Oversea-Chinese Banking Corporation

Full year 2024, group net profit was S$7.59 billion, up 8%. This was driven by robust income growth across our three key pillars of banking, wealth management and insurance. Total income surged above S$14 billion for the first time to a new high, from broad-based income growth. Net interest income rose to a record of 9.76 billion, supported by 5% asset growth. Non-interest income grew 22% to 4.72 billion. Wealth-related fees and insurance income delivered strong growth, while our trading income rose to a record high. cost-to-income ratio was below 40% at 39.7%. We achieved high single-digit loan growth and deposit growth this year. Loan growth of 8% was above our guidance level. Portfolio quality remained healthy with our NPL ratio lower at 0.9% year-on-year. Total credit costs were also lower at 19 basis points. Our capital position remained strong. Transitional CET1 ratio was 17.1% and fully phased-in CET1 ratio at 15.3%. With our resilient results and strong capital position, we are pleased to announce a new two-year capital return plan to enhance shareholders' return. S$2.5 billion capital distribution over two years through special dividends and share buybacks. We will initiate our capital return to start early. with a special dividend for FY24 and another one for FY25, set at 10% of our group net profit. The balance of around SGD1 billion will be via share buybacks over two years at management discretion and barring any unforeseen circumstances. The shares will be acquired from open market and will be cancelled. This means that total dividend payout of 60% annually for FY24 and FY25, i.e. 50% target payout ratio for ordinary dividend and an additional 10% in special dividend. For FY24, we propose final ordinary dividend of $0.41 per share, bringing our total ordinary dividends to $0.85 or 50% of our group profit. We further propose a special dividend at $0.16 per share or 10% of our group profit. that comes to a total of 101 cents per share, 23% higher than 82 cents that we paid in FY23. We will repeat the 60% dividend payout for FY25. Now our capital return plan is set after a comprehensive review of our capital position, taking into consideration the capital required to support our business growth, investment options available to us, and based on our target 14% fully phased-in CET1 ratio. Now let's move back to our financial results on slide five. For full year of 24, we reported record profits for both grouped and banking operations for the third consecutive year. For the fourth quarter, group net profit was 4% higher year on year. Quarter on quarter, group net profit declined 15%. This was partly due to the decline in insurance income from Great Eastern arising from changes in medical insurance business in its core markets of both Singapore and Malaysia. These changes were explained in Great Eastern's results which was released yesterday. At banking operations level, net profit declined by a smaller degree of 9%, due primarily to seasonal slowdown in trading and investment activities. Earlier on, I mentioned that our record profit was driven by strong contribution and performance across three key business pillars of banking, wealth management and insurance. This reflected the power of our diversified franchise and collective strength as one OCBC Group to deliver continuous sustainable growth and improve shareholders' returns. Banking operations reported a third year of record profit, driven by strong income growth. Wealth management businesses continue to grow from strength to strength. both wealth management, income and assets under management delivered double-digit growth to new record levels. Our wealth management income rose 13% to $4.89 billion. Assets under management rose 14% to $299 billion, led by continuous net new money inflows. for insurance profit contribution from Great Eastern rose 39% year-on-year to $882 million, driven by strong underlying insurance business as well as improved investment performance in its shareholders' funds. Moving on to net interest income in slide 11. Our full-year net interest income of $9.76 billion was a new high, supported by 5% average asset growth from both customer loans and lower-yielding high-quality assets such as government securities and interbank lending. In 2024, we deploy assessed liquidity into these high-quality assets as part of our ongoing balance sheet management to sustain net interest income in a declining interest rate environment. Net interest margin was down 8 basis points to 2.20% as funding costs rose faster than asset yields over the year on average for FY24 compared to FY23. NIM was also partly impacted by the increase in high-quality assets which are income-accretive but lower yielding compared to our customer loans. Looking into 2025, we expect full-year NIM to trend lower to around 2.0%. This takes into consideration the lagged effects from Fed rate cuts of a total of 50 basis points in late November as well as in December of last year and our House view of 3 rate cuts of up to 75 basis points in 2025. As at the end of December 2024, meme sensitivity, based on one basis point, dropped in rates across our four major currencies of Singapore dollars, US dollars, Hong Kong dollars and Malaysian ringgit was about 4 to 5 million for one basis point of drop. Now this is lower than the $7 million a year ago as we continuously took steps to reduce NIMS sensitivity including growing fixed rate loans and putting on more cash flow hedges. Touching on non-interest income now. Non-interest income rose 22% to $4.72 billion, driven by broad-based growth. Wealth-related and insurance income rose higher. Trading income rose to a record high. For the fourth quarter, non-interest income was up 18% year-on-year but down 30% queue-on-queue. As I've highlighted earlier, this was partly impacted by lower insurance income from Great Eastern in the fourth quarter. Wealth and trading income were also seasonally lower in the fourth quarter. However, we see strong momentum coming back in January. Full-year fee income rose 9% year on year, led by higher wealth-related investment banking and loan-related fees. Wealth management fees rose 22%. We saw higher fees across all our wealth channels. This was driven by a rise in customer activities from improved investment sentiment. Our higher AUM base of $299 billion also contributed to fee income growth as this higher percentage of AUM was placed in investment products compared to a year ago, contributing to our fee income growth. Now, on average, we have around 60% of our AUM invested in investment products across all our wealth segments. In the fourth quarter, it's notable that fee income was actually slightly higher despite a seasonally quieter quarter in 4Q. Trading Income Our trading income for the full year was at a new high of S$1.54 billion. The 53% increase from a year ago was driven by record customer flow treasury income. We also saw strong growth in non-customer flow trading income, coming from improved investment performance from both our global markets as well as Great Eastern. The robust growth in customer flow treasury income was contributed by both our consumer and corporate segments. for the fourth quarter, trading income declined from the high base that we achieved in the third quarter, and in part also due to the seasonality that I mentioned earlier. Full-year operating expenses were up 9% as we continue to invest in strategic initiatives and pursue business growth. The increase was led by staff costs mainly from a combination of higher variable compensation in line with our income growth and business activities growth. We also saw headcount increase and annual salary increments. The consolidation of PT Bank Commonwealth from May 2024 onwards also added to expense growth this year. Cost-to-income ratio for FY24 was still maintained at below 40%. Our loan portfolio remained healthy and we are currently not seeing any systemic stress in any particular sectors. NPR ratio was 0.9%, lower than a year ago. Total NPAs as at end December were lower year on year at 2.87 billion. In the fourth quarter, our new corporate MPA formation was mainly from a downgrade of one Hong Kong CRE account. We did not observe any significant stress in Hong Kong CRE sector and we remain watchful and closely monitoring the portfolio for any signs of early indicators of weakness, if any. Our full year, 24, total allowances were $690 million, down 6% year-on-year. Allowances set aside in the fourth quarter was mainly related to the Hong Kong CRE account that I mentioned earlier. Total credit costs for the full year were 19 basis points, lower than the credit cost guidance of 20 basis points. Now turning on to MPA coverage, our group's MPA coverage ratio was higher as 159% compared to a year ago. As we can see, NPL has been declining and we have been progressively building up our allowances resulting in MPA coverage of exceeding 150%. Turning on to loans, Loan portfolio continued to be well diversified across geography and industries. Group loans grew 8% year-on-year to $319 billion, driven by broad-based growth across geographies and industries. We saw increases in housing loans as well as trade and non-trade loans. Looking at the chart on loans by industry, I want to point out that we saw notable increase in loans to transport, storage and communications sector. This is in line with our group's strategic focus to capture opportunities in the new economy sectors as well as high growth industries. Another of our fastest growing segments is our Sustainable Financing Loans portfolio, which expanded 31% to $50 billion. This portfolio now made up 16% of our group loans. Turning on to deposits. Now, our group's strong and stable funding position was supported by customer deposits, which represented about 80% of our funding base. Customer deposits were 7% higher at $391 billion from both CASA and fixed deposit growth. Importantly, the increase in CASA was from both corporate operating accounts as well as consumers' savings accounts. This reflected the results of our efforts to grow these lower cost and sticky deposits as part of our proactive balance sheet management to manage funding costs and defend our net interest margin. CASA ratio of 48.8% was higher from the previous quarter as well as from a year ago. Our group strong capital position is reflected in our transitionary CET1 ratio of 17.1%, but slightly lower than 17.2% in the last quarter. CET1 ratio would be 15.3% on a fully face-in basis. After paying the proposed final and special dividend for FY24, pro forma CET1 ratio will be at 14.3%. That's closer to our target CET1 ratio of 14%. My final slide is on dividends. Basically sets out what I shared earlier. Now just to recap, 60% dividend payout for FY24 and a repeat of 60% dividend payout for FY25. The balance in the region of around $1 billion will be returned to shareholders via share buybacks. and all in this translate to 2.5 billion capital return plan and that's on top of the 50% target ordinary dividend payout for the coming two years. With that, I thank you very much for your attention today and I will now hand the floor over to Helen. Helen, please.

Thank you, Chen Yi, and good morning to everyone again. It's always good to see all of you here. I have a few slides to share, but I do want to spend a bit more time maybe on this first one. We talked about record profit for 2017. three years in a row, but I just want to dive a bit more into what brings us to where we are today. So allow me to spend a bit more time, as I said, on this slide. A lot of you would remember we refreshed our corporate strategy back in 2022, and then we talked about different growth pillars and how we actually managed to continue to grow it. We also announced what sort of initiatives will help us to improve our revenues and what sort of different business that we are investing in. So I'd like to recap that a little bit. I think you remember when we talked about the corporate strategy, we're talking about our four growth pillars, which is the crypto-China, ASEAN, investment and trade growth. which is also about the wealth growth in particular in Asia, ASEAN, and also the wealth, the cross-border growth in wealth. We talk about new economies and fast growth industry, that's the first pillar, and then we talk about sustainability. as of course something that is non-negotiable but also a growth pillar for us because of our focus on helping our customers to transition and we continue to build our sustainable finance book. So a lot has been said on that and indeed in 2023 we announced what does all this translate into. We're talking about incremental revenues of 3 billion Singapore dollars from 2023 to 2025. and we have reported on that number. So we did say that the first year, one sixth of it, we make $500 million and then the second year is one half of it, so the target was $1 billion. By the September results, I think I mentioned that we're already close to the target. So just want to say that two years together, we are a bit closer to $2 billion. So hopefully, if we continue with this, all this translate to the profits growth. But how do we translate it? It very much depends on what we call the enablers, which is managing our capital, put capital in where we need it, managing our risk. And you can see the quality of our book, how NPL has also come down. And then it is all about one group as well. I think I talk about it so much. that some of my colleagues at Helen, we all know, we all know, and we are doing it. So it is because of this strategy that we're able to put our eggs together, and indeed over the last two years plus, we talk a lot about innovative market-first products, and don't want to recap them here, but indeed digital acquisition, This is something very important for the CFS business, cross-border regional premier initiatives. These are all progressing well. And we talked about cross-border flow of investment and trade. Indeed, we are supporting a lot of the Chinese commercial banking customers expanding to ASEAN. And we have expanded our good-to-China non-bank FI portfolio as well, resulting in revenue exceeding our targets in that 3 billion, to that extent. So we also see good progress in targeting what we call new economy and also fast-growing industry. So I want to highlight that we've been capturing electric vehicles, mainly in the battery industry. And also, of course, you know that there's a lot of opportunity in Indonesia which is a big manufacturer in that. And that's why we're talking about the value chain along this and also about data infrastructure. We are constantly looking for new opportunities. I think a big thing that we're looking at the moment is Singapore Johor Special Economic Zone. Actually we started even before the final agreement was signed in January. So we started more than a year ago. are putting together a committee looking at what sort of customer we can help. And I want to say that we have dedicated teams to help in particular SME customers across Singapore and Malaysia, providing advisory services to help them start and grow their business as well as connect them with suitable partners. in both sides. I just want to mention this in 2024 alone, we have about 260 mid-sized enterprises in the region to start in Malaysia, setting up in Malaysia and helping them to set up account and look at how they are going to expand. And these cover the services sector, construction, manufacturing, wholesale and retail. and et cetera, et cetera. So for this sector in particular, we think we can continue to grow something like 20% in 2025. So just to illustrate how the corporate strategy work supported when we are working together as one group. The collaboration has allowed us also to look at how as we sell products and new business, more customers to be onboarded but indeed together with that as we say we work together we know where to put resources in and indeed we did look at two investments in 2024 right and you will recall we completed acquisition of PT Bank Commonwealth in Indonesia and we make our promise and our target. We finished the acquisition since it was announced in November 23. We finished the acquisition in May and then in four months time we merged the whole bank into OCBC Indonesia. I have to say we actually have a target of integrated expenses and whether we will take in the business was loss making I think is a understanding but we did reduce immediately that amount and I think we are doing good integrating the people and the customers into OCBC Indonesia The other investment I must mention has to be Great Eastern. I think we talked about this so much in the past six to nine months, but this is a major step for us to strengthen our wealth management franchise, right? We're talking about GE and I will spend, there was another slide that I will talk about it a bit later on. But indeed, I want to recap that. Without all this, without the strategy, and also another investment obviously has to be in Bank of Singapore, where we talk about increasing and we're hiring quite a large number of relationship managers over the last 18 months. And if you're interested, Jason can cover that a bit more. And all these results, as we said, in banking operations achieving record profit, right? And wealth management income delivered double-digit growth, and then profit contribution from Great Eastern was also higher, as Ching-Yi has covered that earlier on. Our loan book also continued to grow. and indeed for wealth management AUM, we grew double digit with net new money, net new money, fresh funds inflow for the year at about 21 billion Singapore dollars, which is I think quite a handsome number. I quite like it. Asset quality, we mentioned, remained healthy. NPR ratio has been trending down the last few years. It is now, at the end of the year, it is 0.9%. And Ching-Yin mentioned we have one case on CRE in Hong Kong, which is a mid-cap name. one of our old customers, but in a way for the last 18 months or so we have been very vigilant on the mid-tier corporate on our Hong Kong CRE exposure and we have been bringing it down. So today more than two-thirds of Hong Kong CRE, the CRE Longbo, is to large corporates. The names that you would know very well and that we're very comfortable with. And on the whole portfolio, more than about two-thirds is fully secure with LTV, still at around 50% and below. So we have also built in the comfortable level of NPL coverage as well. as you actually see in our results. So for Hong Kong, there are still global opportunities, but I do understand the challenge in the CRE sector, which I just mentioned we've been trying to help our clients to deliver over the last 18 months or so. I think with the resilience performance, that is why we do talk about, we have a comprehensive plan for now capital. I mean, this goes side by side with any growth, any investments, et cetera, and we come up with this new two-year capital return plan to increase shareholders' returns. So I don't need to go into the details. Junyi has mentioned all of this, and it is in our results announcement. So if we turn to the next slide, this is a simple one. A lot of people ask me why GE, why your banking operations is doing well, you have corporate strategy, but indeed it is important to see that we have always talked about a balanced portfolio with three important pillars. So we do want to continue to deliver a well-balanced earnings growth across our franchise So double-digit earning growth demonstrated solid structural income, generating capabilities, and include the incremental revenue we talked about to react the successful execution of our corporate strategy. And this is, if you look at all the three pillars, that is what we're talking about, all have illustrated growth. So indeed, with this, I want to turn to the next slide to talk a bit about Great Eastern. There has been, as I said, quite a lot of questions raised. Why do you want to increase your earnings or increase, sorry, your owning or your shareholdings in Great Eastern? And indeed, through the offer last year, our shareholding in Great Eastern is now 93.72%. and the offer is indeed I would say a natural progression in our strategy. Natural progression because we define where we are, we define our three pillar franchise, we know a balanced portfolio can help us to overcome in particular the uncertainty and the volatility in the market over the decade and our ambition as we openly stated is to for OCBC to become Asia's leading wealth management player right which is part of our We are a leading financial services partner for sustainable Asia. That's our ambition. But indeed we want to become, as part of our strategy, to be Asia's leading wealth management player. So capturing Asia's rising wealth and strengthening our business franchise is pivotal to this ambition. So the offer is the move to integrate GE closer with our OCBC One Group strategy. Imagine if we manage to delist it, and if we own 100% of it, or we delist it, we have control and integrate GE to us, then it will help us to realize even more synergy value, right? I give you some data to think about. and indeed we're saying that we have always have GE to have access to our, of course, banker channels. But in a typical banker arrangement, the issuer have, of course, access to the bank's customer. But it's not the other way around, right? If you think about a typical insurance which is not part of the banking group, they have a banker arrangement. then the insurance have access to the bank's customer, but the bank do not have access to the insurance company's customer. For us, with Great Eastern, we should actually have that access. We should. I give you some data as I said. In Singapore, 70% of Great Eastern's customer also hold OCBC's products. and 40% of OCBC's customer hold a Great Eastern policy. You see there's still room to grow for OCBC customers to hold more Great Eastern's products. But 70% of Great Eastern's customer hold OCBC products. if you think about it. This may not be workable if Great Eastern is not part of us. But we still say that there is more room to grow and in particular for Malaysia where GE is truly, truly the leading and recognized as a local insurer for Malaysia. there would be more opportunities for our Malaysia banking business to work closer with GE in Malaysia and tapping into that. So the strengths, indeed the strengths of one OCBC group can be amplified if we tightly integrate Great Eastern with us. through a bigger ownership, and if we manage to delist it. And we plan to accelerate our synergies further, and you think about if we are so tightly integrated, you can also think about what about resources in capital. right at the moment GE of course it is a very regulated industry they do manage capital on a very safe basis and you think about that and even some of our normal day-to-day work right and for example just how we manage our expenses together how we actually share expertise and building investments together, looking together of all together, sorry, the two of us as a group, right? So I think GE's position is very powerful in Singapore and Malaysia. And if our core markets include Singapore and Malaysia, we are a Singapore headquarters bank. Why do we want to give up GE in that sense, right? So with this in consideration, we also did express when we launched the offer that Great Eastern is equity to OCBC and it contributes long-term strategic value to us, right? And it has been a subsidiary, it has been part of the group since I think 1958. and it has been a subsidiary for past 20 years and has been a strong earnings contributor to the group. Profit contribution to the group over the last decade hit as high as 20% at certain point and it's important, thus we say it's important for risk diversification, for balance of earnings, for longer term synergy value, it is important to keep GE in the group. And that is why we say for our investment, investing further in GE is one of the things, one of the natural progression of our corporate strategy. So I have a last, I have another slide to share about the capital plan. I think Ching-Hee talked about it quite a bit, but I want to express the thought that we put through in this. Indeed, we talk about, we have three key pillars of business, banking, wealth management, and insurance, right? And that will bring us well-balanced earnings and also actually further growth opportunities getting into the future. Then we look at the investment options we have, right? I mentioned last year we bought PDBC, we merged it into Indonesia's business, and we are not short of other people showing us other opportunities. Some of you always ask me, Helen, are there something you're looking at? And I could say that we've turned away some of these approaches. I always say based on a few guiding principle, right? We know our core markets, we know our core business, so it has to be something that is related. to our corporate strategy. And indeed, if we assess the final synergistic value is not high enough, or it has very high integration risk, it's not something we're interested in. We think about buying something, it has to generate the value after you bought it, right? Even for PDBC, we did buy at a discounted book, but indeed we know that once we put it into into the bank, we are getting on more customers and also more talent as well to our Indonesia business. So as we record and we are exploring plans to consider with development of the OCBC center and its clusters as well, right? We take further assessment and we decided that we can delay that planning for a while. No exact timetable where we visit it, but as we said, we explored it. and we come to a conclusion. We still have a very iconic building here. Our buildings, our presence, our use of it is still very important to us and we now decided that we can delay that for a while. So with all this in mind, and we keep talking about we have a CT1 target of 14%, and that is already good for us to keep a strong credit ratings, have capacity to pursue further growth. If we grow our loan book, if we grow our AUM, of course, growing our loan book, that means we will continue to build our risk-rated assets, et cetera. And I think with all this in mind, we now come to a stage where we say that we have flexibility. to consider deliver enhanced shareholder returns. So we come to this plan and we already see some feedback this morning after we talk about the results and why is it two years while your peers talk about three years, right? So I thought, isn't it better when we say we actually deliver the return faster in two years and we talk about 2.5 billion, right? So if you just divide it by two, we're talking about 1.25 billion a year. and indeed this is a combination but with a bit more commitment into the special dividend. passing the cash back directly to our shareholders. And we said that for 2024, it is a final payout of 60%. And this is already higher than the last two years of 53%. And I do have a question. People say, why are you lowering your ordinary dividend? And hey, this is not lowering our dividend, right? We are paying more dividend. But we always say our ordinary dividend, we have a target of 50%. Yeah, we have flexibility to pay more, which was evidenced by last year. But when we are paying 60, I think it's good always to say that this is not that ordinary, right? And we are paying 50% ordinary, thus we call the 10% special dividend. because you don't pay a high special dividend every single year. So I think we're sticking to what we promise and what we target. I think Chi may not want me to say this, but if you want to say that it is a 53% ordinary dividend in your own mind as a shareholder, and you treat 7% as a special dividend, in your own mind you can treat it that way. But it is how we say that we follow our dividend policy and we're giving out 50% ordinary dividend. I think this is how I want to actually emphasized that because I already see people talking about why you lower your ordinary dividend. It's not like that, right? So I think the two-year capital return plan is expected to reduce our CET1 ratio by about one percentage point. I think the last page of Ching Yeh's presentation showed that, right? And then it will improve ROE by nearly one percentage point as well. And indeed, if you say, Helen, then what was it about after two years? I would want to say that capital plan is an ongoing thing. It's just not like we stop planning on our capital. This is what we said in the past, right? We plan on our capital, and as we said, we will continue to look at. And we think we have options. and this time we decided it's a combination of special dividend and share buyback. And we will continue to review this as we go along. But the key again, coming back to this, if we cannot grow our business, there would not be building up of capital to return to shareholders. and the dividends would not be going up, right? So important is we are committed to continue to grow our business, steer through the uncertainties, which leads me to the very last page, indeed, of my presentation. A lot of people ask me outlook tariffs, and I can address that later on if you are more interested. But indeed, we are seeing all this. We are expecting the Trump administration to talk about tariffs. and we are talking about potential heightened trade tensions and this could impede global growth and slow down in trade activities. We're talking about interest rate potentially coming down. Is that faster, slower? There's a lot of different talks. Yes, we do talk about a view of free rate cuts in 2025. And you can say, why, Helen, are you conservative? But if you just look at the overnight numbers, if you want to hear more market views, I can invite Ken to talk a bit more about it. that expectation on the market changed very fast. Indeed, it changed very fast. Indeed, we were talking about a very high rate cut and then it gradually moved down with many people talking about one rate cut. Overnight, the view changed again. So no matter what, we have to plan with a base, and we have a house rule of three rate cuts, and we expect LIMDAS to be around 2%. Is there upside? Yes, depending on the market situation. Yes, depending on equity market performance. Yes, depending where customers, as we expect, will come back and be more active. Yes, it also depends on how global trade is impacted, and yes, depending on how the China market is reviving. So is there always upside? Yes, there is always upside. But we want to always follow prudence in our planning and there must be a base for us to plan our 2025 numbers. We also plan mid-single-digit loan growth. I want to express that the very high 8% loan growth In 2024, we see actually big trade. Some of the things that we have done well, we have some big trade deals coming in in the last quarter and somehow make us eventually perform an 8% loan growth compared to the mid-single-digit we talked about. And so I'm happy about it, but coming into this year, we are focusing on mid-single-digit loan growth. Cost-to-income ratio, low 40s, and we continue to exercise strict cost discipline. And credit costs remain at similar levels. We always talk about 20 to 25 basis points. Last year, we ended up at 19. And there's no particular indication of any sector having a very high weakness in our portfolio, but of course we have to do proactive risk management. As we said, I think because so many people talk about Hong Kong CLE, I have to reiterate again, we have started to help our clients to reduce the leverage. more than a year ago. And we don't see systemic risk in our book in that sense. We're committed to deliver 60% dividend payout ratio for 2025, coupled with share buybacks. And we want to use a 60% dividend rather than an absolute amount because we hope that as we grow, that hopefully that 60% will be a larger number. So with that, I think I'll end my very long expression on our corporate strategy on Great Eastern, on how we look at capital, and indeed how we look into 2025. Thank you.

Okay, any questions from maybe the media first? We have Bernadette from Bloomberg.