IFAST Corporation Ltd
SGX:AIY
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IFAST Corporation Ltd
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Hi, everyone. Welcome to iFAST Third Q 2024 and 9 Months 2024 Results Presentation. My name is JP. I'm from the Corporate Communications team. Today, we have from iFAST our CEO, Chung Chun; our CFO, Jimmy; our Group Finance Director, Terence; and our IR and finance teammates. Terence will be presenting the key summary and Section 1 and Chung Chun will be presenting Section 2. And thereafter, we will have the Q&A.
So let's start with the key summary from Terence.
Very good morning. Thanks for joining us this morning. So I'll just go through a couple of key summary points for our third quarter and 9 months 2024 results. So in the third quarter of 2024, the Group's net profit increased 97.3% year-on-year to $16.81 million. This came on the back of a 49.7% year-on-year increase in gross revenue and 53.4% year-on-year increase in net revenue. So the increase in profitability was driven by contributions from the ePension revision as well as improvements in the Group's core wealth management platform business.
At the end of the third quarter of 2024, Group AUA increased 23.6% year-on-year to a record high of $23.62 billion, but this was driven by net inflows of approximately $0.81 billion over the quarter. In the first 9 months of 2024, net inflows amounted to approximately $2.29 billion. iFAST Global Bank or iGB has shown encouraging progress in the third quarter of 2024, iGB's gross revenue increased almost 140% year-on-year to $13.87 million. Our net revenue increased 82% year-on-year to $6 million. Losses during the quarter declined 61% year-on-year or approximately SGD 0.18 million.
iGB's customer deposits grew to $805.63 million as at 30th of September 2024. This represents an increase of approximately 125% year-to-date. The iFAST Global Bank continues to adopt a conservative stance in terms of its balance sheet strategy with the vast majority of client deposits held as cash in the Bank of England and other banks, as well as in short duration, sovereign bonds and investment-grade bonds. And you'll some details on this positioning in Slide 26 in the deck. iFAST Global Bank, part of the iFAST Group's global fintech ecosystem. The group is steadily increasing its capability and presence as a total digital banking and wealth management group. The ePension division in Hong Kong will be an important growth driver in 2024 and 2025, while the overall wealth management platform is expected to continue to show healthy progress.
And the Group expects iGB on the iFAST Global Bank to become an important growth driver in 2025 and beyond. On an overall basis and barring unforeseen circumstances, the Group expects 2024 to see robust growth rates in revenues and profitability compared to 2023. And for the third interim dividend for FY 2024, the directors have declared a $0.015 per ordinary share. So this compares to the $0.013 per ordinary share in the third interim dividend of FY 2023.
So moving on, this is a chart showing the progress of the Group's AUA over the years. So you can see that Group AUA increased 23.6% year-on-year to a new record high of $23.62 billion as of the end of September 2024. We have also shown this split between the B2B and B2C divisions. So the B2B division takes up approximately 2/3 of about 67% of overall AUA. So we have another slide showing some breakdowns of AUA by markets and products. So you can see the largest market still being Singapore, just over 70% from book AUA. And by products, even as the group has been making good progress on the new suite of different products in the ecosystem, you can still see that UT mix up just under 60% of overall Group AUA as of the end of September.
So with the key summary done, let's move on to Section 1, some key financial highlights for the group. So I'll just take you through some of the key numbers for third quarter 2024 versus 2023, I mentioned some of these numbers earlier. So you see that total revenue up almost 50% year-on-year in the third quarter to $99.14 million, net revenue up 53.4% year-on-year to almost $64 million and our net profit up 97.3% year-on-year to $16.81 billion. So we have a similar presentation for the 9 months 2024 versus 2023 on the next slide.
So you see that total revenue up over 60% to $278.85 million, total net revenue up 75.5% year-on-year to $183.48 million and net profit up 213.8% year-on-year to $47.35 million. So moving along to the next slide, we'll see the progress the group has been making over the course of the past few years. This shows 2020 to 2023 and also includes a 9-month 2024. So I'll leave you to digest all these numbers yourselves, but I just want to point out that net profit for the year, so far, 9 months 2024 has already exceeded the full year net profit 2021. So just moving on to the next slide on nonbanking operations.
So we also like to show you some figures on what are the nonbanking operations. It gives you a sense of the progress of the group's core wealth platform business. You can see that total revenue is up 41.1% year-on-year in third Q 2024 to $85.27 million, net revenue up almost 51% year-on-year to $57.95 million and a net profit up 66% year-on-year to $17.63 million.
Similar presentation for 9 months 2024, you can see that nonbanking operations total revenue up 52.3% year-on-year to $244 million. Net revenue, up 76.7% year-on-year to $168.62 million, and our net profit for the 9 months 2024, up 146.2% year-on-year to $52.02 million. So just want to pick up some key financial highlights. I think we have shown this PBT margin for the group. So this is expressed as PBT for total net revenue for the group. You can see that 2022, we had a bit of in this figure. I think as we have explained in previous quarters as well. 2022 was not a very good year for the wealth business overall. I think there are very difficult market conditions back then. But in addition, 2022 also saw the year that we acquired the banking business. So we are sort of on some additional expenses and costs related to that business. But you can see that since then, we have made very good progress and we have grown net revenue a lot quicker than we have grown costs. So you can see that this PBT margin is now more than surpassed what we did back in 2021.
So we finished 9 months 2024 at somewhere above 32%. On this slide, you can see a return on equity chart. So again, maybe just a couple of quick points this year. I think the group transition from just a fintech wealth management platform to now a global digital banking fintech wealth management platform. So the addition of banking into the ecosystem I think adds on a bit of our balance sheet size, right?
So in 2022 the group actually -- so on approximately $103 million in terms of new equity to a share placement back then, that was largely used to acquire the bank. And you can see that, that also sort of weigh on return on equity for group. But since then, we have continued to make good progress on net revenue, we have grown quite a bit since then. So return on equity now stands at close to 23% for the 9 months 2024.
So this is also in consideration that our equity for the group has now exceeded $295 million as of the end of September. So the next slide, geographical segment breakdown. I won't go through all the details here, but just to point out, maybe 2 segments. I think if you look at China, you see that in the third quarter, we have actually seen a narrowing of losses there year-on-year. And also, if you look at our Q-on-Q figures for China, losses have continued to come in a bit lower.
And so as the U.K. banking operation, that's somewhere where we have experienced very good revenue growth and hence, that has helped to compress or we do some of the losses in that business. I'll join through the next couple of slides, and we finish off with Slide 19 on just some details on the third interim dividend for 2024, right? So some of the details there that I will not go through. So I'd like to hand the time over to Chung Chun to take us through some of the key business updates.
Thanks, Terence. I'll move on to Section 2 of our presentation slides. What I'd like to do is just highlight a couple of the trends that we're seeing in recent time. This particular slides here shows net inflow.
In this chart, we have shown the trend for the last 12 years. I think we have, during the previous quarters, been showing the trend in the last 5 years or so. But I thought it's a good time for us to take a step back and look at our history in terms of what we actually have been doing and how the corresponding net inflows have shown.
Just to recap, net inflow, of course, is one of the key indicators for us as a group because net inflow is the key contributor to the group of our group AUA. So group AUA is a function of net inflow and the market movement, right? So if the market is flat, then the net inflow will be essentially the driver -- driving the overall growth of group AUA. So if you look at it last 12 years, you actually find that from time to time, there has been fluctuation in terms of net inflow. And if you look back at the stock market indices over the years, and you actually find that typically after the market goes through a negative patch, a tough patch, then net inflow tend to be somewhat affected, right?
And conversely, if the market is strong, then you actually find that there's typically a better inflow that we actually see. So if you look at between 2017 and 2019, I would say that the increase in net inflow then versus the previous few years was largely as a result of the fact that the group was investing quite a bit on ensuring that we have a good comprehensive wealth management platform transitioning from just a unit trust platform to a holistic wealth management platform. So that did bring some of the growth.
And in 2020, 2021 when the stock market did very well following the pandemic period that we actually saw a quite sharp jump in net inflow as well. But in 2022 and 2023 were periods where stock market was actually going. I think 2022 essentially is a year where all the key asset classes in the financial markets were doing poorly. I think in the U.S. as well, the tech stocks were doing poorly. China market was doing poorly. Even bonds were actually doing poorly because interest rates were in the midst of being high. 2023 was more mixed year. I think the U.S. market started to do a bit better, but China continues to be very tough.
So I think in Asia, we find that China financial market typically have a significant influence on the overall sentiment in the market. Going to 2024, we actually find that we have seen some improvement in terms of overall net inflow. So the first 9 months, we have made $2.3 billion, and that's exceeded the net inflow for the whole of 2023. So for this year, we are looking at a decent year in net inflow, not the record high year, but certainly, the recovery compared to the tough 2 years that we actually saw. Next slide, on the gross subscription for unit trust, that kind of show a trend of somewhat similar. So for the first 9 months of this year, we actually have seen that gross subscription was $5.3 billion and already exceeding the full year of 2022 and 2023.
Moving on. The next slide shows the bond business that we have. As you are aware, we have been trying to build up the bond platform that we have, both on B2B and B2C. And this particular chart shows that the fact that the overall volume that we have on the overall platform basis have actually been trending up.
Next slide will be the chart showing the quarterly gross revenue for iFAST Global Bank. Recall that we completed the acquisition of iFAST Global Bank in March -- at the end of March 2022. So following some initial transition, then we start to launch a new business division, DTB and DPB in 2023. So the chart shows that, when we launch our new business division, the revenue that we have as a bank have actually been growing. The deposit base that we have has also been growing as well.
So the revenue actually reflects the kind of improvement that we have actually been seeing. And the next chart will be showing the losses that we have been reporting for the bank for the last 2 years, right, the quarterly loss. I know that these are negative numbers, but bear in mind that we are talking about the start-up phase for us as a bank, we do believe that going forward, the potential for iFAST Global Bank is very substantial. And the last 2 years were necessary periods of investments for us to actually go to in order to ensure that we build a solid partnership of future growth.
Of course, it's worth while, also noting that these losses that we are looking at, if you have been following the digital banks, the start-up digital banks, especially in the different countries, including Singapore, the losses typically that you see are of higher quantum. I think it's not uncommon to see banks reporting losses of over $100 million in a year. So in our case, we pride ourselves in our ability to launch our technology platform at a pretty reasonable cost.
And that actually allows us to build up the business in much better and more sustainable way going forward. We have previously communicated that we are targeting to breakeven by 4Q of 2024. As of now, that remains the target that we actually have. Still on the bank, we also want to point out that we continue to adopt a conservative balance sheet strategy for the bank. I think we find that quite often many start-up banks when they start off, one of the key strategy will be to have a business strategy that cater to the, yes, the loans part of the business that may sometimes bring additional risk. But in our case, we have actually made it quite clear in the recent quarters that we will adopt a conservative balance sheet strategy. We want to build up our bank deposit base and yet to be employing a relatively safe balance sheet strategy so that in the long run, we have a very strong and sustainable bank.
And yes, won't be too prone to some sudden losses in terms of the [indiscernible]. This particular slide, Slide 27, shows out the ratio we have as well in the past communicated that we intend to keep our ratios well both the minimum regulatory requirement, and that clearly has...
Yes, so those are some of the key observations I wanted to highlight for the progress on overall business. So we'll stop here in terms of the formal presentation. But we'll be happy to take any questions that you may have for us.
Thank you, Terence and Chung Chun. We will move on to the Q&A section of the presentation. [Operator Instructions] Andrea?
Firstly, on the U.K. bank similar targeting breakeven by fourth quarter. Second quarter, third quarter, we've seen the losses narrowing, so there's quite good progress there that is going forward from the fourth quarter. What are you expecting in terms of growth capability we -- are we looking to introduce more new products? What are we -- are we looking for breakeven in 2025 as well? Or is this a positive profit target that we are looking at in 2025? And my second question is also, in your slides, it says that you guide for it to launch in the first quarter of 2025. So what do you mean by this launch? Are we looking at onboarding trustees like how we are doing on the ePension side? Are we looking at some substantial AUM that's targeted or it's slated to come on board? How do we look at this in terms of contributions to the bottom line?
Yes. Firstly, on also, launching in our case, means -- we start handling the actual work with institutional partner leverage we have. And that also means that we start generating the revenue. And in the sense, we expect that, that will start to contribute to the bottom line, so once we launch. Yes. So basically, starting the activity and coming through. That's what we mean by launching.
On the bank, yes. So for iFAST Global Bank, when we acquired the bank, the key business has been the remittance business. So that is a business segment to continue. And there's a business segment that we will be building upon and continue build upon. So that is something that continues. The new part of -- the bank really will be the digital personal banking and the digital transaction banking, and of which the bigger part is actually digital personal banking. So for this, we actually have been running a pretty simple business. Yes, I think in today's modern world, many banks actually run quite complicated banking businesses.
In our case, it has been simple and we tend to keep it simple. Simple means collect deposit, deploy these deposits in a safe and conservative manner and then earn our net interest margin. That actually means -- yes, a growth in deposit base that we have will be an indicator of what -- of the growth of the overall business. So growth and deposit base and therefore, growth in net interest income. So the losses have narrowed in recent quarters, and that actually reflects the progress that we're making in just growing the deposits as well as growing the net interest income that we actually have.
And so if you go on that basis, that yes, you can't actually expect that as long as we are successfully continuing to grow our overall DPB and DTB business and grow our net interest margin then our profitability trend should be on an improving trend. The -- yes. So for us, so many banks or most banks perhaps start off with the simpler part of the business meaning historically, simpler part of the business, meaning, you raise the deposits and then you have some loan business that over time, they get into other parts of our business like wealth management, et cetera.
In our case, we sort of start the other way around. We start the wealth management business without the banking and we have developed a good wealth management platform in a different country. So the intention is that the part of the investment platform business will, yes, will remain outside the bank. The bank will come in. We have a relatively simple model of risk-free helping to enhance the overall ecosystem that we have. So the business model that we have on the for some banking for instance, you find that we cater to the mass market -- mass market, mass affluent. And that is a segment that we believe to be very much under tapped, especially if you think in terms of the fact that we are positioning ourselves as iFAST Global Bank.
Of course, banking is a business has been around for centuries. But if you take in terms of what hasn't developed very well globally, is actually a concept of a global bank, especially for individuals, for retail consumer for mass affluent. This part actually has been under developed because most banks have been keen to develop a business that tap into global source of money, but that's mainly in the private banking area, so for high net worth individual platform, the retail and mass affluent that actually hasn't seen a strong development. So that's why we see tremendous opportunity for ourselves and the progress that we have seen in the last 1.5 years of launch of the digital personal banking division shows that our belief of the demand from consumers globally for a global bank is indeed correct. So that part has actually been progressing.
For personal banking itself, today, we actually have 70% of the deposits coming from, non-U.K. resident, right? So that's a segment that have actually grown quite well. Of course, we intend to better tap into the resident market as well. But in a sense for that part, we needed to better launch some of the services that will actually be needed before we see a faster pace of growth there. So while the key services that will be important to tap the U.K. resident market will be debit card, right? So that project is something that we've been working on and the next couple of months, we should be looking to launch the debit card services, so that will help us with tapping into the U.K. market better.
So if the global bank cater into global consumers as well as the U.K. resident, I think this business model is relatively simple business model that have huge potential. So that's what we expect to do.
Just a quick follow-up on the [indiscernible] part of it. Can I check that we expect revenue to come in for also in first quarter about OpEx and CapEx? Is that platform really deposit build as that OpEx, CapEx, are we expecting more to start on the comp in first quarter onwards? And perhaps if that is something to come in, then is there a likelihood that you need to revise that from...
In terms of CapEx, that's pretty much -- so you take 2024, I think in one of our slides. We are estimating that we should be having a CapEx of $20.5 million, yes, $20.5 million, slightly below 2023. So that number we have included all the various divisions within the group. So yes, there will be a sudden increase in CapEx just because of the launch [indiscernible] also.
OpEx, there will be -- we have some additional OpEx. We expect that also part of the business is above that should be profitable overseeing the...
Okay. I think I'll jump into the Q&A questions that we have received from our participants online because there's quite a few. So I think just to continue on the [indiscernible] project. So just to check if this contract will add to both AUA and also net revenue, and what kind of quantum can we expect for net revenue or PBT, and that's coming...
The [indiscernible] business will contribute to AUA. And in terms of quantum, I would say that it is a sizable quantum relative to the AUA that we have from Hong Kong to do. Yes, if we look, not much less than the full account that we actually have today. So the AUA of Hong Kong following the launch then I should see a good spike up...
The quantum that we can expect on net revenue...
Yes. So in terms of -- yes. Net revenue, so as a result, then there should be a decent increase in net revenue from there as well. Of course, the group right now is quite sizable on an overall basis. Yes, but there is a decent increase in the overall contribution to our Hong Kong business.
[ Royston ] also has a couple more questions. So maybe we'll move on a little bit into the Hong Kong ePension division. So for Hong Kong, ePension division, are there any updated net revenue and PBT targets for 2026? Can management provide an update on how the actual net revenue and PBT for 9 months 2024 are trending compared to 2024 forecast so far that is exceed in line or below forecast. It's very similar to a question that we also have from Paul, from Brian, which is on the ePension. When do you expect the next step-up in the ePension figure?
The progress so far in the first 9 months. Yes, we review the country breakdown in Sing dollar, but if you do some simple conversion, then you actually find that the PBT for Hong Kong in the first 9 months has been HKD 201 million. So relative to the targeted guide, the targeted number that we have given previously, we are tracking well. So we expect that we should exit the number of HKD 250 million that we gave as a target for 2024 previously. Yes, that's where we focus. I think the revenue for that, we expect that should be made as well for Hong Kong. The next step up in terms of the revenue for the ePension part of it, I would say that it will be when we're getting into maybe middle part of 2025. Yes, that's where we expect to see the next step up, particularly second half of 2025.
As far as 2026 is concerned, we don't have any official other than guidance at this point. But we do expect that our overall revenue should show further growth in 2026, compared to 2025. As you all should already know, the eMPF project that we have is for a period of at least 7 years, right? We certainly hope that it will be much longer than 7 years. So 2026, certainly is a year we expect and we will continue to show the growth in revenue as well as profitability. But I think at this point in time, it's not our intention to give the exact guidance for 2026 for Hong Kong. We previously gave that for 2024 and 2025 because coming from a time where many other details were not given. We thought that it's really good to let investors have a better sense of what's going to happen. But going forward, I think we will, yes, give the updates and some overall guidance the way we do for our business. That's the thinking at this point.
Royston has a question on iFAST Global Bank. How much profit does management envisage for this business to generate in 2025?
we don't have an exact number to give as yet, but it is our target and believe that once we're unprofitable as a bank, then the trend should be something that continues to be in a positive upward direction. I think if you look at most banks around the world, if they have a good simple business, especially one revolving around retail business that is quite well straight up where we have good control on the pricing, on the margin, and they don't take too much balance sheet risk, et cetera.
That is a business that can actually build good profitability and can do so in quite a stable manner. So we have been very keen to have a bank because we see that as something that can help our overall business quite a bit. And yes, as we continue to build up on the client base that we have, as we continue to build up the deposit base that we have, as we continue to deploy the deposits in good sustainable manner, then actually something that will continue to help us to grow. Yes. So 2024, so far, we made a loss of $4.7 million, something like that. So if we're able to turn profitable by 4Q, then it's going to 2025, then there should be some positive contribution -- with some negative contribution from the bank. But we don't have exact number to give...
We will continue with a few more questions on iFAST Global Bank. So we have this question from Paul. For iFAST Global Bank, why have the new products being popular, especially in attracting deposits?
The new product has been popular mainly because most banks haven't bothered to develop this part of the business. And this part business, I mean, essentially allowing customers from all over the world to open a bank account for themselves outside the home country. I think there are many banks around the world, but interestingly, most banks prefer to only development business that cater to the residents of their own country. And I think that includes Singapore and various countries, except of course for the high net worth individual.
So it is an interesting situation that has remained despite the fact that the world has changed. We're in a global world now. We are used to rely on -- we are used to living in a world where when you watch TV programs, you rely on local TV station, where you listen to the music and rely on local radio station, but the world has completely changed, right? Most people don't count on the local TV station as a main source of movies anymore. And I think -- so you have companies like Netflix, Spotify, we have shown that a global business can be viewed. You operate from one or a few countries by type of the customers around the world.
But interestingly, when it comes to banking, that actually hasn't happened in a substantial view other than for high net worth individuals. And is it because that service is not useful? Clearly not the case, right? Singapore is generally may not feel the need to open bank account outside the home country unless you're sending your kid to study in U.K., et cetera, and so on. But the truth is, many people from nearest country do want to have a bank account outside the home country. And that is a segment of demand that hasn't been properly met. Both banks still are not putting too much effort on them. And we're essentially just tapping into this very strong level of demand is there. That's why we've been able to make the progress in terms of growing the deposits and generate increasing net interest income without taking too much risk. And yes, that is a level of demand that will continue to be there or in fact, increase for the foreseeable future.
So yes, we're simply adopting a blue ocean strategy that most banks haven't done so. That's why the cost that we spent in trying to build out the business as well is a very small number compared to what both start-up digital banks are actually using. So that is really the simpler explanation about why we've been able to meet it.
On iFAST Global Bank, Benjamin has a few questions. So can you share a geographical breakdown of the deposits. How do we compete for deposits? And how much higher is the deposit rate we offer?
Yes. So if I take -- so for the bank as a whole, iFAST Global Bank as a whole, U.K. deposits would still account for the majority of the deposits. But if I especially look at the Personal Banking division, the digital personal banking division, which today is a main division as far as the source of deposits is concerned. For that part, deposits from U.K. residents account for about 30%. So 70%, if you come from nonresidential. We don't have the exact breakdown by the country that we're releasing at this point, but a number of different Asian countries actually contribute to the majority of this non-U.K. deposits. That's not surprising given the fact that our main base is in Asia. So we probably have more Asian clients who know us better over here. So that provides an initial pickup in demand.
But we -- today, we actually have customers from over 90 countries, who have opened a account with us for our DPB, Digital Personal Banking division. And that's at least that will continue to grow. So the overall base of customers that we have from different countries should be something continue.
We have a question from Glenn on iFAST Global Bank. Are the majority of the new deposits coming in from existing iFAST customers or are there new customers?
Majority are, in fact, new customers. And in fact, in recent 2, 3 quarters, I think we're going to see an interesting trend where a number of customers will start off by opening the bank account at iFAST Global Bank. And subsequently, they actually open an investment account with us in Singapore and Hong Kong. And in a sense that it's a pretty positive deployment. There is intended positive effect that we would like to have for the group, right? So we see -- so we've been talking about having truly global business model. So by that, we actually mean that we can operate for a few centers, few financial centers, particularly, and we cater customers from different parts of the world.
So banking is actually a service that offers the simplest product, cash, right? So everybody understands cash. Investments, you actually find that, that tends to be something that's more difficult to develop cross-border, especially in the online way. But banking is actually simple because everybody understands U.S. dollar, sterling, et cetera.
So it's about them being able to open the bank account. And from that, then you actually find that some of that -- those days, we start to open investment account with us in Singapore, Hong Kong, et cetera. So that has been the positive effect that we have started to see and we believe that will be an effect that will broaden as we go forward.
It's likely that you'll see you to open up investment service to the bank just expanding on them.
We are already providing full investment of service through Singapore, through Hong Kong, Malaysia, et cetera. Within the bank, we don't see the need to directly offer investment service. Of course, we think that it's foreseeable that at some point, we may start to offer investment service in, say, the U.K. itself, right? That's possible, even though we don't have -- that's in the plan. Yes. So within the bank, we intend to keep that business strategy simple.
Benjamin?
Just a few questions, pretty quick ones. The first one, maybe I just want to clarify whether your Hong Kong guidance is including also so far or not?
The Hong Kong guidance is for the overall Hong Kong business. So yes, it will be including also.
Okay. The second question I have is on your dividend policy. I see that the last time the guidance was for increasing absolute payout this as your PPD growth, right? But how should we think about dividend going forward? Because I think last time you mentioned that you -- iFAST is planning to keep some capital for the banking business as well. But when I look at the capital ratios for the bank is very comfortable. The business model is also very conservative with limited lending products. So how should we think about the amount of capital that iFAST intends to keep and then also the dividend payout for the overall group?
Yes. So in the past, when we first were listed and we don't have a banking business, we felt that we can afford to have a rapidly higher dividend payout ratio. So back then, I think we're looking at around 50% of the net profit being paid as dividend. Then yes, in recent times, then of course, we started growing to the banking business and so on.
So we have to start a balance between having enough capital for us to material growth in a sustainable way and having still a good dividend policy. So if you look at so far this year, I think our payout ratio has been around -- is it 26% to 27%? Yes. So something along the line of 25% to 30% seems to be a good balance from our perspective and perhaps that can be decreased as the management thinking in terms of dividend policy at this point in time for the next couple of years.
Okay. Very clear. The last one that I have is on the U.K. bank. I think currently, you're making a 1% spread on your deposits. Do you think that you can keep this maintenance spread even in a lower rate environment?
So the -- yes, the spread that we have in our view is actually probably not the optimum spread as yet. And the reason is because we are new in the business, and we need to make sure that we are able to offer good value propositions to the client. That thinking, of course, to continue. But over time, we expect that as we launch new services, example, for instance opening the debit card, right? So that becomes -- once we launch that the service that we have relative to other mainstream banks, then you actually find that we've become a lot more interesting. Mainstream banks in U.K., so you find that when they open a current account, a large part of the cash is, in fact, offering no interest income.
So many banks actually have this practice of separating between savings account and current account. Current account is where we can use to make a payment that can use to for your debit card, et cetera. And for that, they either offer little or even no interest rates. But we feel that, that is essentially a way of doing business that dates back to the last couple of centuries. In today's world, I think customers will expect that they will be able to open a current account, use a debit card, user payment services and yet still able to enjoy interest rates that are comparable to what they can get from overnight savings account.
So that is the opportunity that we actually see once we fully develop our services. So going forward in the next couple of years then, we hope that we can in fact broaden the margin a bit.
With regards to whether the margins can be maintained as we hit into an environment where the Fed and Bank of England start to cut interest rate. I would say that as long as interest rates doesn't get cut to close to 0, then there should be the whole environment for us to still be able to combine a decent margin.
Got it. Sorry, just 1 more question, if I may squeeze in. Over the long -- medium to longer term, do you think getting a banking license closer to home is a possibility for iFAST?
We think so. We think so. We -- yes, Singapore is sort of -- Singapore is a place where the financial sector is one of the most open financial sector around the world. So both segments of financial sector, you actually find that MAS allow various players to come in and apply for license. The standard tend to be higher, but as long as you meet the requirement, then eventually, you can get the license. And that is the case for, say, stock broking for fund management, et cetera.
But there's one segment of the financial sector that is very much a protected segment. And from what I can see, it will continue to be a protected segment. And that is actually banking, especially retail banking. So we don't expect that having a full retail banking license is something that is achievable for iFAST in the foreseeable future. But having said that, I think that there's still room for us to look at in terms of the opportunity. For instance, there are many private banks in Singapore. And they do have a more limited [ carbon ] banking license. But that itself is actually something that can offer a good opportunity. So in time to come, we would like to be able to look at this particular opportunity if MAS give us that chance at some point in the future.
Okay. We have a few questions on the Wealth Management business. So let's go into that. So firstly, on what is driving the net AUA inflows, anything lumpy and which products? Is it just investor sentiment improving?
Yes, I think if I take the trend over the various quarters, then I'll say that the growth that we're seeing comes in the different product category. Yes, so be it unit trust or stocks, ETF bonds, I think these are all improving. So yes, we're seeing the pretty widespread growth for all the different asset classes. So no particular lumpy item to actually single on. There will be a bit of a lumpy item as we head into next year coming from, say, also but in the recent quarters and so no particular lumpy item. As to what is driving the increase in inflow, yes, as I was noting earlier, if you look at how the trend tends to be historically, you find that inflow doesn't come in a straight line, right? Because we are talking about the investment world, we're talking about financial market, there's a tendency for the inflow to sometimes fluctuate around.
So when the market conditions are better, then you start to find that the inflow start to improve and can improve very substantially. When you go into a period where the market conditions have been poor, the inflows start to drop off quite a bit. So when we hit into 2022, that was an effect that we actually saw where the net inflow actually start to drop off quite a bit because financial markets were very tough.
Even in 2023, I think we continue to see quite tough financial market in the China market and Asian market as a whole. So that's why we are not able to grow. But as the overall environment becomes more positive, then we start to see the positive effect of all the various improvement in services and the continued effort that we put on in terms of the business. So that is the way I would describe the reason for some of the improvement.
Glenn has a question on wealth management as well. So how much margins have improved on the AUA, in particular, which segments and products have improved the most or the least?
Yes. So maybe I'll just offer some color on this historical question. So I think for -- the way we look at the wealth management business is because we are largely a product agnostic kind of business, right? So depending on the size of various components of AUA, whether it's in UT, stocks, bonds, ETFs and so on. So we are basically -- the margins will be a function of those products. So generally speaking, cash actually has some of the highest margins in our wealth management ecosystem. And usually, stocks and ETFs tend to have a bit of the lowest. So we are talking about margin on AUA. Of course, in terms of any increases we have seen as the stock and ETF trading volumes pick up and you start to see a bit more turnover, then you'll see some improvements in those margins. But otherwise, by and large, across the board, we have not really seen any noticeable anomalies, I guess, in the margins. I hope that answers the question.
So the next question as why as B2C recurring revenue been declining for 2 consecutive quarters despite growing unit trust subscriptions? This is a from Kelvin.
Yes. Maybe I'll just offer a comment there as well. I think the B2C division versus the B2B, it tends to be a bit more focused on some of the newer products. So things like the stocks and ETFs and also on the bond side as well. So I think you will start to see a bit more focus on the upfront or transactional revenue. So we have seen, I think the B2C division having a bit more growth on the upfront side of revenue, whereas the B2B is still very much, I guess, still dominated by the Unit Trust business and also very much focused on the recurring revenues. So it's not something we are overly concerned about at this point.
We also have a question from Ryan, again, on the wealth management side. So is AUA growth in the B2B business expected to primarily come through new partner additions or growth in existing partners in the long term? And also a bit of a longer question. Could you walk through the process of adding additional B2B partners to the iFAST platform in Singapore? What does the go-to-market strategy look like? How long does it take for the partner to transfer assets onto the platform? And what asset size do target partners manage on average? And lastly, what are the demographics of the end clients on the B2B platform? Are they high net worth or mass market or?
So regarding -- yes, how the business -- the B2B segment will be growing. It will essentially be from both existing partner as well as new partner. I think that is something that continues to be the case. And so if you look at the B2B business, historically, our main B2B partner has been the independent financial advisers. So if you take Singapore, Singapore today -- Singapore today, we have over 100 B2B partners, of which the majority are independent financial advisory firm or financial advisory firms.
Within the financial advisory firms, then you should find that there are today, probably 7,000, 8,000 individual reps who are using our platform. So essentially, each individual rep basically, they're building a career out of increasing the revenue base that they have for themselves, especially when it comes to recurring revenue base. So individual reps, they basically aim to have $20 million, $50 million, $100 million assets under advisory, for instance. And when they build that, then they generate a certain recurring revenue on that assets under advisory under that AUA.
So every rep is trying to grow the AUA that they actually have. And every -- at a firm will correspondingly trying to grow the AUA they have as a firm. So as a platform, then, of course, we'll be working with all the different partners, then we will grow from that accordingly. So yes, so those are for the existing reps that are using us. Of course, we continue to broaden the number of partners that we actually have, so which is why I say the growth will come from the increase in AUA from existing partners as well as from new partners that we actually have. As I was mentioning, our traditional base of our partners have been the independent financial advisory firm. But as our platform services broaden, then we actually start to have different kind of partners that we actually work with.
For instance, in addition to just an independent financial advisory firm, these days, we actually start to work with a number of different securities firms who may actually use us, for instance, the bond platform because stock exchanges -- well, the stock market and stock exchanges, but bonds, there isn't a bond exchange. So for us as a platform that provides services that make it easier for securities firm to do the bond business, then that is something that is increasingly in demand. Yes. So the type of companies that use us actually broadens over time.
There's also some trend of globalization in a sense. For instance, we can have wealth management firms in Hong Kong, for instance, for advising their clients. So historically, maybe the bulk of the clients prefer to happy -- happy to have all the assets being custodized in Hong Kong. But these days, the Hong Kong advisers could very well be helping the client with assets in not just Hong Kong, but in Singapore as for instance. So as a platform that offer services in different countries, then we actually find that we have a broader base of partners who are actually using us, each adopting slightly different business model. And yes, so these are all the different examples of how we actually broaden the base of partners that we actually has -- so this slide that is on the screen shows the iFAST Ecosystem. The latest number is we have over 700 companies and over 13,000 reps, individuals who work with our B2B business.
Maybe to follow up on an earlier question about why is the recurring revenue for B2C see some decline. I believe on Slide 41 for the 9 months results, there's a decline of 2% right, in the recurring net revenue for B2C. Yes, we have to -- yes, so all hand, I think I'll say that for B2C, okay. So in the case of 2024, we're probably seeing a slight effect of the net interest margin on the cash coming off slightly from the more exceptionally high level in the previous year, but it's still at a very high and comfortable level. So that could have contributed to some of the reduction in net revenue. That's probably something that is one factor, but -- yes, but I think some of these numbers do fluctuate. But on the overall trend, that is a business where we continue to expect the net revenue to grow over time because the unit trust base that we have, et cetera, continue to grow.
I think Ryan has a bit more specific questions. Perhaps we could get back to you, Ryan on some of the details regarding the B2B side of the business on the client demographics, for example. We still have a few questions. So maybe we'll take some of the questions from Paul. Can you comment on the trend line for staff costs? Are you adding too much fixed costs if related to Hong Kong project?
I think for Hong Kong, we have the -- yes, eMPF platform that was launched recent times. So clearly, the number of staff have to increase quite substantially. We're still in the midst of ramping up the number of staff that we have handling this ePension part of the business. So that is something that is essentially needed to ensure that we can run the business well. Well, are we ramping up the too much? I'll say that we are ramping up in a manner that is required to ensure that we can run the business properly. That, of course, is a business that will bring us recurring income at least for the next 7 years and so on. So we certainly feel very comfortable with ramping up the number of staff and the cost that we have over time.
Ryan has a question on this. We have seen a worsening receivables turnover trend. Why are receivables on the balance sheet increasing at an accelerated pace relative to revenue.
So maybe I'll just take this question. I think it's worth highlighting what the receivables are in relation to the business that we run. I think for a good number of years, these receivables have been quite straightforward. It's just a wealth management revenue with the business partners, fund houses and also client fees that we collect. So that's the kind of receivable situation. I think in recent years, the addition of new businesses and services have made that receivables number increase a fair bit. So one, of course, is the Hong Kong ePension project that we are working on in collaboration with our ECC [indiscernible]. I think that's a very sizable project. And of course, there are some receivables related to that part of the business that sits on the balance sheet.
There's a second part, which is something we talked about, I think, in the previous update on the growth in the margin financing business. So that also is receivable. And clearly, as we grow that part of the business, you still see this number increase if clients don't pay down the loans and continue to grow that segment of business with us.
There's a third part of business, which is also on the bank side, where the bank, in addition to the DTB and DPB business, on the remittance business, the bank does have a need to prefund certain sums of money and make those sums of money available for customers who want to send funds from one point to another point. And when those funds are sent, then the bank also starts to accumulate a certain level of receivables that are related to the size of remittance business that the banks wants to do and is comfortable doing. So if you put all those figures together, I think you get a sense of why the receivables on the balance sheet have increased since, I guess, if we look at the business versus last year or even the year before. So I hope that gives some implication on how to look at some of the numbers that we have.
Yes. We still have a few more questions, but maybe just pause for a minute to see if anyone here would mind to ask a live question.
I have a few questions. You also increased uptake in the U.K. bank 100% recently, I think GBP [ 4.5 ] million [indiscernible]. Second question relates to, you also set up a subsidiary company [indiscernible] and lastly, the $100 million bond issue right now, any purpose on the bond issue and will be looking at more issue in the coming year.
So the first question regarding us increasing the stake in iFAST Global Bank to 100%. That, in a sense, is something that we have planned internally at some point. So when we bought the bank, we entered into the deal together with a minority shareholder who was actually in a sense, instrumental in bringing that opportunity to us. So we went in together with that particular individual. But yes, the ongoing running of the bank is actually done within iFAST. So we had expected that at some point that we would want to sell the stake. And of course, for us, we certainly want to, at some point, increase the stake fully to 100%. So recently, it was a good time that measures the requirement of both U.K. and us, this when we bought shares now [indiscernible] 100%.
The second question about the new Malaysian subsidiary. Okay. Yes. So yes, the Malaysian subsidiary, yes, I think we call it iFAST [indiscernible] Malaysia. So if you look at us as a group in recent years, you actually find that we start to look at some payment-related kind of services. I think the -- particularly say, debit card in Singapore, we have the debit card business. U.K. we have a debit card. So now that we are a bank, that payment becomes part and parcel of the business of a bank. So beyond just the bank itself, I think for the platform side of the business in Singapore and now we're looking at Malaysia as well. So there's some sort of related adjacent services, we call it in payment that we actually want to give. So that's the reason why we have incorporated that subsidiary. So then we will be applying for some of payment license.
And the third question is regarding the $100 million bond. Yes, we raised $100 million in June. And the main use for the proceeds of the bond issue has been -- as additional equity capital in the bank. We find that for us as a group, as we progress further in order to have a more optimal capital structure, then one of the things that we could actually do is to tap into the bond market because the bank as we grow, then we will need to increase the equity base. So we find this to be a good effective way of yes, raising the capital. And yes, so I think today -- so in our case, the cost for that for us was about 4.5%, coupon was 4.3%. So we feel that there's a reasonable cost for us. So on the overall weighted basis, I think that is...
So as we've also disclosed, when we raised the bond issue, we use it for capital injections into the bank as well as for working capital refinancing. So we're also going to get paid down some of the outstanding borrowings. So you also noticed that our bank loan position since then, we have also reduced that.
We move back to a couple more questions in Q&A box. So [ Rupam ] is asking whether we should be comparing our iFAST Global Bank more to the likes of Wise in revenue, et cetera, as a core is to compare it to Singapore banks because of a more global business model that we've been talking about. Have we done any kind of benchmarking with these businesses, for example, where do we stand on the speed of fund transfers, interest rates, offered currency conversion rates.
Yes. When we show those numbers on the regulatory ratios and so on, so it isn't really our intention to compare our overall business model to the business model of the local bank. The main point that we actually wanted to deliver really was that we're keeping our regulatory ratios very comfortable for iFAST Global Bank. We intend to have ratios that are well above the overall requirement. And we thought that, putting some of those comparison to local bank is one way of showing that at this initial point. So that's the main reason why we make that comparison rather than comparing in terms of the overall business model.
But I think your point about some of the businesses like Wise and so on, I think more relevant comparison. I would say that, yes, in a certain aspect of it, I think that's starting to be something that will increasingly study. But for this particular point, it's just delivering the message that we are ensuring that we have a very strong bank that is really the message.
Richie has a question on the EMI market in U.K. and Europe. How big is that market size? So EMI here stands for electronic money institutions? And how is iGB reaching out to them, especially in U.S.?
The EMI market is that in U.K. is quite a sizable part of the overall industry. That is actually today the source of the main group of clients that we have for our digital transaction banking business. So the DTB business, we actually launched close to 2 years ago. And the group of initial clients that were built up are mainly the EMI. So that has formed the initial part of the growth for us. But of course, for the digital transaction banking business, we believe that the potential goes way beyond EMI. And yes, it's a business segment where we will continue to broaden the base of customers that we actually.
Richard also asked us on the progress of direct links to U.S. markets and the setting up of payments network.
Direct link to U.S. market, yes, we have been applying for the licenses. The 2 main segments of the application. One is getting the broker-dealer license. And the second part is Jimmy was the name of that -- so we have gotten approval for the first part. We are in the midst of working on the second part, right? And setting up of payment network.
I suppose probably related to the payment applications that we talked about.
Right, right. Yes. So in terms of payment, so as I was mentioning, now that we are a global digital banking and wealth management group that payment becomes something that is increasingly important. We already have some payment services that are actually quite well developed for the remittance part of the business, for instance, the easy remit that caters to lot of partners in the Middle East, and that allows almost instant payment to be made from the bank to at least, say, 70 countries. So that easy remit part of the service has been incorporated into our digital personal banking division in recent months. So that will be something that will help to make a difference as we move on, right, help to deliver on our vision of a global digital bank.
Of course, that in itself is still work in progress because there are still many parts of services to be delivered. The other part of the payment, business will be the debit card. So that is actually work in progress as well in different places, including U.K. That's something we expect to launch in a couple of months. Within Singapore, we have been working on getting further licenses so that we can develop it better. In Malaysia as well, we're actually working on that particular application as well. So these are all the different things that are ongoing as we try to broaden the overall level of payment-related services that we have as a group.
From Jonathan, any intention for iFAST to start SBL business borrowing and lending monetize shares...
We don't have this as an immediate plan at this point in time.
And more questions in the Q&A box. So we'll go to Ken's question. On China, can you remind us on what's the current strategy? Is it similar to the rest of the markets? Will there be a change in strategy, assuming the market activities pick up going forward?
So on China, the key thinking really is that, yes, we want to be able to grow the China business, both onshore as well as offshore, offshore really tapping into the offshore money, offshore Chinese money that are already there. I think while we have been growing our Singapore businesses quite a bit, but I think we are probably not capturing sufficiently of the offshore business that are already there. I think the banks have managed to capture it much better than us. But certainly, we look at the China business in relation to the overall strategy, onshore, offshore. And yes, that is something that will allow us to grow better as we move on -- and onshore, the group have been working on controlling the overall cost and so on. So that have actually made some progress and that have allowed us to reduce the overall losses that we have actually incurred for the China business as a whole. So yes, going forward, I think cost control will very much still be something that will be the ongoing effort while we expect revenue to start to grow better as we move on.
Okay. The last question in the Q&A box is from Alan. Any other geographies we are planning to enter next for our wealth management platform?
We don't have any immediate country that we're planning to enter into set up the platform, basically as of now. I think in recent couple of years, you'll find that increasingly, we're talking about the world as a geography effectively because we talk about truly global business model. So the more immediate focus that we'd like to buy for on in the medium term will be this concept of using the few countries that we are already operating in to tap into customer base from all over the world, and that will allow us to have a more scalable business model.
Thank you, Chung Chun. Any more questions perhaps the last one from -- if not, we'll wrap it up here. So thank you so much to all of you for joining us for the results presentation. Have a good day.
Thank you.