Oversea-Chinese Banking Corporation

Okay, we are a bit early, but I guess we can start. So, good morning, ladies and gentlemen. Welcome to OCBC's second quarter 2025 results briefing. On our panel this morning, we have our Group CEO, Ms. Helen Wong, and our newly minted Deputy CEO, Mr. Tan Teng Long, our CFO, Ms. Gold Chin-Yi, Mr. Kenneth Lai, our Head of Global Markets, and then to Helen's left, Right, we'll have Mr. Sunny Quek, our Head of Consumer Banking, as well as our Group CEO, Mr. Jason Mu. So I guess today I'm just a bit too excited because we have our CEO and our WCO together. Alright, so I think Chini will take over to go through our results and thereafter we will take a Q&A. Chini, please.

Our first half 2025 group net profit was S$3.7 billion, 6% lower than last year's record high level. Total income was little changed at $7.2 billion The decline in net interest income was mostly compensated by growth in non-interest income reflecting the resilience of our diversified franchise Net interest income was down 5% to $4.63 billion against the backdrop of declining interest rates I will spend more time to talk about net interest income in a later slide. Non-interest income rose 8% to $2.57 billion, lifted by broad-based fee income growth and higher trading income. Expenses were well managed and controlled, even as we increased our strategic spending to invest for growth. Cost-to-income ratio stayed below 40% at 38.9%. We achieved solid year-on-year growth in loans and deposits, up 7% and 10%, respectively. Asset growth remained resilient, with NPR ratio at 0.9%, total credit cost at an annualized of 18 basis points. capital position remained strong. Transitional common equity tier one ratio was 17% and fully phase-in ratio was 15.3%. In line with our target ordinary dividend payout ratio of 50%, interim ordinary dividend of 41 cents was declared. Moving on to second quarter performance. Group and banking operations second quarter net profits were 7% below last year, mainly due to lower net interest income. Against the previous quarter, banking operations net profit was up 2% from higher operating profit and lower allowances. at group level, net profit moderated by 4% as GEH second quarter performance was impacted by lower insurance income. Our three key business pillars of banking, wealth management and insurance provide diversified earning space. Banking business continued to see customer driven growth. reflected by rising loans and deposits volume. Net interest income came off from prior year's peak level, but mostly compensated by double digit growth in our non-interest income. We are seeing results of our focused investment in wealth management business. Our wealth management income was up 4% to new high of $2.66 billion, contributing 37% to our group total income. Banking AUM rose 11% year-on-year to record $310 billion, driven by net new money inflows across all our wealth segments, as well as positive market valuation. Our first half, 25, net new money inflows were $9 billion, with $4 billion in second quarter alone. For insurance, first-half profit contribution from GEH grew 10% to $553 million. GEH's higher contribution was driven by improved investment performance from its shareholders' funds and our increased stake in GEH following our Voluntary General Offer last year. new business embedded value or MBEF was 16% higher and MBEF margin improved to 44.7%. This reflected GEH strategic shift towards higher margin products. Moving on to net interest income in slide 10. Second Q, net interest income decreased 3% Q on Q to 2.28 billion Average assets rose 2% but this was more than offset by 12 basis point decline in NIM We have included additional analysis on this slide to provide more colour on NIM The main factor was the drop in loan use, which impacted group name by 17 basis points. This was largely due to the sharp fall in SING dollar and Hong Kong dollar benchmark rates during second quarter. Reduction in loan use outpaced the drop in deposit costs, which reprised much slower than loans. close to half of our loan book are denominated in Sing Dollar and Hong Kong Dollar. About 80% of our Sing Dollar loans are on floating rates and nearly all our Hong Kong Dollar loans are on floating rates. in the second quarter, one month and three month compounded SORA dropped more than 50 basis points and high bore fall was even sharper. One month and three month high bore rates were down around 300 basis points and 220 basis points respectively. Strategic liquidity deployment into income-accretive, high-quality assets during our first quarter also led to a small drag on NIM about two basis points. Now our June exit NIM was 1.88%. we expect upward inflection from the exit NIM as we see flow through from ongoing deposit rate cuts. As at end June, NIM sensitivity based on 100 basis point drop in rates across our four major currencies of Singapore dollars, Malaysian ringgit, Hong Kong dollar and US dollars was around 12 basis points on an annualized basis. For the remainder of this year, we maintain our assumption of three Fed rate cuts. But with the unexpected sharp drop in SORA and HIBOR that I mentioned earlier, we now expect FY25 NIM to be in the range of 1.9 to 1.95%. Moving on to non-interest income. Our first half non-interest income grew 8% year-on-year to $2.57 billion, lifted by strong growth in fee income, trading income, as well as higher realized gains from sale of fixed income securities. This more than compensated for a 9% decline in insurance income. The lower insurance income was largely due to two factors, mark-to-market impact of decline in interest rates on valuation of insurance contract liabilities and revaluation of private equity holdings in our insurance funds. More details have already been shared in GEH result announcement earlier this week. I will cover more details on fee and trading income in the next two slides. First half fee income grew 19% to $1.13 billion from broad-based growth, underpinned by increased customer activities. From the chart, we can see upward trajectory in fee income over the past few quarters, supported by sustained growth momentum in our wealth management fees. first-half wealth management fees rose 25% to $548 million, the highest level in the past three years. Our strong performance was driven by growth in private banking, bank assurance, unit trusts, as well as structured deposits. Compared to a year ago, customers increased deployment of funds into investments. Now around 60% of our AUM are placed in investments across all our wealth segments. First half 25, trading income was up 6% to $771 million. Customer flow treasury income, which made up almost 80% of our trading income, grew 10% to a record $594 million. The growth was contributed by both wealth and corporate segments. We also saw higher treasury sales across all our key markets. On cost, we continue to be disciplined in cost management. First half operating expenses rose by a modest 3%. Our cost-to-income ratio held below 40%. Second Q operating expenses was 2% lower Q on Q. Our overall loan portfolio quality remains sound. NPR ratio unchanged at 0.9%. We continue to stay highly vigilant, including conducting ongoing reviews of the potential impact of trade tariffs on our loan book. We have assessed that trade tariffs having first order impact on 3% of our loan book and two-thirds of our loan book are in sectors with strong domestic focus. We further stress tested our loan portfolio and assessed that our portfolio remained resilient. First half 25, total allowances were $326 million, up 4%, largely due to higher allowances for non-impaired assets. This included pre-emptive allowances set aside for trade theories and macro uncertainties, as well as adjustments for macroeconomic variables updates attributable to weaker economic outlook. Our first half total credit cost is at an annualized of 18 basis points. Second Q, allowances decline 46% Q on Q from lower allowances for both non-impaired assets as well as impaired assets. The decline in allowances for non-impact assets was mainly due to changes in credit risk profiles and exposures. These are partly offset by additional pre-emptive overlays as well as downward MEV adjustments in second Q. NPA coverage ratio stood at 1.56% as at end June 2025. allowances for non-impact loans were maintained at 0.9% of our total performing loans. Our loan portfolio remains well diversified across geographies and industries. On constant currency basis, loans grew 9% year-on-year and 3% Q1Q to $325 billion. Our robust year-on-year growth was underpinned by increased Singapore housing loans as we continued to build market share as well as higher non-trade corporate loans where we supported customers in sectors covering infrastructure, data centres, as well as transportation. Our sustainable financing loans continued to see high growth, rising 19% year-on-year to $53 billion, now accounting for 16% of total group loans. Our group funding position remained strong. anchored by a stable customer deposit franchise which made up 80% of our funding base. Customer deposits grew 10% year-on-year and 1% Q-on-Q to $407 billion. In particular, CASA deposits grew by 26 billion or 14% year-on-year across both corporate and consumer segments. Our CASA ratio rose to 49.8%. We maintain a strong capital position. transitionary CET1 ratio was 17%, 0.6 percentage points lower Q on Q, mainly due to payment of our FY24 final ordinary and special dividends, which offset profit accretion. On a fully phased-in basis, CET1 ratio would be 15.3%. After paying our first half dividend, pro forma CET1 ratio will be at 14.6%. Our board has declared an interim dividend of $0.41. This is in line with our target 50% ordinary dividend payout ratio. We remain committed to our previously announced $2.5 billion capital return via special dividends and share buybacks over two years. This includes paying 10% of our FY25 Group Net Profit through a special dividend. Together, we have our target ratio of 50% dividend payout for ordinary dividend. This represents a total dividend payout ratio of 60% for FY25. With this, I end my presentation. Thank you very much for your attention. I will now hand the floor over to Helen.

Thank you, Chini. Good morning, everyone. Again, it's always a pleasure to have you all in so that we can do a review together on our performance and also have some time to reflect and also look ahead. Just would want to send an apology. You may hear that I'm coughing, I have a lingering cough, but I'm okay generally. But if I do have some coughing, so bear with me. Allow me first to just delve a little bit deeper into our first half performance. So if we go to the first page, just want to say we continue to deliver a resilient set of results. This is with wealth balance earnings, even through a rather complicated economic cycle. A few points here, indeed. We benefit from diversified earnings, as we said, with a strong non-interest income cushioning the impact from declining interest rates. Junyi has expressed on how interest rates have shaped the movement of our limb, but if you want to talk about this more, maybe later on we can cover. And indeed, I think why we're resilient also reflects that we have been successful in executing our strategic initiatives to drive revenue growth. I think you all remember we talked about the three-year plan of incremental revenue of $3 billion from the period 23. to 25, and as at the first half of 2025, we have achieved nearly close to 90% of that 3 billion. so it's probably a bit ahead of our schedule. As shared by Chin Yee, our net interest income has also in a way declined, right, from the peak reflecting the significant decline in SING dollars and Hong Kong dollars benchmark rates. But we continue to see volume growth. You can see our loan exposure, our loan expansion, though the pace has indeed moderated in recent quarters. Non-II has shown resilience backed by our efforts in driving our strategic priorities. We talked so much about building the wealth business and building the cross-border business linking up greater China with ASEAN where we are well positioned to serve our customer. So on wealth management, I want to mention this is an important key business pillar under our plan and of course we have been seeing realisation of the strategic efforts in growing our wealth business. We have Sunny and Jason here today as again if You are more interested in the wealth business. I'm sure they're very happy to share some of the things that we have done that enable us to continue to grow and keep the momentum of the growth in our wealth fees across all the product channels. And indeed, this led to a 25% increase in wealth management fees year on year. Wealth management income, as said, we continue to grow that. And AUM has also increased 11% from a year ago. We've continued momentum in net new money. I think that is important. We see that inflows across all wealth segments. And just give you some breakdown. First half, we have net new money of $9 billion. And this is a $4 billion growth in the second quarter, following $5 billion growth. growth in the first quarter. We also saw an increase in demand for diversified investments options. So clients interested in wealth planning advice and also alternatives investment as well. So this is a testament to how we have enhanced our capabilities and also expanded our RM pool. Remember we talked about in particular for private banking, we are growing our RM in our three-year plan. so these have helped to enhance the wealth management business all in all. Trade income improved, largely driven by customer flow, this is the good part, and indeed we have seen increased client activities. It all comes together when you talk about incremental revenue, of course you have to have the initiatives, and with a one group approach. But indeed, it is through a few years of working on serving the customer better across more geography, have volume growing, have more customers, and more customer leading to demand for more and different products. And as we improve our channels, that's also help. Clients continue to also actively hatch their exposures, including long term. rate hatching for infrastructure and also project finance transaction. So wealth is all the way for Sunny and Jason's business, but a lot of our growth is also not just for loans, but anything that related to the loan exposure, as I just mentioned. So for GH, or Great Eastern Insurance Business, right? Profit contribution 10% higher than a year ago. The business performance stayed resilient. I think Greg and Ronnie are in today. If you want to catch up with them, but they did already announce the results and talk about how they have performed and have a bit of a forward-looking talking about strategy as well. So indeed, investment income also improved, right? And this is our growth in the contribution is also in part due to higher shareholdings gained from the VGO. So about the offer for Great Eastern, there's quite a lot of comments in the media, and maybe I'll just take a chance to really reiterate OCBC's position on Great Eastern. So if you ask me, I am happy. We are satisfied because we fulfilled our objective of gaining more economic interest in Great Eastern, right? So our objective which we set, if I bring you back one year, our objective when we set in our 2024 VGO announcement, right, was to increase our stake in Great Eastern with a view to the list. We did say that. We were successful in increasing our stake, so rising from 88.44% to 93.72%. So if the increase was substantial enough to result in a delisting, we welcome it. It did not, but it is also acceptable to us. This year, the listing resolution was proposed by Great Eastern. And Great Eastern's plan, and they have to, we solved the 11-month trading suspension. So OCBC supported the listing proposal with an exit offer. So we are consistent. But if the listing is not achieved, we already have the plan to support GE to resolve the suspension by opting to take only Class C shares. I think you know the whole proposal very well. I don't need to explain it. So the Class C shares is without the voting rights, right? So we maintain our economic interest, but help GE. Of course, we still need to see the result, but this is a plan to help GE to resolve the suspension, right? So, and also our strategy with Great Eastern has not changed. GE has always played an important role in OCBC becoming a leading wealth management player in the region. And over the years, we have increased our stake, we deepened our integration and increased our synergies with Great Eastern. And we will definitely have more to share as Greg continues to work very, very closely with every one of us in considering and planning for more synergies and collaboration working together. And in the past, we already have built a more comprehensive and innovative suite of investment insurance and estate planning solutions to our customers. And Great Eastern likewise have benefited with a very committed retail and commercial customer base for them to deliver their products. And with the increase in our shareholding in GE to 93.72%, we will continue to accelerate the synergistic work with GE as we grow as one integrated financial services group. So I just want to leave that on the comments. on the GEE, what happened recently. So just want to wrap up this page. Of course, cost to income ratio remain below 40%. GEE talk about tight management of costs, but we still want to enhance technology capabilities, especially in AI. So we maintain cost discipline and strong control on discretionary expenses. But for investment we need to put in, we continue to do so. Asset quality, of course, remained resilient. NPR ratio maintained at 0.9% for five quarters in a row, and this is since June 2024. And of course, a lot of people talk about uncertainties due to the trade tariffs, and we haven't seen the end of it yet, but that has been impact, but I think we have always been prepared. we look at tariffs, we don't respond to tariffs changes. We prepare ourselves, we prepare our customers for that. And I think the market was quite prepared as you can see how market has rebound since Liberation Day. But having said all that, Because of the uncertainty and the volatility, we did put aside additional ECL in both first and second quarter as the trade negotiations progressed. And this included overlays for businesses impacted by tariffs or slowdown in global trade, as well as adjustment for our MEV updates mostly. from the change in GDP forecast. And we will continue to view overlay approach as the tariff negotiations progress. Currently, we do not see significant weakness in our portfolio, but do want to highlight that Hong Kong CRE remains a sector that we are closely monitoring and working with our customers to support them. in tightening over this difficult time. So continue to focus on tight underwriting criteria. We do close monitoring, proactively de-risking our portfolio where appropriate. There are some spots that we grow our business better. I'll ask Thich Long to cover those later on. But with resilient results and strong capital, indeed we're keeping to our dividend policy of 50% payout ratio for the interim results. Okay, so turning the page, we did say, I think we do have stronger than anticipated first half results and we expect second half to be more challenging though, right? Because alongside being resilient, first half has benefited from the better than expected GDP growth across the region, right? So regional markets were also supported with front-loading activities ahead of the US tariffs and government policy support. But of course we look into the second quarter, tariffs and heightened geopolitical tensions have created uncertainty and challenges. And there could be further fragmentation of global trade. There could be potential inflationary impact from tariff shocks. This continues to cloud the operating environment in the second half. although we have a more calm first month of the second half. We remain, though, long-term positive on regional growth. Asia, we still say, is the place to be, and trade investment and wealth flows across ASEAN and Greater China region continue. We still see, as I said, pocket of growth opportunity in the region and our key markets. And with that, I now invite Teck Long to share more on this.