Oversea-Chinese Banking Corporation

Good morning, everyone. Welcome to OCBC's first half and second quarter results briefing. This morning, we have on our panel our Group CEO, Ms Helen Wong, our CFO, Ms Gou-Chin Lee, Mr Tan Teck Long heads our Global Wholesale Bank, Mr Kenneth Lai heads our Global Markets, And then to Helen's right, you have Mr. Sunny Quek, which is head of Global Consumer Financial Services. And last but not least, our CEO of Bank of Singapore, Mr. Jason Mu. So Chini will take us through the slides and thereafter, Helen will share her thoughts on our results, as well as provide an update on their offer for Great Eastern. So I'll pass the time now to Chini. Chini, please.

A very good morning to all. Thank you for joining us at OCBC's first half 2024 results briefing. We are pleased to report a record first-half net profit. This lifted return on equity to 14.5% on annualized basis. Our first-half profit was underpinned by three factors, broad-based income growth, cost discipline, and benign credit costs. Total income for the first half crossed S$7 billion for the first time Net interest income was up 3% to S$4.87 billion This was underpinned by assets growth Customer loans grew 3% on constant currency basis and other financial assets grew 12% The asset's growth more than compensated for the moderation in net interest margin, down 5 basis points to 2.23%. Non-interest income grew 15% to $2.39 billion, led by higher fees, trading and insurance income. Expenses were well controlled. Even as we increased our strategic spending to invest for growth, Cost-to-income ratio improved to 37.5%. Assets quality remained robust. Credit costs were 15 basis points on an annualized basis, six basis points lower than a year ago. ratio improved to 0.9%. With our robust results and strong capital, we are pleased to raise our interim dividend by 10% to $0.44 per share. This represents a payout ratio of 50%, in line with our dividend policy. Our group and banking operations net profit for the first half were record highs. Bringing your attention to the second quarter, group net profit was $1.94 billion, up 14% from a year ago. Compared to first quarter 2024, where Sorry, compared to first quarter of last year where we, sorry, sorry, compared to first quarter of 2024 where we achieved a record quarterly net profit, this quarter was 2% lower but still the second highest on record. I will elaborate more on our financial performance in the following slides. Our three main businesses continued to deliver strong performance. Banking operations' first half net profit rose 6% to $3.42 billion. This was lifted by higher net interest income and fee income. Our wealth management franchise performed very well. group wealth management income expanded 14% to reach a record $2.54 billion. It now contributes more than a third or 35% of the group's total income. Assets under management reached a new high of $279 billion. Quarter on quarter, the increase was contributed by sustained net new money inflows and positive market valuation. Moving on to insurance. Profit contribution from GEH increased 40% to $504 million from strong underlying performance of insurance business and favorable investment performance in shareholders' funds. Total weighted new sales and new business embedded value were higher year on year, boosted by sales momentum in both the regular and single premium plans. This slide shows the breakdown of our operating profit by business and by geography. With a diversified franchise, we are able to harness our comprehensive network presence to deliver balanced earnings growth through economic cycles. We continue to maintain our strong capital, funding and liquidity positions as you can see in the charts on this slide. This puts us in good state to pursue growth opportunities, buffer for uncertainties, and increase shareholders' returns. Moving on to details of our Group Performance Trends from Slide 9. Net interest income for the first half reached an all-time high of $4.87 billion, lifted by a 5% asset growth. We strategically deployed our liquidity to high-quality assets, which resulted in a rise in total interest income. However, these assets were lower yielding as compared to customer loans. This largely contributed to the moderation in NIM to 2.23% for the first half. In the second quarter, NII was sustained at a similar level compared to a quarter ago. Our assets grew by 3%. This largely offset a 7 basis point decline in NIM. The increase in lower-yielding, high-quality assets that I mentioned earlier and the tightening of loan yields resulted in a narrower NIM. NIM was 2.2% for the quarter and underlying exit NIM in June was 2.19%. Our house will is two rate cuts this year. We are maintaining our NIM guidance of 2.2 to 2.25%. At this stage, we are looking to come in at the lower end of the range by year-end. Non-interest income grew 15% in the first half to $2.4 billion. The strong growth was driven by a broad-based expansion across our various businesses and reflected in higher fees, trading and insurance income. I will go into more details of our fees and trading income in the next few slides. Net fees and commission rose 7% to S$945 million in the first half. This was primarily led by wealth management fees, which grew by 19%. Our wealth management franchise has continued to expand. Sustained increase in customer activity drove both fee and AUM growth. There was higher demand for wealth management products such as structured products, structured deposits, unit trusts, and bank assurance. During the first half, net trading income climbed 28% to $726 million. Customer flow, treasury income, reached an all-time high. The increase in customer flow income was across both corporate and consumer segments. We continued to invest to support business growth and create franchise value. For the first half, the increase in operating expenses were largely driven by higher staff costs from annual salary adjustments as well as continued investments to support our franchise growth. IT-related and business promotion expenses also rose. Integration costs related to the acquisition of PT Bank Commonwealth Indonesia of 12 million were also recognized during the second quarter. Our first half cost-to-income ratio improved to 37.5% despite our ongoing investment in business growth. This reflects our strict cost discipline on discretionary expenditure. Asset quality remained resilient. NPR ratio continued to trend lower at 0.9%. This was lower than a year ago and against the first quarter. NPAs in all key industries have declined year on year. Total credit costs for the first half and second quarter were lower at an annualised 15 basis points. During the second quarter, total allowances of $144 million were 14% lower quarter-on-quarter. Specific allowances for the quarter were largely for the few corporate accounts in Asia across various sectors. These were idiosyncratic in nature with no specific sector stress observed. Our group's MPA coverage ratio was 155%, the highest across the past five quarters. Our loan portfolio remained well diversified across geographies and industries. Customer loans of $304 billion at end June were the highest level booked so far. Year on year, loans grew by $7 billion, led by higher non-trade corporate and consumer loans. From a geographical perspective, the expansion in loans was from Singapore, Malaysia, and our global network in the United Kingdom and Australia. As part of our corporate strategy, we remain focused on supporting our customers' sustainable financing needs. Sustainable financing loans grew 33% year-on-year to $44.6 billion. This accounted for 15% of group loans at the end of June 2024. Customer deposits were $370 billion as at June stable from the previous quarter. Compared to a year ago, customer deposits were 1% lower. During the period, we released excess liquidity in the form of higher-cost fixed deposits which declined $7 billion year-on-year. CASA balances rose $8 billion and CASA ratio increased to 47.9%. Group loans to deposits ratio was higher at 81.1%. We will continue to proactively manage our balance sheet and liquidity. Moving on to dividends. The Board has declared an interim dividend of 44 cents, 10% higher than a year ago. This represents a dividend payout ratio of 50% in line with our target payout level. Moving on to my final slide. Our capital position remained robust. CET1 ratio of 15.5% was lower compared to a quarter ago. While our CET1 ratio was raised by profit accretion during the quarter, this was firstly reduced by the payment of our 2023 final dividend in May this year, and secondly from an increase in risk-weighted assets, which was partly attributed to loan growth. With the payment of our first half interim dividend on 23rd August 2024, The pro forma CET1 ratio will be lowered by 0.8 percentage points to 14.7%. This will be further lowered by about 0.2 percentage points to 14.5% after accounting for the period from the end of second quarter to the close of Great Eastern Holdings voluntary unconditional general offer on 12th July. Helen will be providing more update on the offer in her presentation. With this, I end my presentation and will now pass the floor over to Helen.

Thank you.

Helen, please.

Thank you, Chin Yeh. Good morning, everyone. I welcome again to our building and this is our first half results. So, again, a warm welcome. Chen Yi has gone through a lot of the details of the results but I just like to recap some of my thoughts on our performance so I would have to say the first half results is satisfactory it is a record results performance and this was indeed underpinned by our broad-based income growth across our big three pillars, banking, wealth management, and insurance. So the total income for the first half, of course, surpassed $7 billion Singapore dollars for the first time. NII and wealth management income also reached new highs. And total income for the second quarter was also a new record. So AUM was also a record level at $279 billion Singapore dollars. and indeed compared to the last quarter, the growth in the U.M. is driven by net new monies that came in and also positive market valuation. Costs are well managed. We embarked on the cost this year as we focus on executing our strategy. We feel there would be more uncertainties coming and interest rate would move. So we put in quite a lot of thinking into how we manage costs. So this is on top of we continue to invest strategically. I'll talk a little bit about strategic actions, execution in the next page. And compared to the past, I think cost is doing pretty well. We recorded positive operating draws, of course, with our first half cost to income ratio lower than a year ago. Loan growth at a rather, I wouldn't call it difficult market, but we all do know that industry demand is not actually that high. Interest rate is high and people are a bit, companies are a bit careful in managing their investments. But we feel our loan growth is still robust. Year on year, we added $7 billion Singapore dollars of loans. This is a disregard that I think some of our regional currencies remain to be weak and have some translation. That does not reflect the growth. But in a way, this is indeed strong growth in the regional franchise and also through growth in the international network. We continue to be very well-placed to support our clients as they seek to expand in particular cross-border. Chen Yi mentioned our NPL status. Our portfolio remains resilient, and our NPL ratio continues to trend downwards, and at the moment, as at the end of the first half, it's 0.9%, and credit calls declined to 15 basis points. While, of course, we say this is good, we're comfortable with our loan bulk, but we continue to be prudent in managing risk. With our record earnings and solid capital position, we talk about a 50% payout of our profits to $0.44. But I do want to mention that in absolute terms over the past five years, compared to the first half dividend pre-COVID, 2019, our $0.44 this half year is more than 75% above the $0.25 in 2019 first half. So as I said, I want to cover a little bit about the strategy execution. We did talk about, we announced last year that we have a three-year plan that would help us as we execute our strategy correctly and in a good manner, we should be able to deliver three billion Singapore dollars of incremental revenue over three years. So that is from 2023 to 2025. So this is exactly the halfway mark, right? So I think at the end of the year for 2023, I did talk about we achieve what we plan to achieve. It is on the rising because whatever initiatives you put in, the investments you put in, should continue to generate more incremental revenues over the three years. So last year we said we're happy to achieve one sixth of it. So that was around $500 million. So this is the halfway point. The second year, we talked about $1 billion as a target. So we're past half a year. I'm pleased to report that we also achieved our half-year target, slightly above, actually. So hopefully, with the momentum going into the second half, even though there may be some uncertainties geopolitical-wise and also potentially interest rates start to come down, we hope to be able to deliver the one billion we plan to. So this slide just shows what we talk about. You will recall, a lot of you recall, we refresh our corporate strategy towards the end of 2022. We talk about four growth pillars, right? And all the initiatives we set to generate incremental revenues come from this belief that we should be able to win as we define our strategy correctly. So if you look at the four, what we call the growth pillars, which is the capture Asian wealth, support ASEAN, critical China trade, and investment flows, embarking on a knocking value from the new economy, plus we're saying that we want to drive our transition to achieve sustainability, indeed to reduce carbon emission, and very importantly, continue to support our customers as they transition their portfolio to green. So I would not go through all the numbers, but just want to highlight that when we say we want to achieve this, we have to have the right people, we have to manage our capital and risk accordingly, and we have to invest in digital and transformation and indeed we want to act as one group. So when we say we show results of the growth in the four pillars, the enhancer, I mean what we have invested in as we talk about managing our capital, refresh our dividend policy, we manage our risk, we just talk about our MBOs trending down, we talk about changes of the management team over the past two, three years, who you now get to know everybody better. We talk about the one group. I think that is very important as we pull everybody together so that we can act with the investment in digital. We're able to launch more products across our franchise, across our core markets. We're able to serve our customers with more products and across more geographies, which leads to how we deliver the incremental revenues. So, flipping the page, just want to say that we obviously cognizant of the geopolitical uncertainties of course, including ongoing wars, sadly, and also other outcomes, elections that has happened and election that will be upcoming. So again, this backdrop, we still remain confident in the resilience of the ASEAN economy. So macroeconomic outlook and opportunities in ASEAN region remain strong. And with our robust capital position, diversified business franchise and prudent risk management, We think we are well positioned to navigate the challenging landscape, ready to capitalize on the opportunities we identify, continue to invest in our infrastructure, our technology infrastructure, continue to invest in our wealth. I think you can always ask Jason. We continue to hire RMs into the private banking network, and we use a lot of digital to acquire new customers in the CFS franchise as well. On the back of record earnings and steady execution of the corporate strategy, we have made advancements, as we said, to meet targets set for 2024. Just to recap a few things which Jimmy has already touched upon, for NIMH, expecting to come potentially at the lower range of 2.2% to 2.25% at this stage. loan growth remain to look at a low single digit and for credit costs to still range between 20 to 25 basis points. Of course, we continue to manage the risk, but as we said, We're always cognizant of uncertainties. And we also committed to deliver the target of 50% dividend payout ratio. But for, of course, for the year end dividend, we will consider as we look at our capital position and how's our performance for the second half. So I now come to the end of the results but I think we have distributed a deck regarding GE and I think it is a subject that a lot of you are very interested in. That's why I want to provide an update on the voluntary unconditional general offer for Great Eastern Holdings. So just call that VGO and also call Great Eastern GE when I talk about them. So the first Let's flip to the content, yeah. Just very simple, I think you know, but just want to recap. The VGO has closed on the 12th of July, couple weeks back, and we have increased our shareholding in Great Eastern to 93.32%. I think sometimes you see a number of 93.52%, or 53%. Just want to, because on certain count, we need to disclose consorted parties holding. But for those that is held by OCBC is 93.32%. So although the offer is over, GE shareholders can continue to sell us their shares under section 215 of the company ordinance. This will be on the same terms under the offer. That means Singapore dollars 2560, right, per share. But however, Great Eastern has recently declared interim dividend of 45 cents per share, so shareholders who are entitled to the interim dividend will receive $2515 from us and the remaining as interim dividend from GE. An announcement with details on this will be made later on the stock exchange. So as I said, I want to also give a number, although this has only reissued the notice about a bit more than a week ago, and as at the end of July, so meaning two days ago, end of Wednesday, over 130 shareholders holding more than 600,000 shares have accepted the offer, meaning they exercised the right to put the shares back to us. So just an update on that. So I also want to spend some time because during the period of the VGO, you all asked us quite a lot of questions about the price, right, we offer. We couldn't really discuss that. I mean, this is because we are in a period of the VGO. So I just like to take this opportunity to just to go through our thoughts and on the price. So I think this page recap some of the multiples, right? But I want to say that when we assess our offer price, we really considering carefully both accounting and material multiples before we make the offer. So I think PE and PB, right? Price over earnings and price over book. are calculated using audited net profit and also book value. These are based on international accounting standards and hence these are generally more comparable if we consider other comparables insurance company. Of course, there is the price over EV, right, and better value. This can be calculated using a variety of methodologies and management assumptions. So it does vary quite a bit as we make comparison across insurers, and this is a bit more challenging in using price over EV. So this matrix, of course, all have their pros and cons, right, but we decided that it is important to assess the valuation using more than one metrics and so that we consider the metrics holistically and not simply rely on any one of them. So as a recap, I think the table shows that the offer price implies a PE of 15.6 times, price on book value of 1.5, four times, and price over EV of 0.7 times. So this matrix represents a premium to most of the traded metrics of listed life insurers mentioned in Great Eastern's own IFA circular for the offer dated. 14th of June. So the offer price also represents quite a healthy premium over the last trade price. And we talk about, we measure that over the last trade price, it's 36.9% premium over a longer weighted average of one month, three months, six months, and 12 months. These are ranging higher, between 39% to 42%. So also at the one page on EV because it is a question I always receive. And I want to also mention that EV and better value is sensitive to long-term profit forecasts and assumptions. So that's why we said it does vary across different insurance companies. And this is assumptions on future claims, assumptions on benefits, investments, returns, operating expenses, capital requirements, and risk discount rates. So this is looking into the future and have a set of metrics that is not particularly standardized across different insurance companies. So because different insurers use different methodologies, assumptions, et cetera, so the results in being a, to a certain extent, a less perfect metric to be used solely. for comparison between insurers. And of course, when we talk about price, there is always the condition that whether you are buying a franchise or you're buying a new license, an insurance license, for us, we're not buying a new license, we're increasing our investment into GE. So when comparing the EV, the embedded value of Great Eastern with other life insurers, it is also important to note that GE was able to assess OCB6 extensive distribution network without paying excess fee like other life insurers who have paid to the other banking network for banker, right, for banker assurance business. So this has a positive impact on GE's EV in the past. So lastly, also along with the implementation of IFRS 17 last year, some insurers will look at how stakeholders would view their business and have stopped reporting EV. So I just want to get that a little bit clear because so many of you asked me about EV, how we price against EV. So turning to this next page then, I still want to say I cannot say it when we are individual. You asked me whether I like the price, so I want to say now that we feel the offer price is meaningful. Meaningful as to the fact that it represents a premium to most of the traded matrix of listed life insurers mentioned, and most of the listed life insurers mentioned in GH IFA circular are also trading below their EVs, and the discounted EVs of some of these companies are material. So we actually capture the charts in the appendix from that IFA circular, dated June. So this is a last line I want to share before we go to Q&A. Okay, next steps. I just want to say that we'll continue to work on our one group strategy to achieve greater synergies with Great Eastern and try to minimize leakage of the economic value generated. When we say minimize leakage, that is why we are buying more share of it so that we hold more shares so that they can contribute to us. We are in the Section 2153 period. So we are assessing how shareholders is responding during this three months. As I said, some of them already have put back the shares to us. So we will continue to assess the situation and decide on next steps. At this point, not much can be said, seriously. but as mentioned previously, we are prudent, we are calibrated in our approach. If we, and people ask us whether we will have another offer, but if indeed, if ever we decide to make an offer in the future, it will be made in the interest of OCBC, because we are OCBC, so it will be made in the interest of OCBC and our shareholders. So with that, I think I close this presentation of discussion on GE VGO. And thank you very much for taking the time again, coming here, listen to us. We now move on to take any questions you may have. So over to Collins and Jingjing.

I first hand that went up was Chania. So I will have to give it to Chania. Ladies first.

Thank you.

We'll pass around a mic. I have three questions. Let's go back to the CRE. I noticed that your CIE exposure to loans as total of loans is 11% and that's a decline from 12% at year end. Do you see room to further reduce commercial real estate exposure? And what's your view on the sector in Hong Kong? On Great Eastern, do you have plans? Do you see room for Great Eastern offerings in Greater China? and just one for Jason, the RM headcount mentioned in the deck is 6% increase from June 2022. Could you share the total headcount now and why it's not compared to 2023? Thank you.

Okay, I'll just add a bit on the numbers on my deck. It's actually December 2022. We try to use December 2022 because it's right at the end before we have our corporate strategy, the 3D corporate strategy. But certain data, we do not go back as far as December 2022 because some of the initiatives as we launch at, for example, I talk about QR code. We've now managed to have a lot of cross-border transactions using QR code. And because we launched in 2023, most of them. So when we are comparing, we try to compare to December 2022. But of course, a lot of happened over the last 18 months. So that is for Jason to take on the third question. So coming back to the first one, CLE, you asked us whether we continue to reduce it. And I think the point is about diversifying, meaning we continue to see opportunities. For example, we talk about new economy, right? So in a way, if you have, and also if you onboard more clients, then of course, CRE sector, the exposure will be reduced, right? And of course, we can always assess the risk and whether we choose to refinance when some of the loans are coming due as well. But I probably would want to pass that to Thich Long.

For the CRE exposure, we have been quite conservative in the markets. So earlier on, I think there were questions and a lot of focus on the US CRE. As you can see, we have ride that cycle pretty well. we have stopped financing office real estate in US for quite a while, even ahead of other questions. For Hong Kong, we can see the cycle changing, as in moving downwards and vacancy rates going up. So we have been quite conservative as well, looking at exposure, so very, very selective. So that's our stance. But I want to put into context for Hong Kong CRE. Our Hong Kong CIE exposure for office is less than 2% of our total group exposure. I think this is the first point I will make. The second point is that we are very conservative and we mark the market, the valuation every year, at least once a year. Now, at this point in time, our circular exposure in Hong Kong has an average LTV of below 50%. The last thing I will say is that coming from the other angle, actually, on a slightly more positive note, if interest rate were to drop, it could give some relief to the cycle in Hong Kong.

The question on GE Greater China, of course, we always look at where we are and what value we can extract by working closer together. So this is a discussion we have with GE, continue going forward. But at the moment, nothing I can talk about GE going into Greater China. Of course, we said we want to get even more synergies by working closer together. So when we say we review that, of course, we review where the bank is strong. Pass to Jason on the RM question.

Sure. Thank you very much, Helen. So to answer your question, Chania, we have, ever since I came in March of last year and launched the new strategy in line with capturing Asian wealth, which is a larger OCBC corporate strategy, we have announced that we would be aggressively expanding our RM account base. So again, the comparable is December 2022 and before I came on board. And so we have been executing that strategy fairly aggressively across our locations, focused predominantly on the three hubs, which is Singapore, Hong Kong, and Dubai. and I'm glad to say that those hires have been paying off in our net new money as you have seen. So we continue to execute that strategy and that will contribute to the Asian wealth segment of the larger corporate strategy. I'm sorry, 6%? I couldn't hear that.

Current number. Our current number.

Yeah. I'm sorry. I'm sorry, what was the question?

No, my question is the total headcount of RMs after the 6% increase that you mentioned.

Well, as you can see from the number, we have 445 RMs as of June. But we are continuing to increase that number as weeks go by. So I can't give you the total headcount. That number keeps changing as we speak.

You just want to know the number as at June, right? So it's 445. 445. Yeah.

Neil, maybe from CRSE first.

Hi. Thanks for the presentation, Helen. I've got a couple of questions, I think. First is on NIMS. Can you walk me through the dynamics of the time? How much of it was asset yield related? How much of it was funding cost related? On the funding cost side, do you still have any more branches of old high-cost FDs that can be purged out into lower-cost FDs maturing over the next quarter? So that helps, or if not, then not? and how much of that dynamic on the NIMS is also interbank margin related. That's the first question. The second is on CRE. I mean, everything we are seeing from the China banks reporting sound quite grim. US commercial real estate in certain pockets as LTVs, prices have dropped from peak by almost 70%. Certain parts of Hong Kong, China getting there, at what stage do you think about an impairment or revaluation of the book? Or are you very comfortable at this stage? And the net new money for this quarter, where is it from? That would be my third question. Thank you.

Okay, I thought you were looking at Jin Yi when you asked the first question. So, Jin Yi.

On the question about NIEM, you asked about the dynamics, right, about asset yield as well as funding cost. I will break it into two parts. One is first half, 24, versus first half, 23. This is where we do see both asset yields as well as funding cost go up. yeah but over this period half on half the funding cost actually went up higher compared to what I said you that sort of it's just slightly higher so that sort of contributed to the slight you know moderation in name over the half on half. Now, on Q on Q, first Q versus first Q to second Q, second Q versus first Q of this year, we saw actually both funding costs as well as asset yield sort of declining. Yeah, except that the asset yield actually declined faster than the funding cost decline okay and why is that the case is because as we I mentioned earlier right we put on more of the high quality but lower yielding assets lower yielding meaning compared to customer loans which sort of add to our NII growth but actually lead to a sort of compression in NIM overall. So it reflects what we are doing now to balance the NII growth versus the impact on NIM such that we continue to be able to sustain our NII in light of expectations of interest rate going down, which will hit asset yield as well as funding costs. So as part of this shifting of our assets, we are also looking at really managing our funding costs such that it can come down in line with the interest rates. Okay, yeah.

I do want to add that the investment into high-quality commercial assets is also to prepare a book in view of interest rate coming down. So we have made some investment in high-quality bonds. And of course, the high-quality bonds are also good in terms of RWA. So I think this is something we have started to prepare to do as we prepare for interest rate coming lower towards the end of the year. The active management of funding continue to be very, very important in terms of having digital offering that would be easily add on new customers so that we will own more operating accounts so as to improve the CASA ratio. and as interest rate coming down of course customers will be less inclined to put into longer term fixed deposits as well. So in a way I think this is as part and parcel of everything but we are still projecting if we are looking at today towards year end that's why we say that LIM could be at the lower end of our range of 2.2 to 2.25. So come to the second question about CLE, right? And you're saying that China's CLE not doing well, U.S. in particular, but we did disclose the percentage based on our loan book. Of course, if you remember last quarter, we did talk about have more ECL 1 and 2 on real estate. looking at Quartier China. I think we did that looking at Noel. I think we did that first quarter, right? Yeah. So yes, we do prepare. We do account for a potential weakening of the portfolio. So that's why we have that. And if you look at our coverage, NPR coverage ratio, it's actually even trending higher in that sense, right? So do we re-evaluate the properties? We do. I think Thich Long just talked about it. And we watch very carefully our CRE exposure. I think the comfortable part is a lot of DCRE exposure is extended to a lot of our big customers. When we say big customers, it will be blue chips, big listed company, and what we call our network customers. So in that sense, of course, when you say we have to watch very closely, and we did indeed make more provisions on that just to be prepared. but the important part is watching, continue watching how these properties perform. So price is one thing. I think Thich Nhat Hanh talked about still at relatively LTV at renewed valuations. but again whether the customers can continue to rent out and also as we look at the refinancing, what are the proposals and how do we make sure that if the refinancing is something we like, it's structured in a way that helps us to continue to manage the risk. So that's on CRE. And I think on net new monies, I think I'll ask Sunny and Jason to comment.

I think we see our net new money increasing due to a couple of reasons. First, I think we have seen an increase in new-to-bank customers for the consumer bank and I'm sure the branding exercise that we've done regionally definitely helps in that and I believe we have a good customer proposition. Secondly, I think we have a very strong flagship 360 account whereby customers are rewarded as they do more with us and based on customer feedback, we also add on the credit card spend. This definitely helps to increase to get more new-to-bank customers. We also have been working on workplace banking, working with our corporate colleagues. When they open a corporate account, we go together. Besides getting a corporate account, we open their salary-crediting account as well. This definitely helps in getting new customers. In fact, first half, year-on-year, we're getting three times new customers. to bank customers compared to last year. And also talking a little bit about our flagship 360 account. We are seeing the customers do like our propositions. We see account increase in this account in particular up 20%. And also, we also have been investing in our digital offering and the customer experience in opening a 360 account has been fantastic. If you don't believe me, try an open account. You'll believe me after that. We also have seen that the increase in our wealth management fees has increased partly also customers are coming in investing quite a fair bit on bonds. So I think that helps to increase our net new money as well. So these are a couple of reasons and this will help to contribute in our CASA as well. I pass over to Jason.

Thanks, Ani. So just to reiterate the previous point that I made, we've hired quite a number of new RMs as part of our ongoing strategy, and they are starting to bear fruit in terms of net new money, so they've brought in quite a big chunk of the net new money that's attributable to Bank of Singapore. In addition, we've had obviously being helped by the market, so valuations have helped increase our AUM, but more importantly as well, we've got clients who are selectively now increasing transactional activity and re-leveraging back into the market in anticipation of rate cuts coming towards the end of the year. we've seen net new money coming from re-leveraging as well. So those are the two main points for us.

Of the $279 billion, how much is net new money as opposed to valuation on a quarter-on-quarter basis? And where is that coming from? Is it largely Singapore, or it's from all over?

Where it comes, so you're talking about out of the 279, how much of that comes from valuation increases as opposed to? No, and how much of that is net new money? So in total, I believe, sorry. I'll take that. So market valuations have increased at least in BOS by about three billion, whereas net new money has increased by, on a combined basis, about two billion.

We have a few hands raised.

Sorry, shall I answer that question? I think I look at it in terms of a response from the group. So I think in terms of the group net new money that came in, I think it's about roughly about 6B this period. So I think for, again, for competitive reasons, we won't break it down between Bank of Singapore and CFS, but as a whole, I think net new money is about 6B. Maybe we move on to the next question, Akesh from UBS.

Thank you, and thanks for the opportunity. I've got four questions. The first one, I just want to touch on the net interest margin again. On a half-year basis, if you look at the cost of funds, it was up around 11 basis points. I think this looks a lot higher compared to what we saw at UOB yesterday, which was only two basis points. I'm just trying to understand why is the funding cost dynamic so different? Is it like a lagged repricing of deposits that you're seeing, and how do you see it going on for the second half of the year? And then if you could remind us what the latest sensitivity is. I think the last time the guidance was three to four basis points of rate cut from the Fed. Is that still the same, or has that changed? The second question is on the RWAs. So if you look at the increase quarter-on-quarter, some of it came from credit risk, which is in line with loans increase. But I think there was $3 billion from market risk as well, which is around 30% Q1Q, which is something you have not seen, I think, for the last many, many years. So what is going on there, and how do we see it going forward?

and maybe these two and then I have two more questions after that if that's okay let me take that okay for name when you look at the overall funding cost right half and half as I mentioned we have you know besides customer deposits we are also putting on wholesale funding which adds to the cost you know in order to fund some of our what we call the high assets, high quality assets that I mentioned earlier. We sort of captured the spread on that to add to the NII.

Is this being done more from an ALM perspective or is it because you don't need extra additional high-cost funding right?

Yeah so that's part of our sort of deployment of funds you know in the as I mentioned in the second quarter right where actually our high quality assets actually grew by 12% and part of that is funded through wholesale funding account for the differences in terms of the funding cost compared to for example you will be

I see and I think this is something that will probably continue for the rest of the year.

It will continue because as we mentioned and Helen also mentioned that right, it's part of our balancing of the balance sheet to be able to sort of lock in some of the bonds in anticipation of rate cuts. and then the follow-up was on the sensitivity the name the latest sensitivity based on the four currencies one basis point would lead to four million sensitivity on an annualized basis. And then if you recall, this actually dropped, right, from like first quarter when we announced, the same question is asked, right, almost every quarter. So first quarter, it was five to six billion. And then in fourth quarter, I recall it was like six to seven billion. And why is it the case? is because we are you know we are lending more to like fixed rate loans you know and also we are performing what we have what we call cash flow hedges all these are part of our balance sheet strategy to you know prepare ourselves for red cards, which are imminent. And the follow-on question, you also have like how many red cards that we are anticipating?

I think you said two already.

Alright, the RWA question. There are two portions to the growth in RWA, almost equal in terms of the quantum. For credit, RWA is really growing in line with our loan growth. And then market RWA, you also notice growth. That's because we put on quite a bit of FX options for hedging purposes. So it's for hedging purposes.

hedging against the interest rate risk, which is lowering your sense.

Oh, FX hedging.

Okay, I think Jovi. Sorry, I have a couple more questions. Helen, do you mind if I answer the question?

Yes, Ken, please. So on the increase in market risk, RWAs, it's largely driven by a couple of things. One, as Chin Yee mentioned, some hedging activities on our exposures. But primarily, it's actually, there's been a lot of increase in our customer flow business. So as a result of pricing deals to customers, whether it's interest rate derivatives or structured products, we are warehousing some of those exposures. That's why the MRWAs have gone up. Understood.

Thank you. May I just add that because I see there's a lot of interest in NIM. right so I may I just add a few things it's not it's not just thinking about deposits how much you pay and the knowns rather knowns pricing tightening name there are more things you can obviously manage for example we talked about are putting in good yield. Of course, low yield compared to loans, but some high quality assets. But we have also put in some cash flow hedges, which we mentioned in the past. Of course, you can also look at growing your fixed rate mortgages. And indeed, if you look at the overall Singapore market, last year, the fixed rate mortgages grow something like $5 billion. If we capture our reasonable market share, we have increased our fixed rate mortgages. That will actually give us a higher yield, in fact. And then some other things would be to, of course, constantly manage the fixed deposit. And then you can also manage by offering the right tender so that you guide customers not to place it too long or too short according to how we want to manage it. So these are all the things that we can do. There are many ways we look at, but that is a very active process, in particular on interest rate and on NIM, right? Because as we said, we haven't seen high interest rate for so long, but of course one day it will come down. So there are a lot of things we're looking at in order to protect our limb, but also to protect NIM as well. If you stay very high in NIM, but your NI drops because your volume drops, then it doesn't really help the results.

Thank you, Helen. The next question I have is on the CRA bit again. Just looking at what UOB reported yesterday, they had a 200 million NPL in Hong Kong with properties in Shanghai and Japan. Is that something that you're looking at as more idiosyncratic, or is that actually leading to higher systemic stress, which is also showing up in your book? like on a quarter-and-quarter basis, is there more stress in the CRE book that you have? Or is this more idiosyncratic?

I think this thing is very difficult to compare between peers, so not talking about that, but you can actually express a bit more on the CRE, how we manage.

I can't comment on another bank's loan book. I think for us, we have been monitoring the situation very closely. I want to share a little bit on how we approach CIE. Right now, we are thinking about asset value and we approach it from that angle. But the way our business philosophy works is that we actually approach it from a customer selection viewpoint. So if the customers meet our target market, then we work with them. For this reason, our portfolio is actually pretty resilient. So far, when we see some losses relating to CRE, it's actually more idiosyncratic situation relating to a client, like something happened, maybe passing on to the next generation kind of stuff, things like that. Having said that, because it's a downward cycle at this point in time, especially for office real estate in Hong Kong, we also want to be careful and monitor and update our valuation to just make sure that the portfolio is resilient. This is another prism to strengthen our risk management. But the underlying portfolio so far has been very resilient, as you can see from our financials.

Thank you. Fantastic. I just have a last quick question on wealth management, maybe for Jason and Sunny. So your AUM did improve, you know, 2-3%, I think, Q&Q, but the fees was down 7% Q&Q, which is also in contrast with what we saw the results yesterday, where it was up 5% Q&Q. Could you comment on that? Like, what drove that decline in fees quarter-on-quarter? This was wealth management overall, yeah.

Yeah, so for the consumer side, actually we are pretty flattish, just minus about 1%, and I think this is partly due to the fact that more of our bankers assurance sites, whereby we have been pretty much a large proportion of our bankers, Bank Assurance come from a single premium. So that has come off because of the high interest rate where customers usually take a loan to finance that. However, well, regular premium, they seem very good growth. In fact, we have seen growing 40% quarter and quarter on that piece. However, the growth still can't quite match up for that. But besides that, I think we're seeing good traction all around. I think our treasury numbers are doing well. There's also a slightly slowdown in the bonds in quarter two versus quarter one because in quarter two, I think customers are thinking, rate cut may be not so fast, and then they slow down a bit. But we do see a resumption in the treasury numbers in quarter three. In fact, we're off to a very good start in July numbers. Great. Thank you very much.

I'll just comment as well on the BOS side. In the same vein, we've had a very good first half of the year, really led by transactional fees, led by structured products, but really first quarter kind of led. Second quarter was a little softer as people kind of switched a little bit more into products which were like bonds which are less lower margin products again as I said as I mentioned before in anticipation of rate cuts people kind of putting on a little bit more of the bonds and fixed income as opposed to equities but nonetheless we still have a very strong pipeline of products and transactional activities coming out okay I'm sorry I'll just come to the media Jovi from the edge

Thank you. Thanks for the presentation. I'm Jovi from The Edge. So just two questions here. I think the first is just building on the wealth management question. We've heard about Bank of Singapore's RM hires. We heard about Bank of Singapore Hong Kong's plans to grow AUM by 50% by 2026. Could you share any full year or maybe 2026 targets for the global wealth management business? And apart from wealth management, what are some of OCBC's strategies to grow other parts of fee income? And my second question here, I think I refer to the pillar three disclosures. There were adjustments of 10 billion from a CET1, including 5.34 billion for investments in unconsolidated financial institutions, including insurance. So does this include Great Eastern and Bank of Ningbo? And if Great Eastern is wholly owned by OCBC, will this amount be added back to CET1? And will this be distributed to shareholders?

Maybe I'll take question one. So yes, we, as mentioned before, we've been, I've been officially in public saying that we will grow our RM base by over 500 to 500, I should say, by end of 2025, I believe. and our AUM targeting 145 billion US dollars by that time. We don't give a breakdown on the geographic splits, but we are definitely well on our way on the RM headcount as we speak. And we'll continue with that hiring quite aggressively across our three hubs.

So the just to repeat the question Joey is on the deduction right so the financial equity deduction to get CET1 right okay so the deduction is for Bank of Ningpoh as our associates and then for GE is actually reflected as when we compute group CET1 it is actually for banking operations only so for insurance they are what we call deconsolidated so we don't take in the capital we don't take in the RWA you don't just deconsolidate them yeah so then your follow-on question like if we get 100% whether we return that to shareholder I think is is not talking about the same thing right yeah in the first place they are already not in our CET1 okay Nick from Morgan Stanley thanks for waiting

Thanks very much for taking my question. Two questions, actually, again on NIM and CRE exposure. Just in terms of what you answered to the previous questions, it sounds like you're putting on interest rate hedges. So my question is, is this the first quarter you've put on those hedges, or have you been running a hedge previously? um i wonder if you could talk a little bit about the size of the hedge and how big you think this hedge may get over the next few quarters and then if you could talk a little bit about the duration of the hedge and also the yield you're getting on the hedge assets and i've got another question on CRA afterwards

I wouldn't go into the details. I mean, what we do and how we interact with the market is very difficult to share everything with you. But indeed, we started to put on a cash flow hedge last year. But it is not a very big amount. I mean, when you say cash flow hedge, meaning you want to hedge, a steady flow of cash flow. So you have certain balance sheet items that have that feature. So in a way, we will hedge accordingly to make sure that it is truly hedgeable. I think that's the first thing. The second thing is we, it's not an ongoing program as per say that you definitely continue doing that, but we will look at the market, what is a good time to enter into some of this hedge. They're not very long-term. As again, you want to hedge against cash flow, right? So your cash flow is actually your income coming in mainly from your loan portfolio. So when I say this, they are not very long-term, meaning they could potentially be two, three years in that sense. How do we see the market and what do we continue to do duration and you maybe can you can comment a little bit without giving away too much trade secret?

Yeah, I think essentially, you know, we expect rate cuts to come through this year, possibly four to five next year. But in terms of positioning, I think a lot of it has already been priced in, in the longer end of the curve. So we tend to take a conservative view in terms of how we look at our books. We run a very diversified portfolio in terms of our banking book, ranging from money market placements to some debt securities, whether it's corporate bonds or government securities. But in short, we like to keep our average duration in the shorter end between two to three years only because we think that the market has actually priced in a lot of the longer end. So if anything, even with the short end coming off, the longer end is probably not going to come off that much. In fact, there's a risk of actually yield curve steepening. So with that in the backdrop, that's essentially how we're positioning it. Very helpful. Thank you.

just actually quickly just related to that the F are you these are US dollar assets or single assets are you doing is the FX hedging you talk about swaps to to fund the hedge or is that something completely different you spoke about market risk going up because of increased FX hedging so I just relate wondered if I was related to the interest yeah I think hedge and cash flow hedge are two different things okay um you want to ask about CRE next question was on CRA yeah just a little bit more detail on that in terms of the revaluation you said that your revaluation you revalue the assets annually so my question was when was the last revaluation because obviously prices have moved in the last six months and just a bit more detail on how you revalue using professional valuers to do this? Are you taking your own haircuts on that? Are you taking the borrower's valuation? I just want to know what you're using in terms of the independence of the valuation. and then just in terms of you mentioned that most of your borrowers are large which I think we're probably quite comfortable with I'd be interested to know what percentage are not large so what percentage about two percent is small borrowers and then have you got have you done any restructuring of Hong Kong CRE loans. So are you offering lower rates or restructuring the separate profile? Are you restricting the duration of any of these loans at the moment? So they're not necessarily coming up in MPLs, but the loan's been restricted.

OK. Before take long go a bit more into details, I want to say that we're not trying to paint a rosy picture here. CRE is a concern, developed market CRE is a concern. I think the whole market knows it, we see that. What we're seeing is when we look into our books and all the years how we manage risk, and we're not sitting here saying that we rely on borrowers giving us evaluation. Of course we have our source. We have our views and we will look at more diversification, meaning there are certainly some customers we don't want to refinance when the transaction is coming to you. We will make sure that the structure offers more protection. and when we say even for our big customers, of course you can also diversify a bit further and say that you do less office, right? Your customer wants you to do transaction with them. Well, we look at, for example, student accommodation. This is something that is a lot more resilient to market because especially in the very popular centers where a lot of foreign students still continue to go to universities in those locations. So just give that broad base and we say that we're very careful and we say that we will look at whether we feel our, look at the MPL, we feel whether our provision is enough and at times we will actually make provision even faster meaning that we don't wait till that's approved that the loan will really be going into delinquents, right? If you do expect, you watch the customers, you do expect maybe we'll just take some provisions earlier. So I just want to say we manage our sales exposure very carefully. and we tend to be more prudent, if you have to say. I mean, no, somehow just sit right behind you. But in a way, we discuss this all the time. So I'm not sure, take long if you want to add some more.

Okay, I haven't helped me answer the bulk of the question already, but I want to clarify something. The statement which I made about annual valuation is at least once a year. That's the minimum. If it detects stress in any part of the portfolio, we actually do a more frequent update, preferably by independent valuers, but minimally we will have some independent basis to determine that. Secondly, we practice a very conservative policy of ensuring that the customers are graded correctly in various risk classification. So you can also think of it the other way around, that for cases which might actually be stressed, has ever been classified into say the various categories like special mention or even MPL. So it is actually already in the book. Now on top of that, I also want to highlight one aspect of how we manage risk proactivity. We also look at it from a portfolio basis and we are there at liberty of making assumptions of what's forward-looking. So the market consensus is the market may drop X percent, we may go even more steep and plan for the future. So far, our track record speaks for itself. We have been very resilient to the China real estate issue, US real estate issue. So I think our track record of managing the portfolio conservatively speaks for itself. I hope that addressed the question.

Have you had to restructure any loans in Hong Kong?

Restructuring of loans I guess is we have a portfolio comprising large and small customers so invariably there might be some restructuring but we do not practice a classification based on if you're restructuring something which is in a credit negative situation we still keep it as a normal loan so you can assume that all the mitigating action will be taken So we don't have a lot of major restructuring, as you can sense from our portfolio at the moment.

There hasn't been any big increase or anything like that in the amount of restructuring?

No. In fact, if you look at our track record, our office exposure year-on-year actually came down. And yet, you don't see the MPR rate spiking in Hong Kong. But we are conservative. We have been watching it very closely.

I want to give one example and say that what do we do if Xiaoyi were not... It is a concern, right? Because the market is a concern. I want to give one example. Last year, somebody... I mean, some of you asked me because the crypto China since there's an NBL jump and then we have pollution jump. Because we have a certain case inside China where there is a piece of security it become an NPL, but we're not sure whether we will very quickly find a buyer. So we actually make full provision. I mean, we would be very careful about this. When we judge that we may not be able to sell it and got the loan we paid, why don't we make a full provision? The market may be quite difficult. Eventually, after I think six, nine months, we actually managed to sell the property and of course, we sold it, we have the loan we paid, we brought back the provision. But I just want to use this example as an illustration that we take our asset portfolio seriously. We will tend to be very prudent. I think Thich Long just used the word conservative, but we're very prudent in considering making provisions and declaring that alone is NPL. So these are very deeply embedded in our culture as a banking group for many years. Just want to use that as an example.

Thank you.

Melissa from Goldman Hi, thank you for taking my question. Just back in terms of the NIM and NII, I just wanted to understand a little bit better. So are you looking to have NII flat? And that's what you are doing with all these. And so for the next few quarters, that's your aim, to have it flat. And so if NIM, if you need, then you take all these other high-quality assets and allow NIM to come down. But we were trying to hold the NII up. then on that front maybe just I didn't really hear clearly on the loans if the loan yield actually went down loan yield itself maybe some quarter on quarter clarification and in terms of these high quality assets that you are taking on um are they in help to maturity or where they help so when rates come down will we see gains you know what what's about there and I just have one last question I'll ask after that

I want to say you really cannot just plan like that to say that I'll keep them flat the next few quarters because it depends on really how the market treats and turn, right? And you also have to look at how is loan demand going, get going, right? And also how do you manage your, it's a very dynamic management, I have to say. But we certainly have projections into this year end. and we will disclose new guidance for next year when we're coming close to that part. But it is, of course, if you ask me, I of course don't want NII to drop, but your interest rate cycle will tell you that NII has to drop at some point. Unless, of course, you protect it that well or you increase the volume, of your assets and the volume of your business. And of course, this is what we say, why introducing, getting that new money is important, why hopefully the fee side will rise so as to counter the NII drop because of interest rate environment. These are all very important. That's why you have to have a strategy and execute it so that you can onboard more customers, get your costs higher so that you reduce your funding costs, right? So, but a lot still depends on the market and the behavior of the customers. So, of course, I can always tell the team I need record profits every year, but that is not going to happen, right? One day, it will not happen one day. I mean, don't ask me when, but one day will not happen. But we constantly look at what we look at the market and how we continue to improve our business and build volume in the same manner as again, because any bad assets actually hit your P&L faster than the dropping of interest rate in the way. So I just want to say that as a preamble and ask Ken to comment a bit on the investment. And of course, when say we put on assets, there are always guidance and there are always limits that guide Ken how to invest.

Thank you, Helen. So to answer your question on the high-quality assets, if they were held to maturity or FEOCI, the bulk of our assets are actually booked under FEOCI. Only a small percentage of our assets are held to maturity.

Thank you. Then on the next question, as best as you can answer. On Great Eastern, I guess you've taken it up to 93%, and you said there's some more who have put it in. Just wondered, in the total amount, what that percentage is. Is this 93%, including the 160 people that have put in?

93-something percent is the close of the offer.

Right, and so then it should be a bit more now, right?

It should be a bit more now, yes.

Then in terms of listing, I guess, you know, 10% is the free float that needs to be there. So now that we have crossed over, does it mean that we will not be thinking anymore about relisting if we don't get that 100% it will be delisted? What is that thought?

Because we crossed 90%, the shares are still listed, but they are suspended from trading. So what we're saying is we will look at this period of three months, and we will continue to evaluate options. So in a way we did say very clearly that of course we want to own as much of the shares of GE as possible. That's the starting point. Because we like the business, we think the more we, the whole of course, the more it contribute to our bottom line. And then of course we would continue to explore stronger synergies with Junyi. So this is what we can say, but how the delisting go, whether eventually it will be delisted, and if we can hold 100%. I mean, these are things we do not know or cannot comment at this point of time.

Back on the CT1 deduction, just curious because I know it's a flat deduction that you're having now for holding GE. If you take it to 100%, does the deduction increase or the deduction is still the same as what we have?

The deduction will reflect the cost of carrying GE, so it will add to it.

Okay, so it will be more.

Yes.

Okay, and do you have a rough guidance of how much it will hit ET1?

Yeah, so we actually provided that sort of pro forma sort of computation when we announced the offer.

Oh, okay, so that will be paying the capital and also the deduction from holding extra percentage of G. Correct, correct. In terms of working more synergistically with GE, with you having such high ownership now, what is preventing you from carrying out a lot of more synergies with GE? I think your competitor talked at another of his bank assurance you know briefing and how they have taken market share on your bank assurance side and what they have done in steps to do that I just wondered like why couldn't you have taken the same steps as well, having been such a large ownership. So I think maybe just to clarify that the steps was to work very closely with their partners in terms of digital and how the two sides actually invested a lot of money on syncing the platforms, making sure it worked, that you can see the policies on the other side and you could buy and everything like this. And that's what they said that helped gain market share and took market share away from you. So what is obstructing that?

We don't talk about our peers. That's what we normally don't do. What our peers talk about us, I'll listen. But I'm not saying that we have not had synergies. We have a lot of synergies, but getting them closer. I mean, remember they are a separately listed company. They have their own... governance on many things. When we see business synergies, we have been always working very closely. But when you talk about if we own 100% of a company, of course there are other sort of synergies you can perhaps do more. For example, do we share the use of system better, for example. do we somehow put some of the support functions together? I'm not saying that this is what we'll do. I'm just giving you potential examples, right? So I'm saying that we will continue to explore all these synergies. Just now, Chania asked whether we will consider CryptoChina, but in a way, in a way, if we are, let's say if we are 100% shareholder, of course, it makes a lot of the disclosure sharing of information even more easier if you know what I mean but if they remain a solicitor company which they are accountable to listing requirements, disclosure requirements, customer data protection requirement, et cetera, et cetera. I'm not saying that this or this should not be observed, but if it is a non-listed company, 100% owned by us, then the synergy, there should be much more synergy we can explore.

Right, okay. Thank you.

First question on U.S. recession fears.

We've seen investors quite spooked today by the likelihood of a U.S. recession in the next one year with worries that rate cuts are coming a bit too late as well as weak. manufacturing data. Is this something that's on the bank's radar and what are the spillover effects for its business in Asia and the rest of its network as well? A follow-up question on that new money, the $6 billion across the group. Could you give some color on what are the main markets that are driving the growth in that new money?

I think the first one first, U.S. recession. I talk about geopolitical tensions, uncertainties, of course. Any markets, especially where we have a presence, and U.S., of course, has more impact on the rest of the world if they do have a recession. So this comes back to our day-to-day work. day-to-day work, meaning how do we stress test situation, how do we look at, I mean, there's a lot of disclosure what the bank does. If you look at ICAP and, I mean, there is disclosure that we are giving out, so you do know that we have, we are looking at various scenarios very closely. So whenever we say why sometimes we said we still think it's important to have a very strong capital position is indeed to brace any potential bigger crisis that may happen, right? And as again, I think something this time I have not mentioned but we always want to be if we will be able to defend a double A rating. that is actually very powerful in terms of bracing crisis where a lot of times where you know that in difficult situation, actually money do flow to higher rated banks, right? It's a flight to quality. So things that we are doing in terms of managing our capital, making sure that we manage the quality of our book route, these are all to brace for more difficult situation to come so I of course I never hope something like COVID will happen again but again actually economic cycle we have seen over the years so of course everybody learned a lot from the Asian financial crisis and the world's financial crisis so There are a lot of things that we can always model and do a stress test on and make sure that we keep the bank sustainable, intact, have enough liquidity to address the needs of our customers and also to maintain that we don't breach any regulatory requirements as well. So is there a possibility of U.S. recession? I think it's up to everybody's views and guess. But whether we stress test that, for certain we do that. The second is on net new monies. It's quite, I think if I can speak on behalf of our colleagues, it's quite across the board, right? for CFS obviously we have a big Singapore book but Singapore book it does means that also include offshore clients who open account with us and also for the private banking of course our key hubs right where we see growth in the hubs and but the hubs can also reflect money from other parts of the world as well so I think it's not totally concentrated on the certain market

Okay, maybe we have time for three questions. I saw in order of people raising their hands, Yong Hong from Citi, Jayden from Macquarie, and then Chania from Bloomberg. Right in this, no? Okay.

Hi, thanks for the opportunity. I think for the CRE exposure that came down from 2.4% to 2%, was that a deliberate strategy to basically stop financing? And for this CRE, is this just office CRE? Because I think one of your peers, they disclosed CRE and within their CRE exposure, two-thirds are actually in mixed use and the one-third are actually evidently split between Retail and Office. Just wanting to get a sense of your exposure beyond Office CRE and how do you see the outlook for these asset classes?

For Office and Retail CRE in combination, I think it depends on which market you're talking about. In the Hong Kong market, which is very much in focus nowadays, our total is less than 3% of the total loan book. and we indeed has reduced in terms of the CIE exposure by quite a bit in the past one year, year on year. In terms of business strategy, we are calibrated towards the customer selection. So any new business we do, the customer has to be financially strong enough to enter into this market. having said that the clients are also very smart they're also looking at the right time to enter the market so right now when we do overall CRE if we leave commercial CRE aside actually some of the growth areas could be other form of real estate such as student accommodation in Europe type of CRE or in the Singapore market, where all of us are familiar, which is quite resilient. So I hope I've given you a flavour of our approach.

Actually, my question is just relating to Hong Kong. Just to clarify, your real estate exposure in Hong Kong is just to office and to retail, which is at 3%, which is what you just mentioned?

Sorry, less than 3% of the total loon book, yes.

Just wanted to clarify if you have exposure to other classes of real estate in Hong Kong?

We have residential, of course, which is quite okay at the moment.

Okay, got it. And maybe just on margins and your earlier comments about getting more wholesale funding, I think if you look at March end and June end, the deposits were actually flat, but the average deposits for second quarter was actually up. So just wanting to clarify, is this inflow of wholesale funding that you mentioned coming through in the first quarter and then a stop in the second quarter? So that means that maybe the cost of funding can be more stabilized the second quarter level?

I think for us, our wholesale funding is part of overall bank funding strategy. What we have been managing is actually to make sure that we got enough funds to fund our operation, but we don't want to overpay. So that's how we have been managing it. So if you have other sources of funds, for example, interbank market or from the CFS franchise, whichever makes sense for us in terms of the economics of the funding, we will do that. So it's actually quite... If you think of it as volatile, it's actually not volatile. It's actually part of our strategy to manage it.

Okay, got it.

Thank you.

Jayden? Thank you. I realize that we're over time, so I'll be quick. Just following up on GE, just on the strategic side. So you mentioned in the slides minimizing the leakage, economic value leakage outside of OCBC Group. We talked a bit before about the capital deduction, but there's also GE's own capital, and there is excess funds that are sitting within GE. So my question is, with 93.3 percent or slightly above, are we now at a point where we could think about returning some of that excess capital for the benefit of OCBC shareholders? My second question is, you talked about the lack of a bank assurance fee structure. Why not put one in place? I mean, from our perspective, it would be netted off anyway, but just wondering why you'd be giving that away for free to GE. So those are the two questions.

Thank you for that. Yes, we do want to minimize leakage. Will we consider bank assurance arrangement? Yes, we will consider. And will we consider distributing excess capital out? Yes, we will consider. When we say consider, of course, everything has a timing. right at the moment we do want to see eventually how much because we need to look at options after we know how much eventually you can get out of the current provisions right so there are many options we are considering nothing we can really say this will be concrete, this is going until we're ready. We certainly will disclose it, especially if there's anything related to a potential future offer. We cannot talk about it. You do know how these things work. but it is something we take very seriously and of course we hope to be able to have a conclusion that we are happy with. But let's see how this three months goes before we can have a further decision on the options we have. and eventually what it means to us in contribution to our capital position and also whether, and you know that for the last few quarters or the last two years we've been talking about capital a lot as well, how we make any improvement in the RWA and how do we actually come up with more capital that we have by now distributed more actually to our shareholders by having a clearer dividend policy, right? And for the last two years, eventually we paid 53%. I'm not, by the way, I'm not promising you that because it is well-being before we're going to make a decision for a final dividend. So don't take that as an indication, please. But what I'm saying is we will always look at our capital position and try to look after our shareholders, look after meaning to be fair. But again, all these questions relate back to what about, what about next year? What about the uncertainties? And so much, so many questions today on CRE. What about higher credit costs? And I mean, we do all our best to protect our position so that make sure that we're happy if we, and we make, to acquisition in a way, not big ones. But in a way, there are many ways to use our capital. The important thing is to make sure our CAT1 level is satisfactory, that we will be able to take care of uncertainties in the future. have some room for acquisition if we see good opportunities and distribute a good amount to our shareholders when we can manage that. So this is balancing everything but we still want to of course improve the dividends we pay to our shareholders.

All right. With that, great. Thank you very much. We have a bit exceeded time, but thank you for your patience and have a good day. Thank you.

Thank you very much for coming again.