Oversea-Chinese Banking Corporation

Okay, so good morning, everyone. Welcome to OCBC's full year 2023, fourth quarter 2023 results briefing. On our panel this morning, we have our Group CEO, Ms Helen Wong, and our Group CFO, Ms Goh Chin-I. And I shall go from where Chin-I is. Next to Chin-I is Mr Sunny Quek, our Head of Global Consumer Financial Services. And next to Sunny is Jason our CEO for Bank of Singapore. Next to Helen is Mr Tan Teck Long, our Head of Global Wholesale Banking Services and next to Teck Long is Mr Kenneth Lai, our Head of Global Markets. Chini will take us through our results and thereafter we will have Helen and the panel to take your questions. Chini, please.

Good morning to all. and a warm welcome to OCBC's results briefing. Thank you for taking time to join us today. We are pleased to report another year of record profit. With our resilient results and strong capital position, our board has proposed to increase the final dividend to $0.42 per share. This brings our full year 2023 dividend per share to $0.82, up 21% or 14 cents from the previous year. This represents a payout ratio of 53%, which is above our target level of 50%. I will now share the highlights of our results for 2023. For full year 2023, we achieved record income and net profit. In particular, banking operations net profit was at a new high. Group profit crossed S$7 billion for the first time to a record S$7.02 billion. This lifted return on equity, to 13.7%, up from 11.1% in the prior year. Our record profit was driven by three factors. Firstly, strong growth across diversified income streams. Secondly, well-managed expenses. And thirdly, benign credit costs. Income rose 20% to a new high of $13.5 billion. net interest income advanced 25% to a record $9.65 billion. This was underpinned by asset growth and expansion in net interest margin, or NIM in short. Our NIM expanded by 37 basis points to 2.28%. Non-interest income has also performed well, up 7% from a year ago to $3.86 billion. This was mainly driven by higher income from trading and investment activities. Expenses were well controlled. even while we continue our strategic spending to support business growth and invest for the future. Cost-to-income ratio was below 40% this year. Importantly, our disciplined credit practices have kept NPL ratio low at 1.0% and credit costs contained at 20 basis points of loans. On our balance sheet, loans and deposits were both higher compared to a year ago. I will share more detail in the later slide. For the fourth quarter, group net profit was $1.62 billion, up 12% from a year ago, but down 10% quarter on quarter. If I may draw your attention to banking operations, Our performance in fourth quarter 2023 was resilient. Net interest income was sustained at third quarter's record levels. Trading income was comparable to the third quarter, while investment income improved quarter on quarter. Loan-related fees grew with improved corporate sentiments, but these were offset by softer fees from seasonally slower wealth-related activities in the fourth quarter. Allowances in the fourth quarter were largely general allowances set aside with a forward-looking view. However, while the operating trends for our banking operations were resilient, I would like to highlight that the group net profit was lower than the previous quarter mainly due to two reasons. Firstly, lower insurance income as a result of higher than expected claims, and secondly, a decline in the profit contribution from our associates. I will share our financial performance in more detail in the later slides. For the full year, our three key business pillars of banking, wealth management and insurance continued to deliver resilient results. Banking operations net profit rose 27% to a record $6.39 billion. Net interest income rose to a new high from a 37 basis point NIM expansion and asset growth. credit card and loan-related fees were higher. Investment performance also improved from a year ago. Wealth management income totaled $4.32 billion and contributed to one-third of the group's total income. Assets under management rose 2% year-on-year to $263 billion. GE heads full-year profit contribution to the group rose 30% to $636 million, driven by better investment performance. Total weighted new sales and new business embedded value were lower. This was because the increase in sales of regular premium products were offset by lower sales of single premium products. with a favorable shift in product mix to more regular premium products and BEV margin was higher than a year ago. Our business growth was well supported by strong capital, funding and liquidity positions. All regulatory ratios remain well above requirements. These provide us with ample room to drive business growth and sufficient buffer to navigate uncertainties. These also enable us to maintain our high credit ratings. Our strong credit ratings give us greater access to wholesale funding markets. Notably, we issued a Singapore Dollars Additional Tier 1 Perpetual Capital Securities in August 2023, which achieved the tightest spread on record in the Singapore Dollars bond market. Moving on to slide 8 for more details on our performance trends. Net interest income for full year 2023 rose 25% from a year ago to a record $9.65 billion. This was driven by a 5% average asset growth and 37 basis points expansion in name to 2.28%. Margins were higher across all key markets. we benefited from higher interest rates as we continue to proactively manage our balance sheet and funding costs. From the quarterly trend chart, our net interest income had been rising progressively over the course of 2023. Fourth QNIM, was higher quarter-on-quarter at 2.29%, attributable to one-off interest adjustments. Excluding these one-offs, 4Q name was maintained at 2.27%, while exit name in December 2023 was 2.26%. Non-interest income for full year 2023 improved 7% from a year ago to $3.86 billion. Trading and investment income were higher than a year ago. Fee income was slightly lower, largely because of softer wealth fees. I will cover fee income in more detail in the next slide. For the fourth quarter, non-interest income rose 25% from a year ago, driven by improved fees, trading and investment income. Against the previous quarter, non-interest income fell 17%. Fees and trading income were generally maintained at third quarter's level, despite the typical seasonal slowdown in the fourth quarter. From the chart, you can see that insurance income was significantly lower. This was because of higher than expected medical claims. For full year 2023, fee income from credit card and loan-related activities were higher. However, wealth-related fee income remained subdued as customers maintained their risk-off investment sentiments. While fee income was 3% lower below the previous year, we can see from the quarterly trend chart that fee income has improved and trended higher in the second half as compared to the first half of the year. Moving on to trading income. For the full year 2023, trading income rose 8%, driven by record customer flow treasury income. Non-customer flow trading income was also higher year on year. This is despite a decline in the second half, due primarily to declines in the valuation of investments. on operating expenses. Our full-year operating expenses grew 8% from a year ago, led by higher staff and technology costs. We have also set aside SING$9 million for a one-off support to help our junior colleagues better cope with rising costs of living. This will benefit close to 14,000 employees across the group. Overall expense growth was mainly driven by our continued investment in building our talent pool and technology capabilities to support business growth and create franchise value. While we raised our spending in strategic initiatives and capability building, we have at the same time gradually realized cost savings from operational efficiencies achieved through process streamlining and digitalization. These together with our continued cost discipline in discretionary expenses help to contain cost growth. As income growth of 20% outpaced the 8% increase in expenses, cost-to-income ratio improved more than 4 percentage points to 38.7%. Our asset quality remained resilient. Total non-performing assets and NPL ratio have declined sequentially over the last two years. as at 31st December 2023, NPL ratio was 1.0%. Total NPAs were 2.9 billion, 17% lower year-on-year as net recoveries, upgrades and write-offs more than offset new NPA formation. Notably, MPAs in all our key markets have trended lower for four consecutive quarters. Total credit cost for the year was 20 basis points of loans, which is in line with our guidance. Credit costs for impaired loans remain low at 8 basis points. Total allowances for 2023 were $733 million, up 25% from a year ago. Specific allowances of $333 million were largely for a number of corporate accounts across various sectors, with no specific sector stress observed. general allowances of $400 million were set aside on a forward-looking view, mainly to reflect updates of macroeconomic variables in our expected credit loss model, shifts in credit risk profiles, and adjustments to management overlays. For the fourth quarter, total allowances of $187 million were largely general allowances set aside to reflect changes in portfolio profiles as well as MEB updates. The group's MPA coverage ratio was further raised to 151%. We have added more general allowances this quarter, while MPAs have declined quarter-on-quarter. Loan portfolios remain well diversified across geographies and industries. Gross loans grew 2% from a year ago and up 1% from the previous quarter to $297 billion. The increase was led by higher loans in Singapore and overseas markets, including Australia, Europe and United Kingdom as we continue to support our network customers investing across the regions. In 2023, there was sustained momentum in non-trade corporate and housing loans, which more than compensated for weaker trade loan demands. Our loan growth was also supported by rising demand for sustainable financing, reflecting our continued focus in helping customers transition to net zero with innovative financing solutions. This year, sustainable financing loans grew 29% and now comprise 13% of group loans. We are proactively managing our CRE office portfolio. The group's loans to CRE office sector currently comprise 12% of group loans. Overall, the portfolio quality remains sound and was largely secured with an average LTV between 50 to 60%. In terms of geography, two-thirds of this portfolio are in our four key markets, Singapore, Malaysia, Indonesia and Greater China. The remaining one-third is largely in the developed markets. CRE office sector loans to developed markets mainly comprise Australia, the United Kingdom and the United States. loans to the United States are mostly secured by Grade A office and these are largely to network customers and strong sponsors. We have also taken management overlays to buffer for uncertainties in this sector. Customer deposits were $364 billion as at end December 2023, up 4% year-on-year but down 2% queue-on-queue. As loan demand remains soft, we have allowed the higher-cost fixed deposits to run off, while continuing to focus on maintaining the low-cost CASA franchise. We continue work on winning new cash management mandates to grow corporate operating accounts, offer competitive products to grow customer base, and deepen our retail deposit franchise. Our CASA balances rose 3% from a quarter ago to $177 billion. CASA ratio increased over a consecutive quarter to 48.7%. Group loans to deposit ratios was higher at 80.5% as at 31st December 2023. capital remained sound, with CET1 ratio at 15.9%. CET1 ratio was higher than a quarter ago, mainly due to profit acquisition and lower risk-weighted assets Now in the fourth quarter, the additional operational RWA that we set aside arising from the SMS phishing scam in 2021 has been released. This contributed to a 0.2 percentage points increase in our CET1 ratio. Our capital strength provides us with ample room to allocate resources to support both organic and inorganic growth. our capital strength also provides sufficient buffer to navigate uncertainties while optimising our shareholders' returns. In 2023, we have signed agreements for two strategic acquisitions, namely PT Bank Commonwealth in Indonesia and Amet Life Insurance and Amet Life Takafu in Malaysia. Both acquisitions are in our key markets and complement our businesses and growth plans. With resilient results and strong capital, we will be raising our dividend payout. Our board has proposed to raise our final dividend to $0.42 per share. This brings our full-year dividend to $0.82, up 21% or $0.14 from the previous year. This represents a payout ratio of 53% above our target 50% payout. With this, I end my presentation. Thank you for your attention. I will now pass the floor over to Helen. Helen, please.

Thank you, Xinyi. Good morning, everyone. So nice to see all of you coming up to our headquarters on an important day of our group. so again pleased to report another year of good results and I think these are solid achievements and we delivered our financial targets as planned for 2023 and including I think we talked about three billion additional revenues and we did in 2023 delivered what I described as one sixth of it. So it's quite squarely on 500 million last year. So, and Chin Yeh did mention that we are having record profits two years in a row. That's something that we feel quite proud working together with all the colleagues in the group. These are all possible, of course, because we have strong foundation and including very steady execution of our corporate strategies. And based on the corporate strategy we started to talk about in 2022, we have had a lot of new initiatives and, of course, capturing the flows and also enhancing our streams to serve our customers across the Greater China-ASEAN link. and this is supported by many of our international offices and units as well. So net profit this year, I'm happy to say that it crossed the seven billion mark for the first time. So again, driven by strong income and this is covered by Chini already, so I don't go into the details. Although the first page is quite busy with a lot of messages, but allow me just to go through some of them in a bit more details. I won't talk about where we grow because Jin Yi covered it, but we're happy that as we grow NII on strong expansion in NIM as well. So we benefited obviously from high interest rates, but again from also positively repositioning of our balance sheet and managing our cost of funding. Cost is an important part, but also happy to report that we manage cost well in the inflationary environment. In line with our growth strategy, we invest in talent and technology. Qingjian mentioned we have granted support, a lot of support to our junior colleagues, 14,000 of them, and this is about 40%, more than 40% of our workforce. Those in Singapore, we receive $1,000, whereas the other colleagues in overseas locations, they will have an equivalent amount based on adjusting for their own local market conditions. Credit costs. is well maintained at 20 basis points. And this is with proactive risk management. And this is also amid uncertain macro environment and uncertainties. And this is important to say that we remain vigilant and balancing between margin and also asset quality. in our credit selection. So if you ask me about loan growth, obviously we've done 2% for the year. There are still, in a rather muted loan demand environment, there are still pockets of opportunities in non-trade corporate loans and also our mortgages. Sustainability, sorry, sustainable finance portfolio expanded 29% to $38 billion, as Jin Ye reported. This is against a total commitment of $56 billion. And this is the end of 2023. We surpassed our $50 billion target, which was set for 2025. You may ask me whether I have set new targets. But in the way I look at the rate of growth, I think setting any new targets is to be broken. Then I tell my team, just continue to work. on it and work hard on it. And the key point is to help our customer and to fulfill our commitment on net zero. But I will talk about it a bit later in one of my slides. Just want to mention known portfolio, of course, remained sound. NPR ratio is on downward trend over the last two years and is sustained at 1% as at the end of 2023. I see no particular sector or systemic stress and I'm comfortable with the quality of our loan book. As we have a robust set of results and strong capital position, this enabled us to increase dividend payout this year. Still happy to say that if I compare to pre-COVID for the year 2021. We are now 82 cents is more than 50% above the 2019 pre-COVID level of 53 cents. and this is reflecting our commitment when we set our target to for our dividend policy since last year at the 50% of our profits and we in a way we did 53% last year and we also maintain 53% this year beating our target as we continue to work to optimize our capital to support both organic and inorganic opportunities to drive growth We also have announced the acquisition in Malaysia and Indonesia to strengthen our growth proposition in ASEAN. I'll talk a little bit more about it as we go on to another slide. One thing I do want to share with you, allow me to take some time on it, is our one-group approach. When I first shared our Refresh Corporate Strategy in 2022, I mentioned that one very important factor and focus is to develop a one-group approach. And important to work as a team. As you know, we are quite diversified in ASEAN, and we have strong presence in Greater China, but we have our international network, For example, Bank of Singapore also has a big operation in Dubai as well. So together with Great Eastern and Line Global, we are present in 19 countries. And indeed, how to bring ourselves together in order to serve our customers better that is indeed a very strong pillar for us to continue to execute on our corporate strategy. So last year, we made a significant move. You have seen that we launched our unified OCPC brand, and this is after the last logo that was changed about, indeed, a quarter of a century ago. So it was 25 years ago when we have our last logo, but we have now a uniform logo for all of our banking entities across the markets. So this is accompanied by a new tagline. And I think you have seen it for now and beyond. And we're really talking about how we position ourselves, serving our customers, not just for now, but forward looking. This solidifies our one group approach as we pursue strong growth based on our corporate strategy. And this signals to all our colleagues across the group the importance to collaborate and work together and present ourselves as one OCBC to our customer. And to strengthen our growth proposition, we also launched what we call our PVA. we activate our purpose, values, and ambition statement. And this is, in short, summarize the purpose OCBC plays, the values we uphold to achieve our ambitions. So we have always exist for 92 years to enable people and communities to realize their operations. This is our purpose. Our values are guiding our behaviors and represent what we do and how we do the right things. Ambition is where we're heading towards, and in particular what we have set out in our corporate strategy, meaning to our leading financial services partner, for a sustainable future. So this is what we want to do. In a way, if you look at this slide four, it's nicely summarized our PVA activation. This is our directives and what is laid as a foundation for our future growth and how we serve our customers to fulfill our ambition. I now will highlight some of our strategic actions and achievements during the year in the next slide. In short, we expanded our customer base and enhanced our capabilities and also brought in our products and services. This included the new initiatives that we launched in order to contribute to extra revenues growth. And some of this contributed to what I said, the first year's one sixth of the three billion target. and to accelerate our growth in ASEAN, we also have announced two strategic acquisitions. Just to give you a touch of the details, the PT Bank Commonwealth acquisition, when completed, will help to grow our strong presence in Indonesia through the addition of more than 1 million customers to our network. And the customer base complements us. It is retail and SME customers, and this would create synergies and strengthen business franchise as well. For Great East End, our dear colleagues' announcement of the creation of mMedLife Insurance and AdMap Life Takaful. This has an exclusive 20-year distribution partnership with NBank's network of 3 million customers. It will allow us to expand our distribution network for our insurance business and to capture more market share as well. If I flip the page, that leads to one of my favorite subjects, sustainability. I always say the one group approach is how we work together to grow our business and serve our customer, but sustainability is a non-negotiable pillar of our corporate strategy. It is, as I said, important, non-negotiable, and our sustainability imperatives are laid out in our framework, our sustainability framework. in a refreshed, what we call an ABC approach. So you can link up the ABC to, of course, climate change and environment and bring an impact to our communities as our social responsibility and also conducting our business in a responsible manner as our governance. So more details will be disclosed in quite a lengthy but substantial sustainability report that will be published soon together with our annual report. Very importantly, I want to say again that we reaffirmed our commitment to net zero by 2050. Last year, we unveiled our science-based sectoral net zero targets for six key sectors of our long book. This is progressing well. Of course, we have 2030 middle of the pathway, and we want to deliver updates along the way as well. We also maintain carbon neutrality for all our banking operations emissions since 2022. We'll continue to invest to bring carbon emissions down. We have our customer transition to net zero through launch of innovative products. I particularly want to mention while we service a lot of our large corporate cross-border in different geographies. We also expanded our SME sustainable finance framework to across our key markets. We started in Singapore roughly two and a half years ago. Happy to report that the SME sustainable finance commitment have doubled in 2023 over 2022. so it is to serve our customers across the network and across their different sector segments. Sustainable financing commitments grew 26% year-on-year and crossed the 50 billion mark as we reported and also the outstanding of 38.1 billion is also have grown substantially over the previous years as well. So I have also listed some of our actions to bring impact to communities in the middle part of the slide, and also how we conduct business responsibly. So I don't go into details for that. So my last slide, forward looking or looking ahead. We expect 2024 to be a more challenging year than 2023. It's a lot, it's about uncertainties. And global growth slowdown is anticipated, although we do expect Asia to perform better than the world average. We think there will be continued potential as we optimize in capturing growth opportunities in ASEAN-Quita China Link and our corridor. We remain watchful of impacts from geopolitical, economics, and market developments. We are watchful on how a contour higher interest rate environment may impact our customers, and we stay vigilant and nimble amid the increasingly complex market and geopolitical environment. For 2024, we target to deliver ROE of between 13 to 14%. This include the delivery of 2024 contributions to the 3 billion revenues we announced earlier. We expect a limb in the region of, in the range of 2.2 to 2.25, raise, this is to trend lower from second half, with forecasts, this is our assumption. So you can say, Helen, would that be upside? So it depends also on how interest rates, environment, will actually exhibit in the rest of the year. We are targeting low single-digit loan growth, given the external environment. This is how we see a rather muted demand, but we see pockets of opportunities in various sectors, including energy, power, and utilities. This is always paired up with renewable energy as well, because we continue to see demand of our customers going on the net zero path. We also see demands in inflation-resistant RE segments. This is what we call purpose-built student accommodation, hospitality, et cetera. Technology and digital infrastructure is another area that we see opportunities on as well. We target credit cost between 20 to 25 basis points no indication of any structural weaknesses in our portfolio. We continue our active risk management in 2024. And we commit to deliver the target of a 50% dividend payout ratio. So if we grow well, if we continue to deliver, that would mean a very possible maintaining a good quantum of our dividend amount as well. But we want the different policy to be clear to our investors and our shareholders. So thank you. We now move on to questions that you may have. And together with Ching-Yi and my four business heads, we will take questions from you. And over to Ching-Ching.