Oversea-Chinese Banking Corporation Ltd

SGX:O39

Earnings Call Transcript 2021-Q3

[Ching Ching Koh, executive]

Welcome to our results briefing this morning with Helen and Darren, our CFO; and Helen, our Group CEO with us. You can see them on screen. Darren is going to take us through the slides and then Helen will take the questions thereafter. Darren, please.

[Siew Peng Tan, executive]

Yes. Good morning, Ching. Thank you for joining us, everyone.

So we'll start with Slide 3. Now for the third quarter of 2021, we reported a net profit of SGD 1.22 billion that's an increase of about 19% from year ago and 5% higher than the previous quarter. Customer loans were higher from a year low at 6%, driven by both consumer loan [Technical Difficulty] across our key markets, and this resulted in a 3% increase year-on-year in our net interest income but needs to be sustained to more interest rate environment.

Okay. I've been sort of passed a message by Ching Ching that I should speak louder. Okay, I'll continue from here.

Our Private Banking AUM expanded 6% year-on-year to USD 123 billion on the back of continued inflows of net new money and the net new money is across the region that we operate in. Now on the insurance front, total weighted new sales and new business embedded value continue to grow, rising 29% and 3% on a year ago, respectively. And profit from insurance was 18% higher at SGD 311 million as compared to a year ago.

Our expenses were higher for this quarter, mainly from our continued investment in people and system to support our business growth while not receiving the same government support grants on the job front.

Now asset quality remained resilient. NPL ratio was stable at 1.5%, while allowances in the third quarter, reflecting the improved credit environment was significantly lower. Our common equity Tier 1 ratio remained strong at 15.5%.

I'll now move on to Slide 7. Group net profit of SGD 1.22 billion, as I mentioned before, was 19% higher year-on-year and 5% higher on a quarter-on-quarter basis. The exceptional first quarter, followed by 2 resilient quarters on the back of the improved economic environments had enabled us to deliver a strong profit of SGD 3.88 billion for the 9 months to date.

And if I can bring you to Slide 8, if you have look at the net profit from our banking operations result for the third quarter improved 33% from a year ago and 8% from the previous quarter to SGD 1.05 billion.

Great Eastern's profit contribution for the quarter, however, was lower comparatively, mainly impacted by unrealized mark-to-market losses on its investment portfolio.

If I can move to Slide 10 on our net interest income. Third quarter net interest income rose 3% year-on-year while remaining unchanged from the previous to SGD 1.46 billion. Loan growth had been able to overcome low net interest margin to register an increase in net interest income, at least until this quarter. And you will notice net interest margin had dropped 6 basis points from the previous quarter to 1.52%, mainly from 3 factors: a one-off 2 basis point drop from the impact of interest reversals from the downgrade of Malaysia and Indonesian loans to nonperforming; the lower use rising competition for good quality loans against a backdrop of excess liquidity; and in terms of timing, lower gapping income as we utilize some of the excess liquidity that we have.

And if you move on to Slide 11 on the noninterest income for the third quarter, it was SGD 1.1 billion, relatively comparable to the year and quarter before as the higher profit from insurance had offset the drop in trading income. Now including the first quarter where all segments were doing comparatively better, 9 months noninterest income was still 18% higher against the same period last year.

Moving on to Slide 12. Our wealth management franchise continued to generate 35% of total income. Specifically Bank of Singapore, AUM had dropped slightly to USD 123 billion. The decline in market valuation had more than offset the net new money inflows that I mentioned earlier, which came from the various regions that we operate in.

Moving on to Slide 13. Nonetheless, as you can see on Slide 13, client activities were relatively robust such that income from wealth management remains strong. Consequently, net fee and commission income was higher than most quarters before and after first quarter 2021.

And in terms of trading income on Slide 14, the weaker performance for the third quarter arose mainly from unrealized mark-to-market losses from Great Eastern. Customer flow income had remained strong, resulting in a still higher trading income for the 9 months at SGD 611 million.

Moving on to Slide 15. Operating expenses were SGD 1.19 billion for the third quarter or 8% higher year-on-year and 4% above the previous quarter. Expenses arose mainly from staff-related costs arising from high headcount and variable compensation. And also, as I mentioned earlier, the lower government support -- job support grants received this year. The increase in expenses would have been lower at 6% year-on-year and 3% quarter-on-quarter, so we adjust for the government grants [ administered ].

Now moving on to Slide 16. Allowances for the third quarter were lower at SGD 163 million, a SGD 32 million -- sorry, a SGD 22 million net write-back in ECL 1 and 2 allowances arose largely from the transfer to ECL 3 as a result downgrade of some loans to nonperforming. Correspondingly, additional ECL 3 of SGD 185 million was set aside for the quarter.

And if you look at Slide 17, total cumulative allowances were lower at SGD 4.13 billion for the quarter as we roll-off more impaired asset. This reduction was more than the additional ECL allowances set aside for the quarter, as a result of the lower total cumulative allowances and a slightly higher nonperforming assets, which we will cover in the next slide. The coverage ratio was lower at 97%.

Now on Slide 18, our NPL ratio remained stable at 1.5% for 4 consecutive quarters. Nonperforming assets were SGD 4.24 billion and was about 4% more than the second quarter. The quarter-on-quarter increase was largely from downgrades of secured consumer loans in Malaysia and a couple of corporate accounts in Indonesia as detailed on Slide 19.

I'll move on to Slide 20. Loans grew at a faster pace this quarter to register an increase of 6% from the previous year and 4% from the previous quarter. The largest increase for the quarter were in Singapore and Greater China, led by building and construction, general commerce and housing loans. Our loan exposure to China, both onshore and offshore, currently accounted for 11% of total loans. This was largely lending to SOEs, large local corporates and our network customers. And of these China onshore exposures of SGD 6 billion, less than 1/3 were lending to corporates and real estate sector, and these loans were mostly to our network customers.

And if you look at Slide 21, our loan composition by industry remains stable and well diversified across sectors. Building and construction and housing loans sectors remain the largest segment at 28% and 21% of total loans, respectively.

And on Slide 22, where we provide some update on our total relief loans. You notice that total relief loans for the quarter were higher at SGD 6.3 billion as compared to the previous quarter of SGD 4.5 billion. The increase in this quarter was largely from secured customers' loans in Malaysia, followed by the roll out of the new Pemulih package in July 2021 by the Malaysian government.

In Singapore, exit from the relief loans program have reduced outstanding balance to SGD 1.6 billion from 2.8 -- sorry, from SGD 2.2 billion a quarter ago. Total relief loans accounted for 2% of the group loans, of which 89% were secured against collaterals. Majority of this relief loans are still performing.

Now I'll move on to Slide 23 on deposit. Customer deposit rose 8% year-on-year and 5% from the previous quarter to SGD 333 billion. CASA deposits continued to form the majority of our deposits at 62% of total customer deposits.

With this, I would pass the floor to Helen.

[Pik Kuen Wong, executive]

Thank you, Darren. I hope you all hear me well and good morning again. I have prepared some update. But before I go into the presentation slides, allow me just to talk about how I see our performance for the third quarter and the 9 months of the year. I do see that the year demonstrates our strong franchise and was underpinned by the good progress we have made on our strategic priorities. We have 3 quarters of resilient results, which drove our 9 months earnings to a new high actually.

On a year-to-date basis, loan growth is up 7% or SGD 18 billion. Loan growth is on track. I talk about mid- to single-digit growth for the year. I think we're on track to reach that by year-end. As I mentioned in the first quarter results, I expect momentum to grow in the later part of the year, and we have seen our third quarter loan growth to be 4% year-on-year.

We're also seeing our pipeline pick up in Singapore, Greater China and our overseas market across both consumer and corporate banking. And another one about loans to take note is our green financing loans saw strong growth trajectory and make up close to SGD 6 billion or 1/3 of our year-to-date overall loan increase.

Wealth management franchise performed well, performed strongly as reflected by net money growth quarter-on-quarter across our premier private sector and also our Bank of Singapore for our private banking customers.

Customer-related activity is holding steady despite recent tightening measures. We saw 3 quarter -- the third quarter fee income as higher than pre-COVID levels. Customer treasury flow income is also steady and the insurance business is also doing well.

To some areas to highlight. Darren would have covered most of this earlier, but I also want to touch on these key areas to provide more insight on questions you might have. So trying to address your questions beforehand. The first one is the 8% increase in operating expenses in the third quarter without the effect of higher job support grants a year ago, our OpEx would have grown 6% instead of 8%. This increase reflects both higher variable compensation in line to our business volume growth, but importantly, investing in headcount in our strategic priorities, which I will cover later on.

Technology costs tick up 12%, of course, for third quarter and also for 9 months in the year, but we continue to see very good progress in our digitalization efforts. I want to emphasize, when we say costs, it is investment into the technology. And indeed, this is before technology staff costs, so we are making quite a lot of investments in this area.

The second point I want to highlight is, I think there will be a question on the China exposure, particular on Mainland. So I just want to recap what Darren has mentioned. Our Mainland China onshore exposure is only 2% of our group loans. This is largely lending to our network customers and large SOEs. And the reason is very simple, we are a bank -- a foreign bank that aims to connect China companies with the rest of the world. And so our total exposure outside is always higher than the exposure onshore.

So Mainland China onshore real estate exposure is 1/3 of total loans. And even then, this is lending mainly to our network customers. Focus is still partnering the China SOEs and large corporates as they move out of China into our region more predominantly, obviously, ASEAN.

On credit quality and relief loans, credit quality of our overall portfolio remains healthy, and we are committed to have our customers with orderly exit from the relief programs. The group relief loans make up 2% of total loans is down substantially compared to last year this period. This is also nearly 90% secure. This is well below the peak a year ago when relief loans make up, as I said, much higher, which is 10% of our loan book.

Another point is regarding Malaysia. Our relief loans rose to $4 billion or 1/5th of Malaysian book. Some of these loans were downgraded to nonperforming according to regulatory reporting and accounting and the associated interest accrued reversed from our P&L. This make up for close to half of the 6 basis points quarter-on-quarter decline in our third quarter NIM.

Nonetheless, we are comfortable that we have set aside sufficient provisions, including management overlays to buffer for any unanticipated stress in our book.

Overall credit costs, if the credit environment remains stable, I'm still expecting credit costly to be at the lower end of our guidance of 100 to 130 basis points for 2 years. So for NIM guidance, it remains stable at current levels.

I'd like to just cover very quickly the slides that I have prepared as an update. You have seen it, and I just want to share my thoughts.

And if you look at Slide 2, my thoughts on economic outlook in 2022. I will say GDP of ASEAN and China largely expected to be better than the world average and trade for the region has also rebounded strongly. And you do know that intra-Asia trade is more than 50% -- cost more than 50% of Asian trade. So meaning Asia is trading more with ourselves than with other parts of the world. I do expect a 3% to 6% GDP growth for our key markets in 2022.

Western Asian is a very important part. We have seen COVID situation in Malaysia and Indonesia improving as vaccination rates grow. Malaysia, 90% of adults fully vaccinated. Indonesia, vaccinated about 1/4 of population. For our staff, we try to help them and our staff are highly vaccinated in Malaysia and Indonesia.

Encouraging to see gradual opening of travel lanes in Asia, and so we expect business activities to continue to pick up in tandem. Another megatrend is obviously sustainability. No longer optional. No longer optional. I want to repeat that. And there is increased global focus on climate change. And of course, COP26 is happening and -- at the moment. And we see there's a lot of demand for sustainable financing and products and investments.

We remain watchful of some near-term headwinds, concerns on power crunch, especially in China, rising energy prices globally, limited industrial output in the short term. Supply chain disruption is happening and continue . Sorry, dislocation in the container market, shipping and also shortage of key manufacturing components. These are all threats.

And of course, we want to continue to support the China Plus One strategy for their MNCs, and a lot of them are coming into -- continue to come into ASEAN.

So driving our strategic priorities in the next slide, Slide 3. I'm pleased on the progress so far. And these priorities will also power our future growth in the next few years. I talk about 4 pillars in the past, and indeed, if we look at Slide 4, regarding the continued investments in our wealth platform. And also, you will see that as you look at our numbers, it does reflect in wealth management income and fees and the robust AUM growth across our wealth tiers.

Just announced our partnership with Ping An Bank, as you have read, under China's Wealth Management Connect Scheme for the Greater Bay Area. This will open up a whole new segment of customers. As you all know, Ping An is among the top banks in China, in particular, they're based in the Greater Bay, the headquarters there. They have more than 300 branches in the Greater Bay area and over 100 million retail customers.

Our customers in Mainland China and Hong Kong and Macau can now open wealth management accounts for wealth management through our partnership with Ping An. This is both for Southbound and for Northbound.

Start by -- we'll start by offering investors to assess our unit trust and continue to extract value from our business franchise. So for ultra high net worth and high net worth individuals, we target opportunities from key markets. We're growing our China onshore wealth, emergence of family office and indeed, a lot of the wealth investments overseas, and we continue to see Singapore as the hub for wealth management, and we are helping -- we are servicing a lot of customers coming our way here.

For the emerging [ agent ] and mass market, we continue to drive acquisition through digitalization and strategic partnerships. So we do build a wealth conversation and execution on mobile. You will see more and more new apps actually the phone, allowing us to do banking a lot more effectively, including not just transaction but wealth management. We continue to build our team to support future growth. We want to double the number of relationship managers for our Chinese clients to 500, I mean, RMs to 500 by 2023.

Going to the next pillar, which is powering growth in the ASEAN-Greater China corridor. We are strengthening capabilities to capture this trade and investment flows in this corridor. The Greater China loans have expanded 12% since end 2020. We focus on a regional hub and spoke model using Twin-Hub Singapore and Hong Kong and leverage regional network strength. We want to enhance our Greater China transaction banking, investment banking value proposition to support import -- inbound and outbound clients. I'm happy that we have made some inroads there, and we've been winning mandates, in particular, helping clients from Greater China as they expand into ASEAN. So this would be cross-border support on trade and cash management demand of our clients.

We also continue to build our team to support the growth. I announced a Greater China organizational structure and appointed Mr. Tan Wing Ming as Head of Greater China. And we have made major management appointments, including Investment Banking Head for Greater China, who joined us in August.

And we continue to target corporates across the region to grow our loans and fee income, so this would include our technology contract manufacturers in Southeast Asia and China infrastructure, data center, which is continue to be a hot investment subject.

Logistics, life sciences facilities, of course, telco 5G technology, biopharma, MedTech, you name it, of course, healthcare, very important and AgriTech and about food and green businesses.

And again, the mobility ecosystem, EV, how we help our customers from building sample charging station, manufacturing of EV batteries, car loans, EV car loans, et cetera, et cetera. So quite a lot to target on.

And of course, we want to continue to build our emerging business banking through digital channels. And we have seen in Singapore, in particular, 98% of our SME account opening is entirely online.

So going on the next one, driving sustainability efforts. I need actually 2 slides to talk about it. We want to build a leading sustainable regional bank and I have set clear priorities and targets. There are many, many growth opportunities in the sustainability space, which we can capture.

I hope Page 6 summarize a lot of the things that we have been doing and some of the achievements we have made. We are certainly committed to create lasting value for all our stakeholders, be it our shareholders, our customers, our community and our employees. We want to deliver positive social and environmental impact.

So just to go a little bit deeper into that. On the financing side, we saw strong traction in growth. I mentioned this year's green financing is growing very well. And you will remember, we have a SGD 25 billion by '25 target, which is SGD 25 billion on our books by year 2025. I'm glad to say that we have -- our commitments have already exceeded that. We are almost SGD 30 billion in commitment, so we are awaiting for some of the drawdown, of course, in order to cross that 2025 mark.

We will also -- are looking at a new and ambitious target in due course. And we also grow our sector coverage, sustainable food production, I mentioned agritech, which is very important, and Singapore in particular, go for our [ 30 by '30 ] target. We look at renewable energy ecosystem, it is not just financing, the creation of energy, but how our energy is supplied. And as I mentioned earlier on, how energy is supplied, and that will lead to other business such as, I used, EV as an example just now.

Green trade and working capital, SME framework. We have a framework for SME to allow them to do green financing without additional costs, meaning we create framework as long as they fulfill the requirements in the framework, the certification is already done for them. So we are looking to double sustainable financing to SMEs by year-end. We have limited partnership and well financing green instruments.

On sustainable investing, we expand private bank ESG investment solutions, and we integrate ESG consideration into our research and discretionary portfolios. I hope you find some of our research interesting on this front.

BOS is also first in Asia to incorporate ESG factors in the assessment of the loan quantum for investment financing, encouraging clients to invest sustainably. I do want to mention, we just had our elaborate TCFD report last month, reflects our commitment to drive transition to a sustainable low carbon world.

And in terms of equipping employees with skills, we launched a set of sustainability training modules to groom more subject experts within the bank. I just say we need to make the program interesting, and I thought that is quite -- truly quite informative for our colleagues.

Last but not least, on the fourth pillar, which I always described as accelerating digitalization, we have high tick up across digital platforms and increased penetration. I talked about high level of SME accounts opened digitally at 98%. We also are seeing 85% of transactions in digital.

For consumer business, 62% of our new secured loan sales are digital. And digital secured loans have grown 3.5x in a year. Our digital wealth acquisition and sales is also up 4x year-on-year. We have a number of new digitalized offering this year announced in mid-October that we'll be rolling out travel with OCBC in the coming weeks as Singapore opened up vaccinated travelings. It is a one-stop digital platform that will enable our customers book airline tickets, hotel, car rentals at preferential rates, use our card reward points to outside purchases at check out with OCBC cards using OCBC Pay Anyone and also buy travel insurance.

I hope that helps you as you plan your travel based on the [ VDLS ] and I do want to say we also are looking at instant buy, sell of precious metals. So we are allowing OCBC digital app on Monday to Friday, 24 hours a day, if you are interested in precious metal. So these are just examples. And obviously, we'll continue to drive initiatives across our digital ecosystem and enhance our customer value and experience. I'll stop here. It's quite a long message. But indeed, thank you. We'll now move on to questions. Yes, thank you.

[Ching Ching Koh, executive]

Okay. First off is Chanya from Bloomberg.

[Chanyaporn Chanjaroen]

Thank you both for comprehensive briefing and congrats on the numbers. I have 3 questions. First, Helen mentioned that our GDP this year she expect 3% to 6% in country -- key countries that you operate in. What's the outlook for next year? Are we out of the wood from the pandemic? And what are your key areas of concerns? That's the first question.

The second one is about the current wage trend, which you already see higher expenses this quarter. What's your thoughts on pay and compensation to your staff next year to be in line with the global trend?

Third question, Siam Commercial Bank last night said they are going to spend $0.5 billion acquiring crypto assets. Your rival is also running one. What's your thought? What's your playbook on crypto?

[Pik Kuen Wong, executive]

Chanya, thank you. Just to reaffirm when I talk about GDP growth rates for our key markets, it is for next year, 3% to 6%. So I hope that addressed your first question.

Interesting question on pay compensation. We do see -- if you look at our expenses this year, we do compensate higher due to volume growth. And I do see an extent of increase of compensation for next year. Allow me not to mention levels, which we are looking at. But indeed, we do know there is a strong competition for talents in the market and particularly in certain areas, and we need to compensate correctly in order to attract the talents and keep our people.

There is a lot of investment, whenever you talk about investments in digital. It isn't really not just the hardware or the software. Although that is reflected very much in our IT spend, right? But indeed, there will be more hires for people who would be able to do digitalization. It's not just in the IT department, but around our business units and other functions as well as we continue to look at using more data and also building more agile transformation sort of team. So I think these are all important and -- but I do see the need to compensate correctly.

On crypto, it's always a big topping on me and also on my management team. We've been looking at that. We see how the region has seen new development. And it is important, we will look to play a role in it. But it is also -- we'll be addressing demand from our customer base. And so that our customers are investing or using it with the right risk consideration. So more hopefully to disclose coming [ June ] next year, but I would just stop here with your 3 questions. Hope I have taken them rightly. So next one, yes.

[Ching Ching Koh, executive]

Okay. Goola, you are up next.

[Goola Warden]

Okay. Can you hear me? Hello. Okay. I've got a few questions. First of all, Great Eastern, I just wondered, there has been some volatility in the mark-to-market. And we don't hear about that from AIA and Prudential's bond portfolio. So I'm just wondering why Great Eastern appears to be more volatile on that side. And also, there was a decline in the Malaysian, I think, total weighted new sales. I just wondered what the cause was for that? And there is a falling NBEV margin, what is the cause for that? So that's on the insurance side.

Then just can I ask what are the management's thoughts on Web 3.0 because MAS has been talking about it. Is it a disruptor or an opportunity? And do you see -- do you see problems? Is there a threat there? Yes. And the last question is for Darren. For the SPs, what were the SPs for? Is there anything specific there? And is it just for it just [Technical Difficulty]

[Pik Kuen Wong, executive]

Goola, I might have missed 1 or 2 in the middle, but let allow me to go with Great Eastern and then Web 3.0. I probably missed out one in the middle. But please repeat that after I address Great Eastern and Web 3.0, yes.

So on Great Eastern, thank you for the questions. You mentioned our peer. Obviously, we cannot comment on our peers. However, we do understand that life insurers are generally impacted by market fluctuations as they hold investment portfolios. There might be differences in the metrics used and highlighted by each insurer, so it's very difficult just to compare that. But typically, most will only highlight the operating profit and the new business embedded value, as we know. And this will be in the results announcement, because these are key industry metrics.

Great Eastern has also disclosed these, and they continue to do well as soon as the recent results actually announced yesterday. So -- but as Great Eastern is consolidated into OCBC, its accounting profit, which includes unrealized mark-to-market movements will be reflected in our results, and there may be some volatility as a result. So I just want to highlight that because it's a part of us.

My thoughts on what -- on Web 3.0. Is it a disruptor? Or is it an opportunity? I think that is a good question. But for -- I think if you look at 3.0, it's -- there is not a common definition as yet as is exactly what it needs to. But it is -- of course, it is a new thing. It is an improvement from Web 2.0. So if you look at what we are doing with technology for the first 9 months, our tech costs, hardware and software, excluding staff cost, as I said, accounted for 12% of our operating expenses. So when you -- this is nearly, I think, $400 million for the first 9 months. So when you talk about Web 3.0, I take that as we continue to invest in what is new, what is available, what benefit us in our in our systems and in the way we do things.

There are quite a lot of things that is very valuable. For example, we continue to use AI. We look at Internet of Things. And I would just say this is important, and it is also an application that we can use to help us to do many things and to help our efficiency, to help reaching out to our customer, to help us in managing risk. So I wouldn't say it is a disruptor. I perhaps would say personally, I think that it is more an opportunity. Darren, I think that's the question for you. And if we do miss out, please repeat your question afterwards.

[Siew Peng Tan, executive]

Yes, Goola. Pertaining to SP, you're referring to ECL 3, right? Essentially, for the quarter, the bulk of it, as I mentioned during the result discussion as well is related to customer loans in Malaysia, the relief loans in particular and also a few corporates in the manufacturing, wholesale and retail space in Indonesia. There's a bit coming from the oil and gas sector. But you will probably notice that essentially pertaining to the oil and gas sector itself is not creating the same [indiscernible] that we have as we had in the past. So I hope that answer your question.

[Goola Warden]

Yes. If I could ask about, there's some falling margins on your NBEV in Great Eastern. I'm just wondering what the cause?

[Collins Chin, executive]

Goola, this is Collins. I think the NBEV margins, they are a reflection of the composition of sales in a particular period. So let's say, in a certain period, there are stronger sales in a certain segment, perhaps this may be of a lower margin, then this will be reflected in the overall NBEV margin.

[Chew Sun Teong, executive]

Maybe if I can supplement that. Helen mentioned earlier that Malaysia because of the lockdown, there's a general decline in terms of policy sales. And if you were to compare essentially the agency force in Malaysia compared to Singapore and also the history in terms of the proportionate sale of policy in Malaysia versus Singapore, there's a higher proportion of regular premium product of Malaysia. And as you know, regular premium product because of the protection element coming from it, tend to have a higher margin. Hence, when we have lower sale in Malaysia, naturally translated to low NBEV.

[Ching Ching Koh, executive]

Okay. Thanks, Goola. Next up, we have Prisca from Straits Times.

[Prisca Ang]

Can you hear me?

[Ching Ching Koh, executive]

Yes.

[Prisca Ang]

There are some reports in recent days that some of the banks [Technical Difficulty] are moving closer to...

[Ching Ching Koh, executive]

Prisca, sorry, I think you're breaking up. Could you try that again? Sorry about it.

[Prisca Ang]

Is this better?

[Pik Kuen Wong, executive]

Yes.

[Prisca Ang]

Following up on recent reports that some of the banks drivers are moving closer to for Citi consumer banking assets. Do you have an update on the whether it tends to bit [indiscernible]?

[Pik Kuen Wong, executive]

It's about Citi.

[Siew Peng Tan, executive]

Yes. As usual, we tend to not comment about the sales process to be fair to the players involved in the process.

[Ching Ching Koh, executive]

Any other question, Prisca? Sorry, we are not able to comment on it, any specific details.

[Prisca Ang]

No, no. It's all right.

[Ching Ching Koh, executive]

Okay, thanks. And we have Alice from the Asian Private Banker.

[Alice So]

Hello, can you hear me?

[Ching Ching Koh, executive]

Yes.

[Alice So]

I have 2 questions. The first one would be, could you further elaborate on how the OCBC Group will approach business opportunities with ultra-high net worth and emerging family offices in the Mainland China, particularly on how would Bank of Singapore and the group's China onshore entity collaborate in servicing these clients?

So the other question would be a follow-up on the question about increasing staff costs. Would private banking be one of the business segments you mentioned where the talent competition is particularly fierce? And to what extent this staff cost would influence the level of profits generated by this business? Would digitalization help in lowering costs in this aspect?

[Pik Kuen Wong, executive]

Thank you for the question, Alice. The first one regarding high net worth customer segment for Greater China. We are indeed -- we have been growing our Bank of Singapore team in -- based in Hong Kong for Greater China. Hong Kong a lot of time is the first spot where Greater China clients or wealthy clients in that region would look into investment ideas and having a relationship. And we have continued to build our coverage team in Hong Kong. But also, we are looking to increase our brand strength in China inside our [ Minhang ] China business, where we will be able to serve individuals.

And so there is indeed a very strong link between the Hong Kong team and the China team, and we can also find support if we need more expertise from offshore. We can also bring some of our guys into China as well. And not to actually miss out the very important link with Singapore, it is one business. So some of our clients would have a relationship shift by an RM in Hong Kong, but they would prefer to put some of the wealth in Singapore.

And as you know, we have been seeing a lot more family offices coming to Singapore as well, and that is very important. I think one of the -- definitely one of the strong advantage we have is we'll be able to serve high net worth clients, not just in their own investments and also their family needs, is that we'll be able to help them with the business they own as well.

So there is a lot of cross reference, I'm working together between our wholesale bank in the OCBC Group and in -- with the relationship managers in Bank of Singapore, as we see that as a very strong link.

And if you look at Greater China, we also invested in Bank of Ningbo, and we also have collaborations, if Bank of Ningbo has customers are looking to invest overseas, and there will be a strong working relationship on that as well. So I see we are in a very good position.

You talk about competition for talent. Yes, it is fierce. But we also would try to groom from our internally as well. So we buy, but we also keep and we also groom internally. Because we have a wide stretch of individual business, I'm just saying that from the ultra-high net worth to high net worth to our private -- our -- sorry, our premier private sector and to our premier sector. And in particular, in Singapore, we have a high amount of our customers in the private premier sector.

And I do see some of the RM serving these clients as potential sources of RMs for the higher net worth sector. So I do hope that helps and indeed, it is helping. Staff cost is always something we need to manage. But we'll -- I think the important thing is to have the right team and expand the value created by each individual RMs, making use of our overall network in the group.

[Ching Ching Koh, executive]

Okay. Thanks, Alice. We have one last question from Goola.

[Goola Warden]

Sorry, Ching Ching. I forgot to put my hand down.

[Ching Ching Koh, executive]

I see. Okay. So you're good?

[Goola Warden]

Sorry for lower hand. All right. Sorry, everybody.

[Ching Ching Koh, executive]

No problem. But I think we have Natalie. Sorry, Natalie from Business Times.

[Natalie Choy]

I just have one question. What is the bank's take on Buy now, pay later given that [indiscernible] you just partnered with.

[Pik Kuen Wong, executive]

Buy now, pay later, scheme?

[Siew Peng Tan, executive]

The question is for me then.

[Pik Kuen Wong, executive]

Darren you can take. Buy now, pay later is a consumer...

[Siew Peng Tan, executive]

We did evaluate buy now, pay later. On the consumer banking side. We do have a partnership with a buy-now-pay-later provider. Now in terms of the longer-term direction, pertaining to buy now, pay later is something that we are still watching this space, because you could think about the objective of buy now, pay later is also targeting a different customer base, different segment of the customer base. So there are many consideration coming from that, essentially the quality, the credit quality, the customer base and so on and so forth. So to answer your question, we are watching -- having a partnership in buy now, pay later and see how much this buy now, pay later development potentially will take off in the market that we are in.

[Ching Ching Koh, executive]

Okay, Natalie. Chanya do you have a last question? We will close off after your question.

[Chanyaporn Chanjaroen]

Yes. Yes, I do have one last questions because in her presentation, Helen mentioned dual-hub Hong Kong, Singapore. But on the Hong Kong, Mainland and Mainland sites, the borders are still closed. Restrictions only tightened. What do you see in terms of impacts on your business and the overall financial industries when such key hub in Shanghai and Hong Kong are closed to the outside world? Do you see that easing over the course of next year?

[Pik Kuen Wong, executive]

Thank you for that questions, Chanya. Yes, there is restriction at the border. But thankfully, I think in today's world, as we have been working quite a lot from home, we use virtual means to continue to get in touch with business with customers. Some of our colleagues change the way as they travel into China from Hong Kong, they have to go through quarantine. But when they do go through quarantine, they work from the hotel, right, continuously virtually, which is quite similar to working from home and then extend the stay afterwards to cover more business.

So we're adjusting to that. And obviously, we do hope that the border will be opened up quite soon as vaccination rates continue to go up. So that is how do we do that. But it does not stop us in expanding our business in China and connecting overseas. It's very similar to China working with us in Singapore as well. A lot is going by virtual. So we do hope that, I think, creating -- allowing people to travel more easily, it would help. Likewise, we haven't been able to travel very easily out of Singapore, but we are managing. I think the last 20 months have taught us quite a lot in how to manage our business without being physically present. But I do look forward to be seeing people physically because that does build a better the trust, the relationship and the way people work together.

[Ching Ching Koh, executive]

All right. Great. Thank you very much. I think that takes us to the end of our briefing this morning. Thank you again for joining us.