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Oversea-Chinese Banking Corporation Ltd
Earnings Call Analysis
Q1-2024 Analysis
Oversea-Chinese Banking Corporation Ltd
OCBC Bank had a stellar first quarter in 2024, achieving a record net profit of SGD 1.98 billion, which was 22% higher than the previous quarter and 5% above the prior year. This strong performance was driven by a combination of higher total income, controlled expenses, and lower allowances. Total income rose 11% quarter-on-quarter to SGD 3.63 billion, led by a 47% increase in non-interest income to SGD 1.19 billion. This significant improvement was mostly attributed to higher trading income and an increase in income from the insurance business.
The banking operations segment delivered a net profit of SGD 1.72 billion, a 15% increase quarter-on-quarter due to improved operating profits and lower allowances. Compared to the prior year, this segment’s net profit was up by 3%. Net interest income for the quarter stood at SGD 2.44 billion, growing by 4% year-on-year, while the net interest margin (NIM) was stable at 2.27%. Despite a shorter first quarter, the banking division maintained its strength, supported by a 1% growth in loans and sound asset quality.
Wealth management was one of the standout performers, with income reaching a record SGD 1.29 billion, up significantly to contribute a third of the group's total income. Assets under management (AUM) grew by 4% quarter-on-quarter to SGD 2.73 billion, driven by net new money inflows and appreciating asset values. The biggest boost came from increased wealth management fees and higher customer activity across diverse segments.
The insurance arm, through Great Eastern Holdings, doubled its contribution to the group's profit to SGD 216 million, making up 13% of the total. This surge was due to better investment performance and favorable claims experience. Insurance sales saw a notable increase both quarter-on-quarter and year-over-year, underscoring the healthy growth of this segment.
OCBC Bank maintained a strict cost discipline throughout the quarter, evidenced by an improvement in the cost-to-income ratio from 40% in the previous quarter to 37.1%. Although variable compensation costs increased due to higher income, the bank successfully contained discretionary expenditures, reflecting their efficient management and strategic investments in franchise and personnel capabilities.
Asset quality remained robust with the non-performing loan (NPL) ratio stable at 1.0%. Credit costs were benign, and allowances were prudent, ensuring high levels of NPA coverage above 100%. Loan portfolios were well diversified across different geographies and sectors, with a growth led by higher corporate and consumer loans in Singapore and the UK. Sustainable financing loans also grew significantly by 34% year-on-year, reaching 14% of the group's total loans.
The Common Equity Tier 1 (CET1) ratio was strong at 16.2% as of March 31, 2024, slightly up from the previous quarter due to profit accretion. Even after accounting for the dividend payment, OCBC expects its CET1 ratio to remain robust at 15.3%. This solid capital position places OCBC in a strong position to support future business growth and navigate uncertainties, ensuring sustainable shareholder returns.
OCBC Bank continues to invest strategically in both organic and inorganic growth opportunities. The recent acquisition of PT Bank Commonwealth in Indonesia and ongoing investments in digital capabilities and people underscore their commitment to sustained growth. Looking ahead, OCBC remains cautious given global uncertainties but is optimistic about the resilience of key Asian markets. They are on track to achieve an additional SGD 1 billion in revenues this year as part of their strategic initiatives announced last year.
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We have 2 big announcements. The first announcement is on our results for the first quarter 2024. The second announcement that we made this morning is for our general offer for Great Eastern. So there will be 2 segments of today's briefing. We will do the first segment on our results first, and we get that as that we win, and then we will then proceed to the offer for Great Eastern. So therefore, any questions you may have, may I seek your understanding to hold it off till we're done with our results between. So because of the general offer, I need to say this, we are governed by the Singapore for takeovers and mergers. So in order to comply that, we're not able to give any additional information beyond what [indiscernible] read in all our documents in the actual announcement. And present with us is our financial adviser for the offer, JPMorgan. All right. So we will start with our results. Our CFO, Chin Yee will take us through the results.
Thank you. Good morning to everyone. Thank you for taking time to join us at OCBC's First Quarter 2024 results today. We are pleased to report a record performance for the quarter. I will now share the highlights of our results. For the first quarter of 1Q '24, we achieved record net profit of SGD 1.98 billion, up 22% from a quarter ago. This drove our return on equity or ROE in short a year to an annualized 14.7%. The quarter-on-quarter rise in our group net profit was underpinned by 3 main factors. Firstly, total income reached a new high. Secondly, expenses were well controlled. And thirdly, allowances were lower. Total income grew 11% Q-o-Q to SGD 3.63 billion. Net interest income was SGD 2.44 billion, 1% shy of the previous quarter's record level, largely due to the effect of a comparatively shorter 1Q. Noninterest income rose 47% to SGD 1.19 million driven by higher corp trading income and increase in insurance income. We continue to exercise strict cost discipline with [indiscernible] income ratio improving from 40% in Q3 to 37.1% this quarter. Loans grew 1% during the quarter and portfolio quality remains down. Credit costs were benign at 16 leases times. Our strong balance sheet position was also maintained. I will share more details in the next slides. Drawing your attention to our group net profit of SGD 1.98 billion, this was 22% higher than the previous quarter and 5% above the prior year. Our banking operations and insurance businesses both performed well for the quarter. Moving on to Slide 5 and elaborate more on the performance of our key businesses. For 1Q, '24, our 3 key business pillars of banking, wealth management and insurance continue to deliver resilient performance. Banking operations net profit was SGD 1.72 billion, up 15% Q-on-Q from an increase in operating profit and lower allowances. Compared to the previous year, net profit increased 3%. Wealth management income rose to a record SGD 1.29 billion and contributed about 1/3 of the group's total income. Assets under management grew 4% Q-on-Q to SGD 2.73 billion, led by net fee money recurs. While net interest income has more or less peak in line with the interest rate enviable, GEH profit contribution to the group doubled from the prior quarter to SGD 216 million and comprised 13% to group's profit. This was driven by improved investment performance and claims experience. Insurance sales were also higher Q-on-Q and year-on-year. We have a diversified franchise, this enables us to deliver balanced earnings growth through economic cycles. We continue to maintain our strong balance sheet position. This takes us in a firm position to support franchise growth and tender uncertainties. Moving on to more details on our performance trading come slightly. Net interest income for 1Q '24 was SGD 2.44 billion, up 4% from a year ago. Compared to 4Q Q3, first quarter of 24% was a shorter quarter. On a day-adjusted pages NII was steady against both Q's record level as seen SGD 5 billion increase in average assets compensated for more duration in net interest margin or NIM. NIM was 2.27% for the quarter, and asset NIM or market was also 3.27. Noninterest income for the first quarter was SGD1.19 billion, rebounding 47% from a quarter ago and up 17% year-over-year. The improvement was underpinned by higher fee, trading and insurance income. I will share more details on our fees and trading income in the next few slides. Fee income for 1Q '24 improved Q-on-Q and year-on-year to SGD 479 million, led by increase in wealth management fees. As observed in the chart, wealth fees rose to the highest level since the start of 2023. Customer activities increased across our devious wealth segments as we saw higher demand for wealth management products such as structure deposits, structure, products and unique trust. Trading income surged 45% year-on-year and 67% Q-on-Q to a record SGD 317 million supported by an increase in both customer flow and noncustomer flow income. Customer floor income reached a new quarterly high, driven by both corporate and consumer segments Cost-to-income ratio for the quarter was SGD 37.1. This reflected our continued strict cost discipline on discretionary expenditure. The increased variable compensation associated with income growth, same costs were higher Q-on-Q. We continue to be focused on investing in our franchise and people to build capabilities in line with our corporate strategy on asset quality. Our asset quality remains sound. NPL ratio was 1.0%, lower than a year ago and steady against the previous quarter. Allowances for the quarter were SGD 169 million, 9% below both Q. Other credit costs for the quarter were an annualized [indiscernible]. The group's cumulative allowances rose for the quarter as we continue to prudently set aside allowances. NPA coverage ratio remained above 100%. Our loan portfolio continued to be well diversified across [indiscernible] and industries. Group loans rose $12 million from the previous quarter to SGD 301 million, driven by higher corporate and consumer loans. Hydrography the increase in loans was led by growth in Singapore and some of our overseas markets such as the United Kingdom. In line with our corporate strategy, we are focused on supporting our customers' sustainable financing needs. Sustainable financing loans rose 34% year-on-year and 12% Q-on-Q to SGD 43.1 billion. This comprised 14% of group loans as at 31 March 2024. Customer deposits were up 2% Q-on-Q to SGD 317 billion as at 31 March 2024. We will continue to adopt a proactive approach in optimizing our balance sheet and visibility. Loans to deposits ratio was steady Q-on-Q at about 18%. Moving on to my final side. We maintain our strong capital position. CET1 ratio was 16.2% as at 31March in 2024, up 0.3 percentage points from the previous quarter, largely from profit accretion. Risk wider assets, our RWA in short rose Q-on-Q, largely driven by higher credit RWA in line with loan growth. On a pro forma basis, CET1 ratio would be 15.3% after paying our 2023 dividend later this month. Our capital hedge group places us in a strong footing to support business growth, navigate uncertainties and deliver returns to shareholders. With this, I end my presentation. Thank you for your attention. I will now ask the floor to [indiscernible].
And good morning again, and welcome to our office this morning. We have a group of our representing shareholders' interest and also the media with us so good to see everyone. We also have people online, I believe. So good morning to all again. So following from what Chin Ye has just said through the presentation slides. I just want to -- we kept that we started 2024 with a good update. So total income, net profit don't need to repeat that. It is at record highs. ROE also improved from the previous quarter to 14.7%. So our business do well, and this is reflected in the operating performance across banking, wealth management and insurance insurance pillars. Our venture operations achieved record net profit and wealth management income reached a new high as well. AUM grew SGD 10 billion this quarter and wealths were also up. Total contribution from our insurance operations improved significantly and sales -- insurance sales were also higher. This reflects again the strength and quality of our diversified franchise and progress we made in our strategic initiatives, which I will touch on a bit more later. On NII, can you talk quite a bit about it a shorter quarter with loan growth and a bit of beginning in the margin. So we are rather flat on NII, but this is, of course, compensated a lot by the interest income. We continue to be very focused on going on local. We added four billions of note during the quarter as we continue to support our customers in Singapore and also in the international markets. We focus on growing fixed rate mortgages as well and being put in interest rate hangers to lock in current times. Continue to optimize our funding base. We are pacing deposit growth with loan growth and strengthening our deposit franchise. This has allowed us to preserve our first quarter line quite well, as we said earlier, and its interest rate cuts are less than earlier expected, this year, 2024 Liv could come in at the higher end of our range of 2.2 to 2.25 target. Noninterest income set earlier 47% up against the future quarter, and fee income were higher. Trade income jumped 67% to hit a new high on the back of Recopcustomer broad income. So that is very important. And that is part of how we realize our strategy in building more income in trading through working with the relationship teams with our clients. And we have been keeping quite a tight control on expenses and cost income ratio improved to below 40%. And of course, we continue to invest in our people and also in our digital capabilities. And I do from time to time, talk about to the media in particular, about our investment in people and what amount we invest in order to continue to allow our people to develop. So we're also obviously constantly monitoring our loan portfolio to detect any portfolio or potential concepts. So we're comfortable with our book, I want to reiterate that asset quality is sound. NPL ratio was steady from the previous quarter at 1%. And -- but we always remain prudent, especially in the current environment. So we maintained our credit allowances and coverage ratio, and that is at 146%. Credit cost target continue to be 20 to 25 basis points this year. Looking ahead, we'll be joining the page. We've seen some recent economic indicators looking more favorable. But nonetheless, we have to keep a close eye on what is happening in the world. Of course, there's heightened geopolitical risk as ongoing wars in the Middle East, East and Russia, Ukraine, being a concern. And indeed, we have a number of our coming key elections around the world. We continue to be positive, though on the resilience of our key markets in Asia. Our corporate structure has a strong focus to capitalize on the vice opportunities in this region. We have been seeing good results from the tight execution of our strategic priorities. Remember, we refreshed our corporate strategy in 2022. We talk about our growth areas. And last year, midyear, we also announced that we aim to deliver additional $3 billion revenues based on the initiatives that we design and that we identify coming out of the corporate strategy. So 2023, we realized around SGD 500 million, may be on target. So this year, we're talking about meeting one side of it, SGD 1 billion this year. And we are tracking well, and this has actually contributed to our record performance for the first quarter. So what else, right? I want to share with you that just last week, I was in Jakarta, we completed our acquisition of PT Bank Commonwealth. I think we called PTBC. We did a tap wall in that bank, and the integration is starting. So we hope to be able to integrate this bank. At the moment, they are a subsidiary of our Indonesian bank, but we hope that we'll be completing the integration, taking the people, taking the customers by -- before the end of the year. This provides more than 1 million customers to our bank in Indonesia, and there is not a lot of duplication. So we are quite happy to gain a new customer base and also to indeed have more product capabilities that can be shared and can be integrated with what we have in Indonesia and offer to even bigger has a population of customers. So to conclude, we had a good start and gives us a solid bank to deliver on our targets. Our strong balance sheet position provides us the flexibility to capture growth opportunities to buffer for uncertainties and the capacity to deliver on our 50% dividend target payout ratio. Thank you. I think we will move on to Q&A and just -- I think I'll pass it back to Chin Yee.
Questions on results [indiscernible].
I've got 3 questions. The first is to do with nonoperation. But you're still sticking to your low single-digit guidance for the year. If you accumulate 1% every quarter that gets kind of up to mid-single digit and one would expect the second half of the year should be better given the whole rate decline environment. So are you being conservative on this? Or that's my first question because you haven't changed the guidance. The second is in terms of new NPEs over as there's been great job. So I can get some color on which markets or in the specific sectors, so it's asymptomatic and across the border. That's what. Third is on allowances. So again, the guidance is unchanged. So if you were at 16 basis points for the first quarter, would we expect for the remainder of the quarter to be at the high end of year 2023.
Okay. Loan growth, I think the market is still very certain. We were pretty, very hard to deliver the growth in the first quarter, but loan demand has not been lowly size of the pricing. But of course, we are watching very closely. We do see around the world, I think, China in the way starting to come out of a low inventory situation. So that indicates that we can look at potentially growth in trade, in particular, between China and Asia. But again, we say that uncertainties do that. We haven't helped customers saying that they are coming back to do major investments into that business yet. So you can say we are more on the prudent side. But I think second quarter can tell a lot, yes can tell a lot. And of course, whenever we look at our book, they're constantly repayment of the book, right? So it is not like it would always be growing very fast because you have to go to replace what is prepaid. So, I think we try to be prudent. It doesn't mean that we don't work hard on it. But at this point, we don't see that is a very high opportunity to say that change it to mid-single digit as yet.
Yes, a follow up on that as -- so what you saw in the first quarter, was it what is it more like...
We have seen some... Resins. Yes, that... Right now is after a Trade a typically short term. So we have seen some pickup in trade loans. We continue to be successful to do refinancing that would be set we keep our loan book, not losing the customer, right? And we have taken some new customers as we perform on our corporate strategy. So we see some results or some new drawdowns, but it is a very competitive market out there, I have to say.
Not munching FDI related or?
Not so much on FDI related. I think we see a lot of flow of well into Singapore. Together with that, we see people looking for business opportunities. But initially, if you see flows into this part of the world, they're not asking for low bars. They are looking for the business. They are building up a team looking for investment opportunities. We bank them with providing the banking service and the FX. So that benefit customer flow quite a bit. Yes. But it will be later on when they find what they want to do as they begin to build the work. They're bringing capital to us. And then may be late to all, they would look for a borrowing.
Sector?
Sector if you can, we have one in services, and we have one in investing. And allowances, yes.
Okay.
So allowances, we -- as we say, the ones have been certain, again, we want to see into the second quarter to see how the allowance is going to be like. But in a way, we still continue to hope that we maintain a very simple, that NPL ratio is not rising for us. I mean it's our duty to protect our book so that we continue to generate the returns to our shareholders.
I'll just ask about the well performance. It's obviously a very strong sort of fee performance. Wong, did you quantify the net new money in quarter range and if you didn't [indiscernible]. And then can you just talk about what's booming that what is customer appetite for the type of products are driving it? Are you seeing that continue in the second quarter?
Thank you. We do see that new money because as we said, this is across our whole wealth portfolio. We always talk about when you talk about wealth AUM. It is the higher end of our consumer finance customers and also basically down Singapore. So we see that new money coming in this quarter. And of course, part of the AUM growth of [indiscernible] is also due to some of the rebate in the value of the portfolio.We do not see a big chunk in leveraging, so I think people are still cautious about the market, right? So this comes, as we said, across both the BSI and the bank side. But we do see while we're not meaning as of the market has become more favorable, we do see more action among our customers. So I think that reflects how we have been going well in.
What about net new money. If we look at it as Pecos and wealth business, about A6 billion . Well new pool...
That money... And grow faster because that is increase...
Market... Market impact...
Is this in Singapore dollar?
Singapore dollar.
Yes.
[Indiscernible] How much time do we have today? Because I think really short of time if you're going to cover the GE as well later.
So we hope to end by 10:00 for results.
I think it might be very short. The quick questions reading...
Talking about the question you will move to what offer, but any other... Ads or results
No questions on results. Yes, go ahead.
Yes. Was pretty strong $330 million or so. Is that sustainable? Because I think some of the comments that you made suggested that you made some efforts to improve that? Is that a number that keeps us in? Or is it one-off.
Well, I hope that customer growth would [indiscernible] because as we said, the last 2 years sitetebody working together so much more closer. And we are able to actually serve our customers across more markets as we create everybody to get as said. So that reflects quite a bit on the initiatives when we said we see incremental revenues for the group. So I hope it will stay that way. But again, customer flows also depends on the emotive had on the business as well.
The fee income, it was a pretty strong quarter this quarter. But if you put it in a historical context at if you look at the OCBC overall fee income, it hasn't actually changed much since 2017, 2018 is roughly the same time.
In the proportion to total income.
Absolute number. It's very similar if you look at it on an annual basis. And when I look at it Bond yes, you're 30% higher, 50% higher. And obviously, a last part of it is coming from the Citi business that we acquired in the last few years, right? So my question is like, are you planning to go down the same route because you do still have a lot of excess capital. And I think even this GE acquisition doesn't really change that picture materially because we still have a lot of excess capital. And I don't think there's a very clear plan to return the capital to shareholders. So that's the route that you're seriously considering because that will capture up with the peers in terms of peers.
Okay. I think there were years where the market -- where the equity market and the one market that we use the reversion. So you'll see a lot of this coming into very active of our well customers that they talk a lot of the investment trading leveraging up and all that. So we see COVID has brought that down generally, but we are beginning to pick it back up. But if you look at the market today compared -- the sentiment, the markets today compared to those users, I think it's still very much behind, right? There's a lot of uncertainty in the market now. I mean when we have higher fees, don't we don't have wars in a way in the world. So what we are doing is we will continue to bring in more customers and make our whole wealth platform even better. We'll talk a bit about that when we talk about the Go later. So in order to build a truly leading wealth management business, and that should be able when opportunities are there, we capture more of the business compared to the past. So that is what we're working on.
I mean organic growth in...
No, we -- I never say only organic -- in the past, we always say we look at inorganic opportunities, right? But they have to be right. They have to be like there has to be competent to what we have. So when I talk about CPA OCBC last year, it's small, but it fits very nicely into the Indonesia business. It's not a huge amount, but they do have more than 1 million customers. But of course, they are retail and SME base, but does actually strengthen the emulation business. It is inorganic because we are acquiring additional portfolio and people. I don't know how you call the offer for GE, is that organic or inorganic? To an extent, it potentially is inorganic because you're making an investment, right? So -- but we think that's the right thing we want to do. So I will continue or we will continue to look at opportunities in the market. Of course, there are always option building the business faster, which we have -- we havve done. We have been beginning to do much much better. So organic will hit the capital, if that is right, inorganic, we will also look at it.
Okay. New questions from maybe China.
Just one sorry, certainly saw many questions arose from what Helen just said. Just to be 200% sure, you are saying that you are not excluding inorganic opportunities.
Yes, we're not including.
for wells, right? No for... Things that shuts the group. Not as one. Not just for well...
Okay. I mean PBC is not... It's not just well, it is also SME. They have a good auto financing proponent.
But I mean like are you done with acquisitions in Indonesia with CBA?
If we are looking for opportunity, we will continue to the opportunity in the Indonesia. Because these are core markets, I talk about core markets, right? So Singapore, Indonesia, Malaysia, China. These are the core markets.
Yes. But for Commonwealth Indonesia, which one is more important to dig through.
You cannot say one is more important than the other because they both fit in our strategy. It's that if the more opportunity comes up that you make us look at it to say, this is the one time it's more important. Maybe that's the wealth opportunity come up first that actually fit us, right? But again, capital, we have to manage our capital. So how do we put the capital to work? We know how much we can spend. We know how much we need to continue to build our organic businesses, with our plans and our targets. So the rest is leading to what opportunities come up.
I'm just going... So in the SDG 3 billion that you talked about last year, was it based just on the organic, this is your organic growth. Is that right? You say you have 2 bit [indiscernible].
Yes. Okay. Organic means we are doing a lot of things, including -- of course, you're putting in more customer looking into a new economy, looking at sustainable financing, which are quite strong at, we are sticking into deeper our customers' wallet, meaning by improving ourselves to serve them better, they give us more business, right? So this, you call organic. But it doesn't actually take away potential as we manage our capital, what that will bring along for that $3 billion. But yes, there's no -- because you cannot just say this is an opportunity. We said we would actually get it and then put it into the billion... No. No, not like that.
Because you had this flow business, you want to be a close out of China into distribution. So how much of the sweep bidding is likely to come from that? Or would that be over and above this additional...
We can't break it down like because when you identify, you have to think about what capabilities you have. You look at all the markets we're strong there. You look at the economic growth. So of course, in terms of flow, we see a lot of China flow, right? But you cannot just say that because China flow is this amount, we're going to capture this wallet, and then this is the amount. It is not like that. It is on how our teams all think. If we do this, we can make this investment, for example, into payments, into the payments capability, right? Then we will be able to serve more customers. We know there will be more customers. I think that's a sure in China, not necessarily. Because domestically, if you look at what we have announced in the past, we also have gained a lot more traction in serving the Singapore companies in payments. And some of it is SME, right? We know that if we sharpen our SME offering, our digital proposition to asset means, then we can apply it very much faster in Singapore. But for some of the clients coming into Singapore from China, they can be classified as yes. But you don't then go and say, we must have shipped so much so much in China because it's more about what products we can offer, what customer base we can tap into and the growth in the economy.
Can you make this -- you mentioned that the credit cost in the first quarter came from real estate, is it CR commercial real estate? Or is it a residential -- and was it a component [indiscernible].
It's not in some time, it's Asia last year, but not Singapore.
Pik Kuen, I have one more question. Asking about the...
I answer the question, I'm not --
Because I noticed in the last quarter, your RWA fell quite a lot, but it went up quite a bit this quarter. Is it because of the loans you took on...
Yes. Is in line with the loans.
Maybe 2 questions relating to real estate on the reimplement of this site. So for the business in segments we been the problem in a week sense because they will come to your sort of initial portfolio suggestion. And then secondly, when you develop the site or a hospitality from foreign residential component and will be tapping on some of the incentives like CVD incentive schemes, strategic development incentive schemes, these are my 2 questions.
You really look into it very [indiscernible]. That question. We are indeed exploring a possible redevelopment of this side. I mean when we set this slide, it will be this side, right? We have a few buildings on this side. So -- but the purpose is to rejuvenate the area, right? And this is a strategic area in the central business district. So -- but any redevelopment plans being explored, we will want to improve statin, which have a shooter. So that is what we want to do. This is, of course, a highly recognized number. So while exploring, that means we will talk to the authorities. What can we -- what we have to do if we develop this. Of course, there is guidance from government on the rejuvenating in this area. So we will follow those requirements and guidance, right? So this is what we are exploring now meaning thinking about what we can do, what we have to produce if we ability to be development in this, whether it is required to produce residential. I mean you read as much as what we understand, right? So this is part of the things that we are doing at the moment. So there is no certainty that our -- how we exploring this will say that will result in a very fast plan to say that this transaction will take place. When we actually have reached that stage of position, we will otherwise [indiscernible]. But we are still at the stage shop exploring what we can do. And you can imagine that this will be a very big project. And this is, I call it, [indiscernible]. So you're talking about with the possibility of the rate, of course, we look at all options. At the current plan, we don't have a plan for a rig. And I think which you do understand that you have to inject the buildings into the rig, right? And then it will be run by management. Or when we develop this, we still want to own our properties. This is to continue to own properties in the rejuvenated area. That's how we look at it and also to hedge our -- against future rental in. If you put it in the bridge, obviously, the bridge has to independently manage that property.
Do you think it is [indiscernible] so is it still possible to get another 30% [indiscernible] 10 million...
We can't comment on that. We're exploring it with discussing with authorities, right? So not I'm sure we finish that plan, we are starting what we can do. We really cannot say what we can do.
Okay. Yes. Your ROE targets for this year is actually being 3% to 4%. But I mean this quarter is obviously a -- so are there any changes to your target in [indiscernible].
So I think we will also mention our when we talk about the offer. So with what we have seen in our first quarter performance. At the moment, we see that this year will be towards the high end of that 13% to 14%.
Do you have any more questions on results? Yes, Mellisa.
Yes, can you talk a little bit about your hedging that you have done, could share a little bit more detail about how [indiscerniblle] hedge. We'll continue to do that. And then when we do see intrest rates fall, what is the new sensitivity to your NIM? So what are you expecting for 2025 on that NIM? I have one last question.
Okay. On hedging, as part of our rebalancing of the balance sheet, we will look at the foldable cash flow hedging [indiscernible] filing. And sat debt ot here, and then we continue to add on to that. On NIM sensitivity, 10 basis points will be about SDG 5 million to SDG 6 million.
What about basis point for the one appears to [indiscernible].
Yes, it is based on -- is on 4 major countries.
Do you have it for a... In comparison bid-specific...
There's a parallel shutdown for major currency, so 100 basis points, right? So the 1 basis point it translate to SDG 5 million to SDG 6 million...
Then maybe just going back to the follow up question. I guess one question now that it's a bit net glass versus your credit card saying. Just wanted to understand your thoughts on it. Like, what you're going to do about it. Are we going to give it as such on the tensions to [indiscerniblee].
Yes, on credit cards, we do realize that our clear submit acquisition in that space. So in terms of numbers, we are behind them. So -- but whenever we look at credit card, is part and parcel of the whole customer proposition. If you look at cards fees, card fees is one thing, but a very important thing is the merchant side. If you acquire the merchants and then of course, that will be other things that is actually included in the SM portfolio, right?If you look at whether you fill a loan based on the credit card, that will be analyzed. So it's not shown on the fee side. But yes, we do recognize that our criticized business is smaller than we do thanks on it. Every day, we're doing things on it. But I mean, seriously, they did acquire portfolio. So when you say you want to chase them up and other than doing better in your services and increase the account number, it does not say that you can have something that turn and very good to say that we will certainly increase our criticized credit card business that is equal to our place. I think I just have to be factual about it.
Okay. Just one question not related to results from ultra operators. Chi n Yee you have recently been highlighted as one of the potential strong entities for HSBC's CEO. What is your view on that? Will you give the job a try?
That is something so personal. Otherwise in the OCPC, gathering not should be scary. But I do want to -- I don't want to take this question because I have been asked by some of my friends, okay? So if you read -- I don't know whether you read one particular report which shows a ranking of the candidates. I just think that -- they rang the possible candidates and one-off them on the list. So this is like something like 7 people, and I'm one of the 7. And this -- we somehow rank do a lot of research somehow, but I think it's just judgment. So they rank you according to understand of Western culture, understand of Asian culture, your management expertise, your what else, your wholesale banking expertise and then loan availability. So they put you in a scale of 0 to 5.So I came rank top, okay? I can rank 5, it doesn't matter. We don't they rely to on availability. Now starting my friends, availability, many are able to do that job. So 5 is the top they rank me to. So they recognize that my availability is quite low. And they recognize that I mean whoever is doing that table. So I said I'm going to amend that relative to 0... I'm not available for that job. Sorry, but that is the answer.
[Indiscernible].
Well, I said I want to choose that to 0. No matter I score 5 over everything on my other is 0. I'm 0... That...
Have that cedents not available.
Okay. Just 2 very quick questions on results. One is on the NIM sensitivity. How has that changed with the hedging, has this considerably come down? And also, what are the duration of the hedges? So can you keep these IN&M the lock-in? Is it about a quarter? Is it more 4 to 6 quarters? That's one. And second question is on cost, and anti cost and growth. Do you see your ability to continue doing that? Or do you foresee any pressure on cost the rest of the year?
On the main sensitivity. I remember disclosing that in the fourth Q results presentation as well, which was like 1 basis point translates to SDG 6 million. So now, yes, we give you so it depends on the balance sheet mix as well as some of the hedges, right... Say that stain... Ratio.
What of duration?
Yes. So also the duration is that we normally will look at renewing some of the hedges as core. So yes.
It's a rolling -- and on costs, do you see your ability to sustain this very good control? Or are they eating upcoming in terms of investment...
I must say that maintaining strict control is going to be beyond way. So it's a matter of really driving efficiencies from our business as usual and how we get those efficiencies and use them for our strategic investments. Now assuming the in [indiscernible].
37 looks like a very good number, [indiscernible]. So do you see yourselves being able to sustain -- there is a numerator and denominator. But if there is some normalization on this in an interest income, can you still keep it 38,39 or you think you can get over to 40.
More 40 to 75. What the income sort... You look at our banking, just look at tetration, is really around now is about. And that has really we do have really strong NII over the last years, right? As that starts to be then costs also will start to build up, although we are going to gain that sort of a moderate growth level as we drive efficiency in our business that is usual and make investment in some investments that one as part of our corporate strategy. We do see cost [indiscernible] income rate in terms of the growth rate in the interest rate cycle. So 40% to 45% cost income ratio as well...
Okay. So with that, we almost -- sorry, I like to have one more question.
I think you mentioned earlier that the trading income which was a huge growth this quarter. Did you say you can sustain it for the new on the level -- I mean, not just grows, I mean...
We hope to sustain the customer side of the flow, right? But of course, you know our customers flow trading depends period on how the market is performing.
The last question on the CRE portfolio in Hong Kong. Look, just said they've sort of made allowances for the lower valuations, et cetera. So hav you done the same thing. I mean, as we mark the valuation of the collateral.
Of course, we do that, but we do that. But our LTV has always been quite low for our portfolio. So we haven't seen -- I mean, from time to time, when we look at real estate, we do last quarter, -- we do some of our 1 and 2 on the Hong Kong property market. I think we will constantly look at that and see if we have to do anything else.
On that just so much concern as...
You talk about you asking loan exposed to divesting. I would say it's very big compared to the total loans of the group. And for our home care real estate sector exposure, we are also lending to most of better companies, the bigger companies
Okay. So with that, we'll move on to our second segment, which is on our general offer. I don't think I need to sorry, myself results...
No, no. No...
No, Chin the second presentation maybe give us a chance to let me take through the presentation. First, we will have time for questions. business. Yes.
I try to actually summarize what we have made in the offer and the over announcement into poly to just highlight the key points. And I think as Ching Ching said earlier on, the office governed by the simple cohort takeovers and mergers, right? So we cannot disclose information that has already been made public. So you have to bear with me on that. But I just want to use this slide to summarize on what we are doing actually in this particular offer. So I just want to give some context to it. I talked about corporate strategy on time because I believe only you have a strategy, you know your direction that you build your business accordingly, right? And even if you are doing inorganic, you know what inorganic growth you want to target or the focus on. So from when we first launched our corporate strategy, I think in 2023, we see our structure gaining momentum, right? That's why we say we want to have incremental revenue so we're seeing in momentum. And one of the big pillars in our corporate strategy is indeed capturing Asia's rising well. I think that is given we do know that the Commonwealth nations continue to rise and the flow for wealth is also growing faster. So because there are more and more people we decided to have a second occasion cut some of the wealth offshore exact that is not limited to any country in that sense. So we have been moving intentionally to build up a strong franchise in wealth management. So we talk about hiring people. I think you remember we talked about Belo Singapore, [indiscernible], you talk about our retail debt wartime more RMs, right? We are instituting best-in-class practices and processes, and we increased our investment in the Briestern as well. And investing in good instance is an ongoing process. You can see it, right? So then -- and of course, we need to look at opportunities to best use our capital, which is the question you put forward earlier, inorganic, we just do look at it. So this is what we all look at in order to deploy our resources into businesses that is panning accretive to OCBC. So this is exactly what we're trying to do, right? So if you look at the first page, offer price for GH shares is $25.60 in cash when we specified that that is in cash. And this offer is an inconditional in all aspects, right? So the offer is open for the GE shareholders who -- I mean, for those who are only shareholders, assets not owned by us or our group, so for other GE shareholders to consider, right? So when we look at this premium, the offer price -- sorry, when we look at this price, the price represents a premium to the historical trading prices at this stage, right? So we are saying that it is from the price traded yesterday. It is a premium of 36.9%, but we also look at the last you see on these slides, right? We also look at 1 month, 3 months, 6 months, 12 months and 5 years. So if you look at that, the offer price represent roughly about 30% to 40% premium over the last 5 years, if you look at different parts of that time frame. So why do you need that? Because if we turn the page, I think you all know GD. I mean, if you're in simple log, it's a very owning is actually older than the bank in that sense, it's 115 years old. It has more than 60 million policyholders. I mean these are numbers that we don't always repeat. But I just want to highlight this. And this is GD has been a trusted brand and it has served multiple generations. It is phenomenal life insurance brand in [indiscernible] Malaysia by sales and has the largest agency forces across these 2 markets, right? We're talking about something like 35,000 agents. And in Malaysia, we're very, very well recognized as also the oldest insurance company, like insurance company there. So our relationship with GD is 66 years, meaning we have been in partnership with them since 1958. And we talk to in the bancassurance market in Singapore, right, based on what we do with them. So that has been a strong synergistic relationship. So with GD always working with us, we are able to customize a full suite of investment insurance and estate planning solutions for its customers. So it is always like because this is part of us, we see them as how we work with, for example, how we work with [indiscernible]. We see then how we work with the global markets, right? So when we look at offering products to our customer, insurance is intrinsic it's not like we just call it bank assurance. It's not like because our insurance company incentivize us we sell insurance, it's always like part of the whole synergistic value and when we look at reuse. And of course, GD has also benefited in that sense, to have access to our extensive retail and also commercial customer banks. And the general insurance benefited from our corporate customer base as well, right? So it's not limited to banker in that sense. And of course, more importantly, they are -- we own them and they contribute their earnings contributed to us over the years, right? And as we continue to increase our investment in them, we recognize more of that earnings as well. So if you talk about rationale, simply put, because we believe we're confident this exercise will reinforce our long-term strategic visions to continue to build ourselves as a leading wealth management player and deliver a more integrated value proposition to our customers as well. So I talk about rising Asian wealth and [indiscernible] demand for mobile wealth enhancement and not just enhancement but also preservation solutions, actually insurance come lately into in particular about cancellation as well. And so this is strategically positioned to capture the wealth opportunities in our corporate strategic pillar. So also our one group approach has also allowed us to put everybody together to fund that holistic product offerings over the years. And we believe that in increasing the investment in Gueikian, we will actually fortify this approach even stronger, right? So we look to -- and at the same time, we got to deploy capital into a key business pillar that is attractive and valuable. I think we cited in the announcement on how much they have attributed to our earnings over the years. So if we say turning the page to Page 7, this is how we look at it, right? Our scale, what looks like 16 million policyholders. And of course, we can also take data into that and make sure that they will be able to pay more with OCBC as well. I mean as the more America, I'd say it's not 100%. I'll be very happy we bank with all those 16 million customers. And of course, they have -- they are a good-sized company on its own. They manage over a 100 billion assets and -- sorry, vulnarable which is a subsidiary of Reisten -- and actually, OCPC also own shares in that has $70 billion of AUM under management as at the end of 2023. So the right-hand side of the slide is just to illustrate how we have been growing our wealth management AUM and wealth management income over the last 10 years. And we have been using 10 years to illustrate how GE has contributed to us, right? So that is what we have been talking about why it is important to us. So Slide 8 shows a bit of the opportunity. I'm not spending time on this. We're just saying that GE is in the market of Singapore, Malaysia, Indonesia, this is also our core markets in OCBC Bank. And we're still positive. We remain to be very positive to improve our presence in these markets and continue to have GE to grow that business as well. And hopefully, they grow alongside with the bank and we buy on each other to generate even more business and more customers for the overall group. So one slide down, Slide 9. One group approach, again, it is just very ratable. And it is our approach to capture the rising prosperity and welth growth within Asia, right? So we do work with our insurance, banking and asset management. And in a way, I can always say everything is linked, right? When we -- even for insurance policy, you can leverage it, you can actually land against insurance policy. And when the customers have started a lending relationship with us, they probably will then stop to say, of course, other than buying insurance, life insurance, they think about the mortgage they have with us than the mortgage insurance, right? So in a way, we also work with BOS and introducing actually insuring products to the U.S. customers. So this is not just a bank assurance, which we sell over the current, as I put it, okay? So the next slide. We just want to recap what we said because we said we have the rationale of why we want GE because we can synergize further. It is also earnings accretive to us. So this slide shows how that means, what that means in being earnings equity. So we used the 2023 full year number, and we do a performance. So assuming we acquired 100% of the shares there that is available at 2516 in the price that it will be actually generating 0.2% to our ROE and ROE is actually on an average basis across 2023, right? But as at the end of 2023, if you look at our CET1 CARG ratio, that is going to be an impact. And also will have an impact of being down our CET1 by 60 basis points. We just put that illustration that 15.3% is not the end because we have already declared dividend for 2023. So that would bring it further down to 14.5%. But again, this is before we add on the first quarter earnings. I just want to use this to simply illustrate how we see why we see it is earnings accretive. So the last page -- just want to -- we found that we are financially well positioned to execute the offer. We intend to use internal cash. We are well capitalized. You see how our CET1 GARG is like at the end of 2023. And we did say that after that, the dividend we declared for GE shareholders, we will pay it. And I also said earlier that we still target for OCBC of the same 50% dividend payout. Jan, do you have to first question?
Yes. Chin Yee. This has to go on all it. Why do you think it could work it I mean... Minor any shareholder? Okay.
And can't comment on that because it needs the shareholders of GE themselves to be advised by an appointed I, right, dependent financial adviser to tell them how they see this order. If you ask me, we launched our home cost, we want it to work. We wanted to work, right? But of course, we launched the overall which we speak very clearly to delist in.So if we manage to get everyone selling to us, I'll be happening 100%. But I cannot comment on whether we think we will be successful.
[Indiscernible].
Is pretty clear is a great business and a lot of the benefits from GE. I think you were already seeing those, right, with 88.4% stake in it. The question, I think a CVC shareholders would ask is, that this is 1 billion the as spending, we are earning something like 19,100 revenue net profit extra profit. If you look at the UBC, like-for-like basis, they on $140 million because there are synergies there. We can drive synergies between 2 banking businesses, right? Second the question is like, why is this the best use of your capital? Why is it better than maybe acquiring a credit card business or paying back capital to shareholders. So as a shareholder like how should I -- why should I be excited about this deal...
There is a couple of things. The first one is we position ourselves for a long-term sustainable growth. If we -- of course, I shouldn't comment on dividend, right? But if you say that an option is to distribute dividend to shareholders. After you distribute that, that means your business growth will be lower because you have less capital to use. If you just pay out dividend to our shareholders, then we don't have the capital to -- for future opportunities to grow. We want our growth to be sustainable and for long-term growth, right? That's why we have the strategy to go medium term, that's why we have medium-term targets. So compared to that, then compared to buying something different, this one, we don't have any integration risk at all, right? We don't have integration risk. We are not buying a business we need to integrate that doing integration, of course, that is integration. So this one is a very natural increase in a business that we know very well, that we have synergized value already. But also, you're looking into a potential even further synergizing the relationship because there is still a difference between what they were listed, independently listed company compared to a logistic company.
[Indiscernible] -- what is that? The expression that began taking 100%. So there, I just want to understand that a little bit better.
I think it does not a lot of things I can say to influence how the Marti-shareholders would take the offer, right? So I cannot go into details what I say, but in the offering, we did say that we retain the flexibility to look at the win the GE business product in the future and look at other possible synergy values and maximize it vision. Can I move to a mega side first.
I think we're not going to not of questions, but the first one has to be, have you spoken to the minority and then there are some other questions. Okay, the first question to them. I mean, because the EV better that was I think somewhat set. So I'm just wondering how you treat this on your own balance sheet because the NAV a lot is lower, right? It's about $17. So would you -- with the additional above the net goodwill? That's my on question. And for the minorities itself, I mean, would you be willing to go to the embedded value for them at any point because you didn't say in your document, this is a final offer that's one question. Then the second question was the impact on CET1 debt. And then you -- okay, so -- great Eastern is big in Singapore and Malaysia. And it says that it can't go into Hong Kong because it didn't have the license. And one of the growth areas and maybe it's not a question for you, but if it is simply a question for you, what are the growth areas in Asia versus Hong Kong for AIA potential because we've seen the FY 2023 results and also the first quarter results. So why -- and CDCs over being home for 10 years. So why has Brody's not been able to have that huge potential that [indiscernible] and potentially have got so that's the second question.
So the first question is about do we talk to the multi-shareholder? Of course, with this because people before we launch it, we cannot go and prepare for launching.
Okay. And they ask -- they will be advised by the IFAs I said. And then, of course, under the -- they can still trade on the stock exchange, right? So that's where we would be dealing with them if they -- what we will buy. If they want to trade on a stock chief, we will buy because that is our purpose, right? We want to acquire the shares, yes? So that is what is about the...
Rising I mean, would you be open to...
That is exactly what I cannot comment on it.
And then -- okay, this is the Hong Kong question. And then last question on [indiscernible].
Hong Kong question. When you say we don't have a license for GE to sell into Hong Kong is true and if you ask me about the history, also this is not the right forum to talk about our history, right? But it doesn't stop us by selling insurance in this market where the Hong Kong and the Chinese customers come here to open an account, with the bank, right? So we can sell it to them, right? As into the future, of course, I also cannot comment because that means or telling to share something that is not in the document. But now is in Indonesia. So what stopped us this is our core market. What stops us to continue to support if we become the parent -- the ultimate parent or what you sorry, we outrated parent. But what is it to stop us in supporting GE in that strategy to develop and grow the business. So that is what we stated in our intention as well, we develop the business in the tattoo and develop that business and how you will not comment on... Comment on the plans -- but we commit to have them to continue to develop and products.
And I mean, this question is probably for the bank here. So why don't you get an open market bid to get a fair value with you given the right of first to or maybe it's a question more... Question, I guess. The question is why couldn't GE have gone to the open market, you put yourself up for sale to get a fair value. And then CPCs the right first issue. So is there such a thing in M&A...
That would be up to GE, right? If you said is an action by GE. Well, Spacing... It is a separate listed company.
The question, why does GE put itself for sale [indiscernible].
Open together market value...
An 88.5% 4% of it, they can't put them as for say.
They can't, right? They can't...
On all of your buyer.
Okay. Okay. back...
So can I ask a couple of questions. First is just on the capital position at Jive from my understanding is very strong. And if you earn 100% of it, does it give you more flexibility on GEs and billers and dividend does it need less capable -- it is 100% owned by the bank in par into capital flows between business easier.My second question is the majority of the planners who have insurance companies over the last 20 years have decided to divest of. So what is it that you're seeing that the missing?
Okay. Whether we would do anything to the capital, that's also something I cannot comment. But what we did say is we commit to continue to develop and grow the business of night. So that means if in this growth and development, they need the capital, that means they need the capital. But we have the flexibility to review after this, if we can get 100%, right? We have then put them together with developing their clients going forward. The intention is not true. It intentions not to make a major change to the business of it. This is what we stated in our offer right? There's no current intention to do so.So my advisor is here, but that means we are telling people this whole thinking of attaining 100% gain control and then strip out everything that is not -- that is not in our intention, right? So then it comes back to your second question, why we're not selling it because other people are committed. Because it has always been one part of the group, we talk about diversity franchise, they contribute earnings to us in the economic cycle. And they just always been an intention that we have this as part of our integrated wealth business, right? And I just say that I believe we have more synergies already comparing just to by products from another insurance company. That's how we see it. And it has been a very strong plan but in the OCC over the year. So I think there is no sort of example where there are other banking groups also have insurance and better inside them. And the -- as we evaluate this, investments we have over the last 60 something years, it is very clear to us that we want to retain this business. And when we believe that we can realize even to the values.
Right... Can I just -- I mean, obviously, at the moment, the way that it's treated in the capital structure of the group, sort of get this 10% free rider into 10% of your core equity tier what about into the bulk of -- great Eastern when you get the deduction, which potentially gives you a leverage benefit in terms of your -- in terms of return to get ratings. Yes.
Yes.
Great Eastern... On your capital structure... You can count up to 10% of your equity from nonbanking businesses. So -- great Eastern is in there as part of your CET1 capital yes. And then obviously, you have the deduction of that. So there is a leverage aspect because you can get earnings and you double GAAP or Bus capital. But my -- it seems to me that from your Tier 1 structure that actually MAS doesn't allow you to go away that, so it asks you to hold more capital because you have double leverage of the insurance business. Is that a fact? Just -- does your ownership of Great Eastern mean that your minimum capital ratio in reality, got the water detection calculated is higher than it would be in...
For shipment of insurers now in the end or in to be recognized. So the entire insurance is like recognized [indiscerniblle] from the bank or equity?
From the bank.
Yes, yes. There's how banking sort of group on... So we will just... This constant...
So what is your banking?
It's not like banking, so low is OCBC grew, but without the -- because overall bank coloration because for technical or to group or Tier 1 option, Insurance is sort of consultant having cost in red spending in our point...
You can carry up to 10% of your CET1... And therefore... How the no banking business MBS Core holdings and other financial...
It, there's some of that where you can work to happen in but for insurance somewhat what you mean this... Worry as an... Sorry, the content... Sorry,
Could you comment on the timing -- or rationale of the timing of this offer. Right now earlier on what consideration for the timing? And secondly, is the potential acquisition of this business? Do you see insurance sector as a next rapport that continue to be putting more resources for investment in because of acquisition or other plans in...
I mean, I think it's quite essential, you see this is not the first time we do this over. So of course, we have done it in previous years. And even over the previous years, where the shares is available and if a shareholder approach us, we're willing to acquire and we up and we reported the change in our acquisition. So there is no now best timing for this. It is when -- as we look at our capital, right, because we said we need to look at our capital management. When we say we have capital to use. So -- it has been one of the options that we can do it. So it is just a natural role as we strengthen our wealth propositions. As we -- when talk about strengthening as again, we're not just looking at GE. We have been investing in bank of Singapore, as I said earlier, right? We have been investing in the way we provide our products. We have been looking at digitalizing our channel. That's why we continue to grow that new money AUM and all that. So you have net new money coming in, you want them to invest, right? So in a way, it is a continuation of our capital management and our corporate strategy. So yes, meaning we want to do it. So as we look at our travel position and everything, so we say, no, no, this is the right time. We think this is something that we can do. So we decided to do that.
Think about... There is a big spot...
Okay. It is always one of the variant that insurance has that particular, I mean it ones, of course, runs an insurance on its own, right? But then as we said, it is always part of the wealth platform as we see it because we talk about rising trend, we talk about wealth enhancement and also preservation. So it is indeed a very important pillar. So we're still quite insurance because it is an insurance business. But it will be considered in altogether in our corporate strategy among wealth -- so would we increase our investment potentially, yes. But again, it comes back to we have to develop our plans, what are the right which are the growth area and where we want to put in investments in those areas. So it is always possible that we invest more into insurance. But this is a long part of our whole of the strategy.
You want to... Jean, -- are you on a call... Can you ask a question?
Yes. Apologies I couldn't be there in person. So just wanted to follow up on some of the questions before that Nick was asking about the dividend policy. I note Helen in the overall dividend policy for the group. We have a 50% payout ratio, which is affirmed, but as you mentioned before, if we privatize GE, then there's more flexibility. If I look at GE, there's about $3 billion of retained earnings that are on the balance sheet. Does this give you the flexibility to sort of manage the capital more efficiently across the group? And then if that's the case, is there any sort of potential upside for OCBC shareholders in terms of future dividends from this move? I'm just sort of trying to see if that's one of the upside levers...
I cannot comment on that. I mean, the intention stated very clearly. To say that I have further plans, I'm influencing what I said in the offer. I'm sorry about it. But when we say possibiity, you have to realize that for the last 2 years, we keep on telling -- we keep on sharing that. We are looking at our capital. We are making our capital in a better positioning. We rationalized our RWA. We returned the old bank mining local business. We changed it from standard to IRB. So that is accretive to our CET1. So we've done quite a lot of things to continue to look at how we maximize the capital. So with GE, of course, if you say I don't look at the capital, it is wrong. But this has always been something that we look at, right? Is that potential to make sure that we maximize the use of our capital. Yes, it's always there. It's always there. So -- but I cannot tell you what plan I have because I just cannot tell you. So sorry about it, but this is indeed. We don't look at capital on one specific entity. We're looking at all our entities and our overall capital position. And we promise will continue to make sure that we rationalize and provide more return to our shareholders. This is what we exist for, right? We will deliver, hopefully, we will deliver some of the capital we're obviously putting into growth, right? And seriously, when we think this offer is earnings accretive is because then we realize more of the profit, it goes to our bottom line, right. So if we come with 50%, that means we're paying out more in that sense.
Okay. And can I -- if I could just follow up. So let's just say if it's closed, and we've taken it private and this has all succeeded, which would be wonderful. Does that mean we'll have sort of some update on what the capital management strategy for the group would be later? Or we just would stick with the status quo, just to really understand the point about the payout ratio.
We do intend to communicate with our investors on a frequent basis. We obviously potentially we can structure something when we're ready to share, yes. So it's not like that I don't think something like -- I mean making an offer is not status quo already, right? So in the sense that we commit to better communicate with all of you going forward.
So I've got a couple of questions. [indiscernible] timing, if I may follow up on that because it was just a few months ago that we heard about the request we minority shareholders. So I just want to know if those requests influence this decision in any way, for example, do it expect the decision to sites or did it have any influence on the price. I have another set of questions that are not GE related. I'm going to say it now because I'm worried about that. So it's on the medical claim misconduct U.S. can I find out that similar investigations have been carried out at OCBC since previously processed claims from the same clinic as were any OCBC employees discipline our business. On the same issue, do you think the incident has had any impact on VOS or the white for example, a reputation of...
That's a very different question. Let me address the first one first. Whether it is because of the multi shareholders' questions. The answer is no. Our strategy is always to solidify the wealth management leadership position, right? So acquiring more shares in GA is an ongoing exercise. But as we said, we always look at our capital position, how to best use it. So this is an option -- it is one of the options investing in GE buying a trough and general offer, right? So then again, the second question on that particular write-up about the claims medical claims, we cannot comment on any stuff matter. We cannot right? Because they are our staff. We cannot tell you details about staff matter. But what we can say is we take our -- we take what -- how we do things very similar there. If there is anything, any wrongdoing we'd investigate, and if that's wrong, doing we investigate and we investigate following, but based on our -- what we have set up, we have disciplinary framework and investigation framework. If there is any gaps or whatever, anything that we need to do, we have already addressed. So what we're seeing is we do not see something like that repeat again.
Is there [indiscernible].
You listened, you can tell us.
Thank you for that. Can we do the analyst side?
Melissa?
Just on the ROE. So I think earlier also in the guidance like the ROE guaranty. And I think you showed as well our reason each -- so in terms of rent is -- what do you think the ROE -- I think on a high end of...
The GE offer, it is 100% successful, meaning acquired all the shares as an implication on our is saying that. But this is before we account for this year's profits.
Yes, yes. Yes. So this year's guidance for ROE, you were saying was...
Yes. Because our target has been 13% to 14%, we're saying that at the point we feel we will be closer to the high end.
That 14% have been this quarter. And then if you add additional change force. I think I but the guidance would be like SDG 14 million to SDG 15 million, the higher 50s versus being conservative at on, what can we anticipate...
We are not changing our guidance at this point if that is just a shift and so. Movement of equity is not just because of earnings.
So say you're saying that the 13% to 40% will be likely maybe sand at 14$ because...
In terms of how we see our trajectory of our business and with this one.
We move on to present [indiscernible]
More color on the big earnings. You mentioned that it will generate by 2% to ROE. Could you also maybe give a bit of color on how to the trillion incremental revenue target as far as the impact on near-term net profit.
We have talked about targets about NIM. We have talked about our targets on NPL. We track us on road. So -- that's how we eventually have a target for up. But in a way our only, I think the important part of our strategy is really to focus on growth and manage our capital position well and make when the opportunity comes to make investments both organically and inorganically, right? So eventually leading to an estimate plan of return or income, right? But in terms of cost issues again subject to the market, again, subject to interest rates, right? And also subject to the investment we make, we said we try to control cost, but we're still investing. So it's I can't give you like my business plan is because I should not be, then it's very difficult to take your question as to say that how that it eventually shape into. I'm not sure whether I'm saying the right thing...
Can you...
It seems like I'm not taking your question right, but...
Is you're asking that the GE we declare that [indiscernible].
Sorry. Did you take your question, right?
So it's not related to that. But I remember last quarter I mentioned your baseline shrinking about this year with 2 rate cuts towards the end of the year. Does that still bode...
We were... I think we were talking about 3 to 4... Of the 3 rate as [indiscernible].
So where you got sufficient now is?
Potentially moving to. That's why to say that if interest rate is cutting slower, we think our NIM would be...
So the copper price is still 30% or discount is a better value. So in the instance where the IFA think that is not fair or reasonable, what will be the big steps for -- or is there like a room to make the...
Hoping that is the time line, which I did not go through that...
Is in...
Yes. Discipline time line, right? So what I cannot say is exactly what I cannot share, meaning I cannot tell you. I have a plan after that because I cannot say anything that actually caused the minority shareholders to think otherwise, this is what are the facts on the table, yes. They have to be advised by the IFA. So this is a time line. So if you look at this time line and supposingly, we probably will close, but is now earlier than 28 days.
A slide on the price even just to say that we look at this digital so if you look at the other...
Yes, yes. You're going to have to look at the price to book and then price to earnings. I think this reference point is one...
What about other transactions that have taken place like similar, what sort of price to...
I can't comment on another transaction. But one thing I can say, we are not buying a new insurance license. So we're not buying a new insurance license, we're increasing investment in our insurance company. There's no integration. We're not buying a new license to gain and ensure pillar. We have insurance that we are increasing our investment in our insurance pillar.
But the other one also, I think that was not a licensing issue.
No, I don't want to comment on other product.
I think -- because some of the bankers -- I mean some of enough looked at this and said this should be the valuation. So...
I mean we should look at an... I see...
[Indiscernible. Look, I mean they would have told you these are the...
We are not here to take questions
[Indiscernible].
Is always a comparable, right? The... It at that. This is what we can show. Yes, we have price to value. We have a price to saving, we have to price to earnings. We show you what the premium is...
Yes. Yes. Maybe just on catalog be more active to egg more capital into better markets because I think when base is still high, and one of your peers has been putting some duration into treasury buckets because to have the capital to do so. And by the same time, they will allow you to increase your interest income and portable earnings and dividends. Do you see more opportunity in...
More opportunity in transmit marketing division.
Divison in terms of talking about I don't see excess capital too, yes.
We manage now. Managing our own money on. Yes, of course, when you look at opportunities all the time, but we also adopt a prudent view. And we do have built up what we say are the parameters for us to invest, right? And the duration of our investment, et cetera, et cetera. So I -- yes, I have nothing more to say on top of that.
Just... I think it's out pretty much span enduration, and this will Integration and potentially, [indiscernible].
I think I... Actually if you just...
3-year question on capital allocation. Do you think we would be gearing in line with your peers in terms of CET1, let's say, over a period of time or running slightly higher capital compared to peers is a comfortable position on. Do you think you would tend to kind of come further to in terms of CET1. This was because there is this [indiscerble] where there's a lot of capital in wrote. How do you think about that for...
Will let you declare Basel IV also 3 revolver, whatever we call it, there is some impact on the capital, but it will be rated out over a so of time. We cannot rely on that early part of which is accretive to plan on how to use our capital because eventually, that benefit will be based on totally base of action. So that -- we will observe that, but we cannot really use that because it's not real increasing in couple it's just muscle Basel III result application, okay? So what we actually bring CET1 down, if we continue to grow organically as we plan. And if we continue to invest, if you continue to look at possible other inorganic investment, yes, yes. It will be -- they will be not be for long term, but fundamentally, we also want to protect our credit ratings.
What is the sweet spot so one, we should look at through the final number, the transitional number, if you make [indiscernible] we should completely ignore it for the transition period. And maintaining our credit rating while still being more efficient on capital. Is there a number? Is 14 number, is 15 a number like where should we think as then below which you would not go because of credit rating.
I think 14 is the number.
Keep right in will definitely acquire all the shares in terms of accounting for it on the P&L statement and on the balance sheet. So is the P&L senate and then we just don't have the minority, right? Now on the balance sheet, you may have this one asset in one... That activity line? Does that change the equity number? The -- and will there be a change? Because I'm just thinking in terms of your ROE targets and like, why is it Then...
This assumption, right 100% this main the minority at what we call on non-continuity insurance, we will stay with you [indiscernible] 100%... And on the balance sheet, that actually all depends on how much eventually will take as an investment.
As one last question. Can I ask about Bank of Singapore? How much earnings accretive Bank of Singapore is doing for OCBC?
Maybe if you look at how we disclose our overall wealth maturity come, right, violate banking. I think you can actually see that it's gone up, I think the earnings are very good this quarter, right? And that also -- and they contribute that also by the well site in addition to the insurance side. So I think if you look at it, I think in the chart that I think we showed earlier on namely the AUM, maybe you've gone up from 10 more than 10 years, right? We've got up multiples. So I think that's sort of not sure how manors contributed to the group.
Sure. I'm sure. But maybe for great test your rationale, you stated very clearly in terms of hundreds of million dollars that GE is contributing to back to OCBC now and how much percent. Can you just do that for Bank of Singapore as well.
I mean, it was close like our peers in our financial statements and our contributions for the Consumer and Private Bank ending that also as part of how we look at it from a math perspective that the wealth business as sort included in that number also in Singapore.
For us, our peers, the core ranking at [indiscernible]. So for competitive reason, we forming we one and another.
Is part of that.
Share information that is also in line with our means.
So therefore, when we do comparables causing the 3 banks deals who will disclose the almost by business segment. So when we look at our banks as part of consumer say back is so comparable to how the...
Other banks... So I guess I look at... Contributing to us. Yes... On Bank of Singapore also has its own banking license. That's the context of my question.
Okay. Thank you. Any other questions on the offer? If not, we end today's briefing. Thank you very much for joining us this morning. Thank you.