$294 billion. Our loan portfolio remains well-diversified across geographies as well as industries. Given broader concerns on the commercial real estate sector in developed markets such as the US, I would like to share more information on our Commercial Real Estate or CRE loan portfolio. CRE loans are mostly to network customers in our key markets with proven track records and financial strength and are largely to support economic expansion and population growth. Our overall LTVs are low and are mostly secure. We continue to play a key role in our customers' transition to a low-carbon economy with sustainable financing loans growing 33% year-on-year with $32 billion, making up 11% of our group loans. Moving next to customer deposits. Our customer deposits of $367 billion were 5% above last quarter as well as the previous year. This was driven by strong growth in fixed deposits from CASA migration and in particular, fresh funds placed with us. which reflected OCBC's strength and trust in us. Accordingly, our CASA ratio trended lower, below 50%. The group's liquidity remained ample and LDR, or Loan Deposit Ratio, hit room is supportive of our future growth. Moving to the next slide on capital position, our core CET1 Our core equity tier 1 ratio rose 0.7 percentage points from the last quarter to 15.9%, mainly driven by profit acquisition. Excluding our 2022 final dividend to be paid next week, CET1 would be 15.1% from the pro forma basis. Our strong capital position is supportive of business growth and allow us to navigate uncertainties as well as to capture opportunities as they arise. Moving next to slide 23, I would like to provide more details on our government and debt securities holdings as there have been recent concerns on the banking sector's exposure to this globally. More than 90% of our government and debt securities portfolio are fair value and mark-to-market movements have been reflected in the computation of our capital adequacy ratios. Above 80% of the total portfolio was classified as fair value through other comprehensive income or FBOCI. Year-to-date, Our FBOCI Fixed Income Securities portfolio has seen unrealised gains of about S$0.2 billion and our full-to-maturity portfolio of S$5 billion has had insignificant mark-to-market effects. Overall, the average duration of our total government and debt securities portfolio is between 1 to 2 years. With this, I end my presentation and will now pass the floor over to Helen. Thank you, Xinyi. And thanks everyone for coming to our office.

I think there are also some of you dialing in on the phone, so thank you all for attending this session with us. I think Xinyi has given quite a detailed presentation on our financial numbers for the first quarter of this year. I'll just add on with two slides. to show some of the highlights and the points that I may want to comment on and what's the feel about the business and also how we look at going forward to the rest of the year. So just turning to that slide too, we look at, as Ching-Yi said, we have a record high total income operating profit before allowances and also... net profit. So these are all record high and I'm happy to say that this is despite some of the global volatilities that we have seen in particular in particular for the developed market and in certain part of the banking sector. But I think the robust performance also reflects where we are, that we call ourselves a leading Asian bank with a network in the rest of the world, but predominantly in ASEAN and Greater China. And also we flag our franchise in banking, insurance and wealth. So just want to comment a bit on the net interest income. We say this is second highest on record, supported by recipient NIM. And this is very important because we are talking about last quarter, quarter four of 2022, we have an average NIM of 2.31%. And this quarter, we are at 2.3%. So a one basis point drop. But that means that we've been managing our balance sheet and in particular our funding costs quite well in order to achieve that. So this is important as we in January look at interest rate have peaked and it will go, we do have an assumption that it will go stable without, I think that the chance we're looking at in the rest of the year. So that is an assumption we work on as we continue to work on our balance sheet and how we support our business and protect the NIM. So that's how we look at NIM. On the wealth management side, we do see a rebound in customer activities across our wealth management business as investment sentiments do come back a bit in the first quarter. It's important to say that that momentum, I wouldn't say it is coming back strongly as yet because of, we say again, the volatilities of the financial markets, yeah. but important is we are seen as a point of strength that we are highly rated bank and we do see net new money inflows this quarter across private banking, premier private and also premier banking segments of something of a net inflow of 10 billion dollars which is a sizable amount which we want to to be able to keep and maintain. And eventually, as the investment sentiment come back, we can offer the products and utilize this increase in our AUM. And as to the, on the expenses side, I also want to mention that we are disciplined, but as Again, we continue to invest into our people and into our digital infrastructure so that it is part and parcel leading back to a more effective process for our customers. In particular, I think we talk about deposits all the time. At Casa, it's important that we allow our customers a lot of ease to operate new account with us, that we can then protect our deposit base as well with more operating accounts rather than people really just look for you and park everything into fixed deposit. I think that investments continue to be important. But likewise, expenses for the first quarter is quite well maintained. On the loan side, I think due to uncertainties and also economic situation and still a looming fear of recession, we see trade not rebounding as much. But hopefully trade will increase as China open up and the supply chain come back a bit more to normal. But we have indeed focused very much on non-trade corporate loans. in areas which we have actually seen opportunities and that offer quality. Examples are like energy and utilities and of course are very much related to sustainable financing. Real estate segments like accommodation and technology and digital infrastructure. So these are the segments that we managed to grow and in a way, We also talk about geopolitical tensions affecting economic growth, right? But in that sense, we do see opportunities of banging more multinational companies in this region as competitors from the West are in a way less competitive now in Asia. So we do see opportunity like that. Housing loans, Singapore remains to be our biggest mortgage market. We also saw a slight increase in the first quarter, supporting by drawdowns from a very strong existing pipeline. Although we do note that the cooling measures, the recent cooling measures, may dampen mortgage sales. So I think this year we still look to be OK. Of course, it depends on how the rest of the years unfold as we continue to build our mortgage pipeline. So overall, first quarter loan growth value is relatively muted, but partly due to lower short-term trade loans, but compensated by a slight growth in mortgages and also in our corporate loans. Asset quality is benign. No signs of systemic issues so far. We continue to do stress tests and depending on what we see in the market, we look with a forward looking, we do certain sectors we stress more. For example, recently we do look at whether there's any contagion effects from regional banks in the US, but we don't have exposure, but of course we look at how that impact US dollar liquidity and we stress it accordingly. We have also continued to look at pockets where we think that may be riskier in the loan book that potentially will be impacted more by recession or inflationary risk. So we accordingly stress test our book. We continue to have prudent level of allowances but also our MPA coverage ratio is above 120% as illustrated in the slides that Cheney has gone through in more details. Looking ahead, I think we are well positioned. Important thing is the key market in Asia expected to stay resilient. Yes, Singapore is growing slower, but there are also some patches of recta sectors. I think the services industry is doing well. Singapore continues to be a safe hub and maintain its safe hub status. And that's where we think the wealth AUM potentially can grow even more in the rest of the three quarters. And Malaysia and Indonesia are growing above the global average. Greater China, we see more confidence coming back. has quoted it behind, and also with multiple government measures to stimulate economic recovery. We see the May holidays, a lot of traveling, including domestic, and traveling overseas as well. So Hong Kong was quite crowded, I was told. And a colleague told me he was trying to drive out of Shanghai. but four hours is still in the core of Shanghai city because of the traffic all going out when people want to enjoy that holiday. We, I mean, having said all that, we have to, and we will continue to closely monitor the market volatilities, right? And tightening financial conditions around the world have slowed down inflation, but also likely to dampen global growth. And indeed we're watchful, of increase in overall risk and volatilities arising from, as I said, pocket of issues and in developed markets, such as the banking sector, which I mentioned earlier on, and commercial real estate in the developed markets. Ongoing political tensions will continue to be there, will continue to impact the landscape, but we are well positioned, and we did, as I said, earlier, there could be more opportunities for us if the political tension continues and customers, some of even the MNC for their China Plus One strategy in Asia do look at the support of a strong Singapore bank. So these are opportunities that meet the volatility and the tension. We do want to change some of our targets indeed as we look into how the first quarter has unfolded. So the LIM, we want to change it to the region of 2.2%. Well, that would indicate from 2.3% in the first quarter that we see a general decline in that. The reason being that I think the loan book, you do not have a lot of potential to reprice it upwards. but the funding costs will continue to catch up, which is a natural phenomenon in a rapidly rising interest rate environment. So it will be lower, but we think that it could be in the region of 2.2 instead of the 2.1 guidance we previously provided in the last quarter. Our views, and this again, based on our view that interest rate have peaked, and then indeed, we're not expecting a fat cutting interest rate in the rest of the year. Loan growth, given the experience in the first quarter and the volatility, we are saying now we expect loan growth to be low to mid-single digit, whereas credit costs, we maintain at 15 to 20 basis points as a credit cost. In general, in an environment like this, we do expect generally that MPL may rise in the rest of the year. So we want to keep that by guidance on the credit calls. Last point, I want to just mention sustainability. I think Julie talked about outstanding on our vote of sustainable financing represent 11% of the loan vote, which is a 30 something percent growth. And indeed, if we look at commitment, our commitment is at 47 billion, which is very close to our target of 50. I'm not advising, I'm not adjusting this because it's still another two plus years into 2025. But again, that doesn't stop our focus on helping our to net zero. So it's not just the corporate, it's not just the SMEs, but also one point, one example I want to highlight is we have been launching what we call equal care loans to our retail customers since 2021 and we have seen good trajectory and also we have built a couple of billions on that portfolio already. so also happening to retail sector and coming up would be our net zero white paper we talk about how we look at it as we have joined a natural banking alliance and we're going to make some announcements and I think we have already invited the media actually not ready today so coming up with results coming up yes

So I think I'll just stop here. So thank you, Helen.

It's now open to questions. This is Joby from The Edge.

Thanks for the presentation. I'm Joby. So I think my first question is just about your, can I have more colour for your NIMR look?

I wouldn't call it optimism. It's like, because we have a higher starting point. Remember last year, the fourth quarter, we are at 2.31, whereas the PS, I mean, January don't comment on PS, but we have a higher starting point. So I wouldn't say it's optimism. It's what we see in how we manage our balance sheet lead us to a 2.3% in the first quarter. So to an extent, 2.1 would not be a natural conclusion for the whole year. So that's why we adjusted. Also to give that feedback to our shareholders, to our stakeholders, to show that this is actually how we see. But also, again, based on some of the assumptions. I think last year a lot of assumptions is that that will cut interest rate beginning third quarter. We're seeing that the assumption is now they won't. So it's reflecting how we see and how we project our balance sheet to look like.

So just imagine a riskier loan book and it's some areas that are impacted more than others with the recession. So you mentioned stress tests for certain areas. Which areas at least can you give me more color about this?

I think we look at certain, you know, the banking sector, whether there's MSP or mini bank into HR. We do look at developed market, commercial real estate, because I think banking real estate is always closely linked together. we do have commercial real estate exposure in the developed markets, namely in the UK, US, and Australia. So I think we look at this actively. And in a way, stress testing is also testing on how we counter if there is some liquidity during the marketplace as well. So I think these are some of the increase. I mean, we do stress tests all the time, but as we said that there are pockets that may have issues, then we will do further stress tests and stress a bit more that even on, for example, even on mortgages. So we're seeing that tightening measures and all that, and we would always assume and test a bit more on the debt repayment capabilities of our mortgage broker.

Maybe I take this call first, then I'll go to Tanya.

Okay, sure, congrats. I have a question about...

Actually, in the reverse, we must say we actually looked forward earlier. So in the fourth quarter, we do make some general provisions on real estate, which we did explain when we were talking about the results. So in a way, we have done quite a bit prior, I think, to the beginning of the year. So when you look at this quarter, we still have mixed provisions on general provision. But specific provision, we do not see a lot of stress. And as we look at our books, our policy is still quite good. So I think that explains the reason why we seem to have a lesser provision in the first quarter compared to the fall.

Maybe we can take a question from Chania who is in Hong Kong right now.

Chania.

Hello, can you hear me? Yes. Yes, I have. Helen, congratulations on the numbers and also the stock that's ready for you this morning. I have three questions. The first one for clarification, the growth opportunities that you mentioned in your comment, could you please help clarify whether there's any M&A included? in debt at all. Second question, did OCBC or Bank of Singapore sell any Credit Suisse 81 bonds to customers and any number of losses involved on the client's side?

As you said, three questions. I wrote down two.

I just realized that you have replied the entire question, sorry.

Thank you, Chun-Yang. Thank you. Yeah, yeah. Okay, growth opportunities, M&A is something we do look at opportunities all the time. Nothing specifically we can talk about at the moment, but we still continue to be interested in our core markets and our core business. And frankly, that have a complimentary effect on our franchise. On the CS81, we have very few clients who have an exposure. Actually, that's so insignificant. And I can't tell you a number, but it's very insignificant. And somebody may ask me whether I have margin calls. That is, I can say no margin calls, which reflect how little that is in that sense.

I see. I see. Thank you. Got it. Sorry, just one last thing about the ROE, which is quite high at 14% for the first quarter. Do you see that being sustained for the rest of the year?

Chanya, that's quite a complicated question because on the equity side, the amount, if you want to go deeper, you can talk about what impact that equation, you know, return on equity. But I think the important thing is we want to continue to have the business momentum that we protect the income, right? Income grow a lot because of very largely NII. So we need to protect our NIM, especially when we say in the market of uncertainty that the normal is not to grow substantially, yeah? So, but... But I hold to that we want to, I did talk about we want to hold our hourly above 12%. I'm not going to change that. Whether it will be 14 end of year, there's various factors affecting it.

I see, I see. Sorry, just one last thing about the inflows in AUM that you mentioned. Could you share whether there's any or much coming from Credit Suisse?

Sorry, we don't comment on a certain counterparty. I think that it flows in general across our network. So if you ask me, yes, contribute to our flow from British China, Indonesia, and domestically as well. And the flow is not entirely into Bank of Singapore as well. We have very decent flow into our CFS business, into Premier Private and also into Premier. So I think I'll cover that much. Thank you.

That's very kind. Thank you, Helen.

Bye. Hi, Helen.

I found that actually, you know, you normally don't give the target for the income growth, but could you give us some guidance about this year? Will you still continue to double-digit growth in this year?

That's the plan. That's the plan. But a lot depends also on the market situation. For example, If trade in Asia resumes quite a bit, then of course your trade fees will increase. If investment sentiment is better, then of course the wealthies will also increase. So it quite depends on how the rest of the year unfolds. But compared to previous years, I think that's what we are planning for. We hope that it will be double-digit.

Thank you, Michelle. Michelle, do you want to ask? Oh, Michelle. Michelle's here. Hi, Alan. Congrats again. I wanted to ask, because I know that credit costs have increased from business points, do you probably advise in general provisions? And have you increased your management overlay considering both the opening of the software and the overlay as well?

The first one is, it has eased, do I see what the trend, right?

The second part is much overlaid. Yeah, the first one is whether we can keep our money in balance. Okay. And the second one is whether you have to keep your money in balance.

Okay. The first one, yes, I do see in general a rise, and that's why we're saying that we keep, at this point, we still want to keep our credit costs to be 15 to 20, whereas first quarter is 12. But if you do look at our credit course, I think that's a detailed slide on how provisions and NDL has changed. So that broke some light on why the first quarter is 12. So, but as I said, when we say in general, we do expect it to rise, it's because as we said, recession is still looming. inflationary pressure is still there. Customers' actions are quite cautious. So all this together, we do expect pollution to rise. Management overlay, we did some in the fourth quarter. Also this quarter, we put in some as well. And for, as I said, for commercial real estate. and develop markets. So we do this from time to time and we adjust it. But in a way, always remember to be forward-looking, do something a bit earlier rather than say when it happens, then suddenly the amount jumps up very high.

Thanks for the question. So I think, building on what you mentioned that S-Suites own US property. Some S-Suites with Chinese assets are already facing pressure as well. What is your knowledge on this matter about Hong Kong's office buildings and real estate there?

I need to recap to say that I did mention that because we're talking about pockets of weakness, right? It doesn't mean that I'm very concerned about real estate portfolios. It's not like that. If you look at our book, our real estate is about 30%. of our total bulk, and more than 80% is to our network customers. When we say network customers, our customers that have actually had a relationship with us for many, many years. And we serve them in Singapore, in Hong Kong, and also around the world where they have investments overseas, for example. And in that sense, a lot of the real estate is secure. I think most of it, large part, is secure. And the weighted LTV is about 50%. So in a way, the quality is good. It's just that if we do expect weakness, we want to be more sure that we test the book accordingly. And you know that sometimes when we provide general provision, It is based on economic data, right? And we adjust our MEDs. So this is how we look at the commercial real estate portfolio.

But in general, we see no systemic reset.

Any other questions? Yeah, sure.

Can I ask what the average duration of your loans are and are available for sale? portfolio. Also, how large is your AFS portfolio on your balance sheet?

And lastly, how much of your loan portfolio is likely to be repriced in the next 12 to 18 months? Prince, you want to chime in?

Yeah, sure. I think in terms of the loan portfolio, I think by and large, it will be repriced every three months. Because of the bulk of the loan portfolio, I think roughly 90%, and so on and so forth.

With a shift to Zora, there will be perhaps a shortening in the repressor.

Because in Zora, there will be the overnight rates.

Sorry, Felicia, do we answer all your questions? Actually, for AFS,

If you look at our available for sale, we actually share part of that in our blog. So we have AFS portfolios, government debt securities, you know, 90% of that actually in terms of fair value to other population income. And then on the flip side, on the whole, the maturity part is very, very small. And then you also asked about the sort of, you asked more about... I understand that you'll be explaining in further detail at the next quarterly briefing, but what can you tell us about the impact so far, and are there any similarities

Okay, for the insurance with the

adoption of SFRS 17, we will be seeing less volatility in terms of the devaluation of insurance assets and identities. Because with the adoption of SFRS 17, some of these portfolios will move from fair value to P&L to fair value to OCI. so the volatility will be removed from the P&L cycle. It's what you all have seen last quarter, right? That revaluation market loss. Yeah, so that should be one injured effect of the SFR S70 adoption. I think it's maybe the second trend could be the change in how they account the income. Okay, yeah, yeah. So... Yeah, we also sort of mentioned the reason for the time, right? In our operating expenses, 4% for the group level, you know, compared to the group water. One of the main reason was because of reclassification of GEH operating expenses relating to agency and sales commission as well as claims being reclassified to net of insurance revenue. So it disappeared from the operating expense line and moved up to be a net of the insurance revenue. So that's one of the facts of our system as well.

on sustainable financing. You're right, eco loans is not in our target of 50 billion, but I illustrate that just to say that whenever we talk about supporting climate change, or not supporting, we're saying that we are combating climate change we want to have an overall proposition. We talk quite a lot about supporting the corporates. We talk about supporting SMEs. So I just want to round it up to say that we also focus on the retail. And in a way, we also focus on ESG investment as well and how we look at our clients handling EFT. So why I'm not changing that target yet is because I think through the number of years, We now know exactly how to make the best of it in helping our clients to combat climate change. So we're very focused to continue to support our clients in many ways. In particular, we talked about, I mean, we have thinking about net zero, right? and also about ourselves, how we actually make ourselves eating less carbon as well. So the target becomes something that is always set and actually be reaching actually much earlier on. So I don't see a crucial, this is a crucial stage to tell everybody now, because we have 47 billion, I will reset it. What I'm saying is this become very business as you show to us. that will continue to grow our sustainable financing. Yeah, if we continue to grow like double digit every year, actually that last quarter was a 30 something percent.

And obviously whatever target you set becomes a little bit just a number to be beaten. Joyona, I'm writing this.

is what's happening and the impact?

That's a very big subject. And I think we can reach so much from around the world, all the reports and all that. I think banking sector has always been evolving, right? And if you look at banking, banking industry, it has very different stages over the decades. And I think the last most major impact was the financial, the world financial crisis back in 2008, right? So I think what happens in the regional banks in the US does reflect on the problems created by a very rapidly rising interest rate environment. And I think for banking, the lesson to learn is really whether you're too concentrated on a certain sector, whether your deposit base is not diversified enough. and what do you invest in on behalf of clients and on behalf of yourself when you have, because we are in the business of managing that deposit and that liquidity, right? So I think these are all the important lessons learned and it's not just bank learning, it's really like government learning it, regulators learning about it as well, right? So in a way, of course, we ourselves do a lot of analysis. Whether there will be more banks having problems, we cannot tell. We are not really active in that market. We're just mindful, what if? What if something continues to happen? How does that actually impact us? I don't want to bring it up all again, but I said commercial real estate. Because that is a banking land to commercial real estate, right? When banks have a problem, of course, that reflects immediately on it. And then COVID has a lot of impact on production, manufacturing, healthcare, and all that already. So you look at it, what are the... when it's like coming back to COVID, immediately you look at hospitality, you look at traveling, right? You look at services because lockdown. So when we see something happen in other parts of the world, we immediately think about is there any contagion in fact to the rest of the world? I think so far the dust has settled quite a bit. And I think government reacted really fast. and I think regulators in this region also come out to say something and you would imagine we also have a lot of communications with our regulators around the key markets in particular that we have more sizable operation. So I can't predict what's going to happen next. But then again, over the years, in particular after the IFC, the prices, obviously banks, the way banks handle our business and look at risk and stress testing and capital become ever more of paramount importance. And to an extent, I would say you would rather that a bank has higher capital and better liquidity management than a bank that does not have that. in that sense. So I think COVID does prove that what we have as a capital, as our capital position was actually help us to maintain or pause our credit rating. And I think that credit rating doesn't come from just saying that because Singapore is a AAA, that's why the bank have to be AA. It's not like that. It's because we really is managing our position very well so that we can continue to support our customers through harsher times.

Okay, maybe one last question.

Do you see any changes in your asset liability management since you mentioned the fast pay and the rate tax last year that led to the stress of the US financial system?

Well, that's an everyday thing. That is an everyday thing if you ask a senior or department in particular. It's an everyday thing. But then, with interest rate rising so much, there's so much more discussion involving everybody, right? In particular, how do you fund our local as we want to grow? What are the currencies that's under more stress than the other currency, right? And how does each actually interest rate hike, does it impact every country the same? You look at China, actually at a lower interest rate environment, it impact FIBO or FIBO differently as well. So you talk about how do we manage our investments, which Chen Yi mentioned on that very large page, right? And do we adjust the duration? And do we adjust and put more into hold to maturity, et cetera? So this is, as we said, a very constant discussion among all. and then in a way, how do you balance out your funding costs and needs to fix deposit strategy, needs to CFS strategy, needs to how we attract customers and it's also related to how do we protect our turf in the SME field as well. It's important because our SME deposits is actually more than 20% of our CASA and these are very important customers because they really hold that operating cash with you. and that means your digital offering has to be good so that they can manage their money very efficiently.

Okay. Okay, Jogi.

So your CET1 has been steadily growing over the past year. So what are some considerations behind this and what is the impact of transitional Basel IV on your CET1? Is there a CET1 that's too high in your view and what would this mean for dividends going forward? A big question again.

I'll start with why it grows. Why it That's one thing. In particular, I think we bounced back from the COVID year 2020 really fast. So 2021 already close to a record high in 2019. And then we make a record high last year. So that's the first thing is how we do business and engage our customer. The second thing is we continue to manage our RWA very effectively. So part of the contribution to a high CT1 is because of that. Is that ever too high? Yes, we do have, we do have, we do think that we can, we need to operate our capital effectively vision-based and we need to look after our shareholders as well. And that's why you see that we also commit to change our dividend policy. That means we at least dividend out at least 50% of the profit. And in the past, we are around 40, 40 something, right? So that's already a move to make sure that we also look after our shareholders by distributing more from our capital. And of course, in market of uncertainty, you would genuinely want to hold on to a bit more. But I did talk about hopefully in the next short to medium term, we'll effectively use the capital to bring it down, the CT1 to down to about 14%.

Okay, on that note, thank you everyone for joining us this morning. Thank you.