Oversea-Chinese Banking Corporation

Good morning, everyone. We're going to start soon. Okay, good morning. Welcome to OCBC's full year, 2025, fourth quarter 2025 results briefing. On our panel this morning, we have our Group CEO, Mr Tan Teck Long, our CFO, Ms Goh Chin Ee, and as well as our colleagues from our Hall of Wealth, which our CEO will be talking about, which is Mr. Sunny Quek, Head of Consumer Financial Services, CEO of Bank of Singapore, Mr. Jason Moo, and we have today with us the CEO of Great Eastern, and that's Mr. Greg Hingston, and last but not least, our Head of Global Markets, Mr. Kenneth Lai. So Chini, our CFO, will take us through our presentation slides, and thereafter we will take Q&A. Chini, please.

good morning everyone thank you for joining us in our fy 2025 results briefing OCBC's profit before tax for a full year of 25 rose two percent year on year to a record 9.12 billion Singapore dollars this was the first time Our pre-tax profit crossed the $9 billion mark. FY25 group net profit of $7.42 billion was 2% below our record $7.59 billion a year ago due to higher tax expense. The rise in tax expense was mainly because of the increased profit contribution from higher tax jurisdictions and implementation of the 15% minimum global tax from the start of 2025. Our record pre-tax profit was driven by three key factors. Firstly, record total income. Secondly, well-managed expenses. And thirdly, lower allowances. Net interest income fell 6% to $9.15 billion in the declining interest rate environment. non-interest income grew 16% to a new high of $5.46 billion from broad-based growth. This more than compensated for the decline in NII. Fee and trading income both rose to record levels, up 22% and 10% respectively. In particular, our wealth management fees and customer flow treasury income also hit new highs, driven by increased client activities and franchise strength. Insurance income also delivered a strong 17% increase operating expenses were well managed, up 2%. Cost-to-income ratio was largely maintained at 40%. Our discipline risk management kept NPL ratio stable at 0.9% across the past seven quarters. Credit costs were lower at 17 basis points. on capital. CET1 ratio was 16.9% on transitional basis and 15.1% on fully phase-in basis. With our resilient financial results and sound capital position, we are pleased to announce a final ordinary dividend of 42 cents and a special dividend of 16 cents for FY25. Together with our interim dividend of 41 cents, the total dividend for FY25 will amount to 99 cents. This represents a 60% dividend payout ratio. On our fourth quarter performance, group net profit was 3% higher than a year ago, driven by 6% growth in income and 4% lower allowances. Against the previous quarter, net profit was 12% lower, mainly due to income seasonality and higher allowances. Moving on to our performance by three key business pillars on slide five. Wealth management and insurance delivered strong results, which more than compensated for the lower profit from banking. Wealth Management Income and AUN both rose to new highs. Wealth Management Income was 14% higher at 5.6 billion. It now contributes to 38% of group total income, up from 34% a year ago. Banking AUM expanded 15% to $343 billion, driven by both net new money inflows as well as positive market valuation. Net new money inflow in the fourth quarter was $6 billion. For the full year, our net new money inflows totaled $27 billion, up by close to 30% from a year ago. on insurance. Profit contribution from Great Eastern rose 28% to $1.13 billion, driven by stronger insurance and investment performance. New Business Embedded Value, or MBEF, grew 19% and MBEF margin improved to 48.2% as Great Eastern continued to shift towards higher margin products. banking profit before tax was 2% lower at $7.65 billion, mainly due to lower net interest income, partly mitigated by double-digit growth in non-interest income. I'll move on to details of our group performance trends, starting on slide 8. FY25, NII declined to $9.15 billion, impacted by sharp declines in key benchmark rates, in particular, Sora and Hibor. This was mitigated by an 8% growth in our average assets and the benefits from our cash flow hedges. The asset growth was driven by loans. up 7% year-on-year and on constant currency basis up 9%. Our deposits also grow strongly, up 10% year-on-year. The assets' liquidity was deployed to high-quality assets. For the fourth quarter, NII was 6% lower year-on-year and 3% up Q-on-Q. Our Q&Q rise in NII was driven by a 2% asset growth, lower funding costs and continued deployment of excess liquidity to high-quality assets. NII sensitivity based on one basis point drop in rates across our four major currencies of Singapore dollars, Malaysian ringgit, Hong Kong dollars and US dollars was about 6 billion on an annualized basis. NIM for FY25 was 1.91%. Our exit NIM for December was 1.84%. We will continue to lower our cost of deposits to manage funding costs, deploy liquidity to income accretive assets to grow income and capture hedging opportunities to mitigate loan yield compression. Moving on to non-interest income. Our full-year non-interest income rose 16% to a record $5.46 billion, driven by broad-based growth across fee, trading and insurance income. For the quarter, non-interest income rose 37% year-on-year, but was 16% lower queue-on-queue as wealth management and customer flow treasury income were impacted by seasonality in the fourth quarter. Full year 2025, fee income grew 22% to a record $2.41 billion, lifted by growth across all major fee businesses, in particular wealth management. Our wealth management fee surged 33% to a new high of $1.23 billion and contributed to more than half of our group fee income. The strong performance was driven by two factors. First, improved client sentiment and higher average percentage of invested AUM across all wealth segments. Our invested AUM is now above 60%. Second, our strategic drive to strengthen our wealth franchise, including increasing RMs and use of digitalization. These are starting to deliver improved revenues and productivity. on trading income. Our trading income grew 10% to $1.68 billion as customer flow Treasury income rose 20% to a new high of $1.33 billion. The growth was driven by both wealth and corporate segments with continued demand for FX, hedging and investment products. Next on operating expenses. FY25 expenses increased by a modest 2%, mainly from higher staff and technology costs to support our business growth and raise productivity. Cost-to-income ratio was maintained at around 40%. We continue to invest strategically for growth while executing strong discipline in our discretionary expenses. Loan growth momentum was sustained. On constant currency term, loans grew 9% year-on-year and 4% Q-on-Q to $341 billion. loan growth for the year was contributed by both corporate and consumer segments by industry the increase was broad-based in line with our group strategy to capture opportunities in various growth sectors this includes sustainable financing TMT including digital infrastructure transport as well as our Singapore residential mortgages In particular, sustainable financing loans grew 13% year-on-year to $56.5 billion and now accounts for 17% of our total group loans. Our loan book remains well diversified across geographies and sectors. Overall loan portfolio quality remains sound. NPR ratio was stable at 0.9% for seven consecutive quarters since June 2024. NPAs were 9% higher queue on queue at 3.24 billion, mainly due to downgrades of two corporate real estate accounts in Greater China in the fourth quarter. These accounts were previously classified as special mention loans and have been proactively managed. We remain vigilant and continue to actively monitor our loan portfolio. Total allowances for the full year declined 4% to $665 million. Total credit costs were lower at 17 basis points. For the fourth quarter, total allowances were $200 million and mainly comprised $2.36 million for $236 million for impaired assets, largely for the two corporate real estate accounts that were downgraded. This was offset by a net write-back of $36 million for non-impaired assets, mainly due to migration to allowances for impaired assets and adjustment of MEV updates. to reflect the improved GDP forecast. Our cumulative allowances were higher year-on-year at $4.91 billion. MPA coverage stood at 151%. Allowances for non-impact loans were maintained at 0.9% of total performing loans. Customer deposits rose 10% year-on-year and 4% Q-on-Q to $428 billion, mainly driven by CASA. Our CASA deposits increased 14% year-on-year across corporate SME as well as consumer segments. CASA ratio has improved steadily over the last seven quarters to 50.7%. This is a reflection of our efforts to gather lower costs and stickier deposits, as well as the lower interest rate environment. Our funding position remains stable. 80% comprising of customer deposits. All funding and liquidity ratios are well below regulatory requirements. Next on capital. Transitionary CET1 ratio was 16.9% and fully phase-in CET1 ratio was 15.1%. Our robust capital position supports our growth strategy and enables us to deliver sustainable shareholders returns. Moving on to my final slide on dividend. Our board has proposed a final ordinary dividend of $0.42 and a special dividend of $0.16 per share. Together with our interim dividend of $0.41, the total dividend for FY25 will be $0.99 per share, representing 60% of group net profit. This is in line with our target payout ratio of 50% for ordinary dividend and 10% for special dividend for FY25 as part of our previously announced capital return plan. We remain committed to complete our 2.5 billion capital return plan by FY2026. With this, I end my presentation. Thank you very much for your attention. I will now hand the floor over to Teck Long. Teck Long, please.

Thank you. Thank you, Chin Yee. A very happy Chinese New Year to all of you. Last year was the year of the snake and the economy and the uncertainties in the world sort of take a zigzag pattern. So I wish that for everyone in the room and for the economy of the world at large, that in the year of the horse is a sure-footed one and not a wild horse. If you recall, last year was actually a challenging year, especially after the announcement of the liberation day tariffs. the bank also faces interest rate pressure. And if you recall, in the second quarter of last year, highball actually took a dive from 400 basis points to almost overnight sub-100 basis points. Fortunately, it has resurfaced somewhat, and I hope for more stability. So nevertheless, despite all these challenges, the bank managed to deliver a new high in income To achieve this, we need all cylinders firing. We expanded our loan book, we grew our deposit, and for non-interest income, we achieved a double-digit growth. Great Eastern also keeping very strongly year on year. Our customers flow business for trading also registered double digit growth contributed by the wholesale bank and of course the wealth business which has been a standout in last year's financial performance. So all in all, we delivered a strong financial performance. Expenses remain well managed at cost to income ratio of 40%. credit quality remains sound with NPL ratio stable at 0.9%. It's worthwhile to note that we have maintained this NPL ratio across seven quarters so far, and this despite the challenges we see in the market. Looking forward in 2026, we expect market conditions to remain uncertain with continued pressure from softening of interest rates. We expect a slight to moderate decline in net interest income, but we are still aiming for stable to growing total income. Loan growth is expected to be in the mid-single-digit range. Credit costs. We expect it to remain benign at 20 to 25 basis points, but let's bear in mind that we are at the beginning of the year. I'm crystal ball gazing a little bit. So 20 to 25 basis points is what we are guiding. We'll continue with our 50% ordinary dividend payout policy, but we will complete our earlier announced 2.5 billion capital return plan by financial year 2026. Okay next, I assume that with a new CEO in town, there will be interest to hear our new strategy. But if I'm wrong, please raise your hand and then maybe I'll skip this section. So when we craft our corporate strategy, there were two thoughts at the backdrop in our mind. One is our very deep Asian insights, having operated in this part of the world, in ASEAN and Greater China for almost a century. With this deep insight, given the challenges in the marketplace, we want to leverage these insights to capture new opportunities. So that's one thought behind the corporate strategy. The second is really with an eye to the future. In the 30 years I have been in the banking industry, I witnessed three transformations. First, internet banking. Second, digital mobile banking. And now, with the rapid advancement of AI, we could be on the cusp of a third transformation. Actually, come to think of it, this could be the fourth, because when I joined the banking industry, there were still typewriters around, and we migrated to computer word processing. Next page please. We identified five megatrends and we grouped our thoughts into four strategic shifts to drive these megatrends. Asia, tech, net zero and franchise shift with ADD at the center. ADD stands for AI, digital and data. Now we quite easily put AI in the center. There are some thought process behind that, and we deliberately choose ADD. We don't think AI alone can give us all the synergy we want. So we want to view holistically using AI, digital, data, focusing on customer journey holistically, focusing on employee journey holistically to get the synergies we can get. We also think that the AI technology, some are more mature and can give us benefit and we have already created synergies out of that. But agentic AI is a very promising field, and that can give us even more bang for buck. However, the technology may not be ready today, but it is a fast advancing field. So as a result, our focus on customer journey, supported with a deliberate digital and data strategy, make us AI ready, so that when the AI technology is mature, as and when it's mature, we'll plug it into our system. So next Asia shift. We want to capture opportunities from a rising Asia. Even though we may be carried away and be confused by the uncertainties in the marketplace, ASEAN is actually a good place to be in. We are seeing a rising Asia with rising intra-Asia trade, rising intra-Asia investments and wealth flows. Indeed, ASEAN is projected to become the fourth largest global economy as a bloc by 2030. We are very fortunate that our core markets, Malaysia, Indonesia, and Singapore, account for 60% of the GDP of ASEAN. If we include our branches in Vietnam and Thailand, we can cover 85% of the GDP in ASEAN. To do this effectively, to leverage our single branch presence besides our core market presence, we are working on digital solutioning, especially upgrading our transaction banking services to provide one ASEAN value proposition to our customers. We will continue to leverage our twin hubs in Singapore and Hong Kong to capture high net worth wealth flows. This is not a new strategy, it is an existing strategy and we have experienced high growth and we will continue to tap on this. The second strategy shift is the technology shift. With advancement of technology, we have an opportunity to create a customer-centric ADD strategy. where we gain a better understanding of the customer through technology in order to deliver to the right customers the right products at the right time. So we are going to make investments in this area and grow big. We have also been very successful in identifying and expanding our coverage of TMT sector in the last few years. We have managed to register double-digit growth in the past few years. We managed to ride on the AI tailwinds to finance digital infrastructure such as data center, but we are also in financing the tech supply chain. The third strategic shift, net-zero shift, Sustainability remains very important for us, and we will continue to help reduce carbon emissions by financing renewables and greening of industries, including support for SMEs. If you really think about the content of that sentence, it means that we are trying to make a difference to the environment. The fourth strategic shift, franchise shift, This is a very big slide because it attempts to cover our four core markets. For this briefing, we have distilled the slide to focus our discussion on several big ideas. We have twin hubs and we have the ASEAN domestic markets. In Singapore, we are unique compared to other competitors that we have the full capabilities in OCBC, Bank of Singapore and Great Eastern. This gives us a unique opportunity to deliver what we call the whole of wealth value provisions across banking, wealth and insurance. But if you want, you can call us as the WOW Strategy. We have product capabilities under each of our wealth units and each of them have their respective customer base. Under the Whole Wealth Initiative, we want to have a much more integrated and coordinated effort in delivering our services to the whole wealth continuum. To underline the importance of the Whole Wealth Strategy, we have set up a Wealth Management Committee starring Greg, Sunny and Jason. And myself too. I don't know whether they'll give me a starring role or I'm going to be a supporting actor. Anyway, I'll be chairing the Wealth NC because it's a really important initiative for us. Hong Kong is a gateway city for greater China flows and that positioning has not changed. It is also an affluent city. We want to grow the affluent segment in Hong Kong. Last year, OCBC Premier Banking in Hong Kong grew 70% year on year. As Hong Kong is a financial hub, we also want to scale up our Hong Kong global market business. And this is a really important initiative. Like I emphasized, we are trying to crystallize and distill the ideas for easy presentation. So when it appears here, it's actually really important. So in Malaysia, under ASEAN domestic markets, Great Eastern's customer base, you may not be totally aware, the customer base of Great Eastern Malaysia is almost the size of half of Singapore's population. So the bank and Great Eastern in Malaysia can work together to deliver value propositions to the customer base. It's an immense opportunity here. For Malaysia, we are also very excited about the Johor-Singapore Special Economy Zone, given our presence on both sides of the causeway. We have already financed more than RM15 billion worth of projects. We have four branches in Johor Bahru to serve our customers, and they are seeing very good business flows. Indonesia. Indonesia is a very big and vast market. will be embarking on a digital future journey to serve this market effectively. Although we have more than 200 branches in Indonesia, but we don't think it is sufficient to cover such a big marketplace. We also aim to extend our OCBC Indonesia services to the wealth customers to move them to cover the higher end of the wealth spectrum. As part of our whole wealth strategy, to help OCBC Indonesia differentiate its value proposition as it moves up to the higher end of the wealth spectrum, it can tap on the insights and capabilities of Bank of Singapore. So I wanted to illustrate with some real-life example of what is meant by the whole of wealth strategy. As an integrated financial services group, we are able to address the need of seniors across the entire year whilst continuing. And this is very important as Singapore enters a super-age society this year. So if you look at the three columns, On the left, for seniors who need simple banking needs, we have OCBC Senior Care with special deposit rates and OCBC Care Ambassadors to assist. In the centre, for business owners at ultra-high net worth, they have other considerations such as a smooth transition of business leadership for family business to the next generation. High net worth families also are very concerned about preservation of wealth and how to do the intergenerational transfer of wealth. Great Eastern is able to provide protection as well as annuity income for seniors. So this is just examples of the wealth product services we can bring to the table as an integrated financial services group. Now interestingly, if you look at the left-hand side, smart tax resizing in the OCBC app, it's actually quite important when we announce this feature, I have a lot of friends texting me and congratulating me on this feature because they think that this is exactly what they need. So I think this also suggests to you the age group of my friends. Next, somehow I feel very compelled to talk about gold in the current climate. We have actually embarked under the leadership of myself since last year to come up with a comprehensive gold strategy. What you can see on the slide is a sample of our gold products. So again, we are trying to serve the whole wealth continuum. We have customers who have simpler banking needs, who are not used to gold investment. We have our OCBC app under our consumer financial services, which allows easy entry into gold investing. They can buy 0.01 oz of gold. As low as 0.01 oz of gold, that translates to less than $100 investment in the CFS app. If you want to know the customer experience we have put in for this product, well, after the briefing, please don't do it now, but after the briefing, you can try out and buy $100 or $1,000 or $10,000 worth of gold in our app. The second, there are customers who want to buy gold but don't want the hassle of storing gold at home. and Singapore being a safe haven is also an ideal place to store gold. So we have launched a gold fund under Lion Global which addresses this need. Right now it's focused on large institutional investors and high net worth. When the customers want to exchange the units for gold, they can do so. The final product I'll feature here is that we have launched an insurance product which combines protection with investment-linked planning for gold under Great Eastern. Next slide, please. So we are forging ahead, in summary, with our new frontier of growth strategy. It is very much a growth strategy. And because we are going to focus quite a lot on higher returning business, businesses which requires less capital to support the business, we expect stable to improve ROE. So with this, I end my presentation.