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Oversea-Chinese Banking Corporation Ltd
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Good morning, everyone. We have some of our media friends with us and also some who have [indiscernible] online. We can't see you, I know you can't see us either, but please do -- kind of later on during the Q&A, do raise your hand, and let us know when you want to ask a question.
So before we begin, I'm going to pass the time to Helen, first.
Thanks, Ching Ching Koh, and good morning, and welcome to our third quarter results announcement and briefing. We'd like to first introduce Chin Yee -- for those who are in the room, I think you have introduced yourselves to each other already.
Chin Yee is our own homegrown talent. That's how I always describe her. She joined the group as a management trainee. So like me, I also joined the group as a management trainee. But Chin Yee has stayed with us and have risen through the ranks and have done, I think I never remember everything, our Corporate Finance, global treasury, investment research, asset management and in the financing and in risk management as well.
So it's -- pretty all around it. And she was our Head of Group Audit, internal audit, before she took up the CFO role just this week. So just this week. So I'm sure we will benefit from her experience and her understanding of the institution. And over time, I'm sure she will be getting to know our investors as well.
So I will now pass to Chin Yee to walk us through the financial performance.
Thank you, Helen, for the introduction. Good morning to everyone, and thank you for coming to our third Q result presentation. And for everyone online, I hope to be able to meet these guys in person soon. All right.
I will start on Slide 4. For the third quarter of 2022, we reported a record net profit of SGD 1.6 billion, a 31% increase from the previous year and 8% above last quarter. The group's annualized return on equity improved to 12.4%.
Total income rose 23% year-on-year, a strong 44% rise in net interest income from higher interest rates and sustained asset growth more than offset a 4% decline in our net interest income -- sorry, in our noninterest income. NIM expanded by 54 basis points year-on-year to 2.06%. Both customer loans and deposits grew by 6% from last year.
As income growth outpaced debt of expenses, the cost-to-income ratio improved to 40.3%. Allowances set aside were comparatively lower against last year, and credit cost on loans were 14 basis points.
The NPL ratio decreased to 1.2%. And our nonperforming assets coverage ratio rose to 108%. OCBC's capital remained strong at 14.4% CET1 ratio.
I will now move on to some key financial highlights on Slide 5. Banking operations, net profit rose 31% from a year ago, and 10% quarter-on-quarter to a new high of $1.37 billion. Wealth management income was also higher for the quarter and comprised 35% of our total income.
During the quarter, the group's wealth management business saw positive inflows of net new money, which offset decline in market valuations. As a result, our wealth management AUM was stable quarter-on-quarter.
Our insurance business registered lower sales in Singapore, which should offset an increase in sales in Malaysia, while NBEV margins were higher on more favorable product mix. Net profit contribution for the group for the quarter was SGD 233 million, 32% above last year.
Moving on to Slide 6. Our earnings base continues to be well diversified across businesses and geographies.
Moving on to the next page on balance sheet. We are well positioned with healthy levels of capital, liquidity and funding. This puts us in a very good state to support our customers and capture new opportunities as they arise.
I'll skip Slide 8. Moving on to Slide 9. Moving on to the details of our group performance. For the third quarter, net profit rose 31% from the previous year to SGD 1.6 billion, mainly from higher net interest income. Compared to the last quarter, net profit rose by 8% as an increase in net interest income offset lower trading and insurance income.
Turning to the next page. Our group's net profit for the first 9 months was SGD 4.44 billion, 14% higher year-on-year, underpinned by growth in net interest income and lower allowances. These offset a decline in noninterest income and higher operating expenses.
Turning to Slide 12 -- sorry, turning to Slide 11. Our group net profit grew sequentially for each quarter this year, reaching a new high for the first 9 months.
Moving now to Slide 12. Similarly, our banking operations net profit also reached a record high of both 9 months as well as third quarter.
Turn to Slide 14 now. Net interest income for the third quarter exceeded SGD 2 billion mark for the first time to reach SGD 2.1 billion, 44% higher year-on-year and up 23% Q-on-Q. This was driven by margin uplift and asset growth.
Net interest margin for the third quarter was 2.06%, rising 54 basis points from last year and 35 basis points from the previous quarter. Margins for the quarter improved across all our key markets, including Singapore, Malaysia, Indonesia, China and Hong Kong as a rise in asset yield outpaced our funding costs.
Turning to the next page on noninterest income. Noninterest income for the third quarter was down SGD 1.05 billion, down 4% from last year and 11% from last quarter.
The year-on-year decrease in noninterest income for the quarter was driven by lower fee income and sale of investment securities, which was partly offset by higher trading and insurance income.
Against the previous quarter, the decline in noninterest income was only from lower trading and insurance income.
Turning to next page. Going into more details from the previous slide, fee income for the third quarter was softer at SGD 453 million compared to the previous year. The drop in fee income for the quarter was mainly due to lower wealth management fees.
As we continue to see a risk-off global investment climate with tempered customer activities. A year-on-year rise in our other fee segments for the third quarter which included credit cards as well as loan and trade related fees helped to partly mitigate the decline in wealth management fees.
Moving to next page on trading income. Trading income, which mainly comprise customer flow treasury income, was SGD 194 million for the quarter, above SGD 83 million a year ago.
Compared to the previous quarter, a rise in customer flow income was more than offset by lower non-customer flow income, in part, due to weaker investment performance.
Turning to Slide 15. Operating expenses for the third quarter was well managed and rose by 7% from last year and a modest 1% quarter-on-quarter. The year-on-year increase for the quarter was largely attributed to a rise in staff costs from headcount growth to expand our talent pool and annual salary increments.
With positive operating jaws from strong income growth, our cost-to-income ratio improved to 40.3% for the quarter.
Next, on allowances. For the 9 months, credit costs amounted to 9 basis points. For the third quarter, total allowances were SGD 154 million. About half of these were for impaired assets, which comprise a SGD 47 million charge for the group's overseas properties.
Third quarter, expected credit loss, or ECL, 1 and 2 allowances were SGD 76 million, reflecting updates of macroeconomic variables in our ECL model.
Turning to the next page on total cumulative allowances. Our cumulative allowances increased from the previous quarter to SGD 4 billion. Coupled with the decline in nonperforming assets, our NPA coverage ratio increased to 108% this quarter.
Okay. Next page of asset quality. Our loan book remains resilient, and the NPL ratio trended lower to 1.2%. Nonperforming assets at SGD 3.69 billion, lower by 7% quarter-on-quarter, as higher recoveries and which more than offset our new NPA formation. Touching on Greater China. Greater China NPL ratio was 1%.
The increase in Greater China NPLs for the quarter was largely attributable to a single network customer needs that is highly secured against property and there is no structural stress observed for the group's Greater China exposure.
Move to next page. Recoveries and upgrades for the quarter were higher at SGD 669 million across both the corporate and customer segments in Malaysia and Indonesia.
Next page on customer loans. Our loans grew 6% to SGD 303 billion from SGD 285 billion a year ago, as we supported our customers across our core markets of Singapore, Indonesia and Greater China as well as our international network in U.S., Australia and U.K.
By industry, the year-on-year increase was mostly driven by loans to the building and construction sector, FIs, investment and holding companies and the consumer segments. Again, the last quarter, loans were up 2%.
Our loans continue to be well diversified across geography as well as industry. The building and construction sector and housing loans remained the largest segment at 30% and 20% of total loans, respectively.
Turning to next on the customer deposits. Customer deposits grew 6% from a year ago to SGD 353 billion and 1% higher compared to the previous quarter. As interest rate grows, in line with market conditions, there was increased customer demand for higher billing deposits.
As such, we saw both continued shift of CASA balances to fixed deposits and new fresh funds placed [indiscernible]. Consequently, our CASA ratio for the third quarter was lower at 56.1%. The group's liquidity remained above a loan-deposit ratio of 85%.
Next on capital. Our capital remains strong. The CET1 ratio at 14.4%. The quarter-on-quarter decrease in CET1 ratio was mainly due to third quarter profit contribution being offset by the payment of our interim 2022 dividend as well as higher credit risk rated assets associated with our asset growth.
And with this, I end my presentation, and now pass it back to Helen.
Thanks, Chin Yee. And I just want to add some remark. I have 2 very simple pages of information. And so while I think we all talked about the uncertain market and just [indiscernible] a volatile year, but still pleased to have reported solid performance which underscores our strong business fundamentals.
I think Chin Yee went through all the information. Just think about that happy to see our banking net profit and also group net -- group net profit is also a record high. So this is very pleasant for the third quarter and also for the first 9 months of the year.
I think a lot of attention, obviously, focused on the net interest income and our NIM, and indeed, the key driver of the performance is indeed our -- the NII growth.
And I think I attribute that to a well-positioned balance sheet, we've been reshaping our balance sheet for the past 2, 3 years. And this allow us to capture the benefit from the series of rate hikes. This is -- we're talking about year-on-year uplift of more than 50 basis points for the third quarter.
On loans and deposit, loans is 5% up year-to-date, and this is within our guidance. I'm expecting the full year to stay in the mid-teens level. This is indeed a lot is -- on supporting our customers' working capital and investment needs across our network.
I think we have a page that shows -- Chin Yee shows a page of where we grow our loan book, so very much in Singapore and in the international branches that was shown earlier on.
On the deposit side, our franchise continue to grow. I think a lot of investment in digitalization for the previous years. We have mentioned the deposits from SME is actually growing very nicely because we think that it is very effective in opening an account with the SME.
I think 98% of SME accounts were opened online, and without having the customer to bring documents or whatever into the bank.
On the consumer front, it's very effective. I believe we have the lowest number of trips to open an account. And once you click, everything with the information, the account number comes to you in seconds.
So I think that is a result of the investment in digitalization. So that helps us to have more accounts, and indeed resulting in also a higher CASA percentage.
CASA at 56%. This is countably above the pre-2020 levels, and we expect it will stay. Although, of course, with continued interest rate rising, there's still opportunity, but we will start to pass on, of course, to passing on to the depositors as well. So we know that CASA has dropped also because some of the funds are switched to fixed deposits, which is a natural phenomenon in the high-interest world.
Wealth Management. Our wealth management fees indeed depend on investment sentiment. The good thing is we have net new money coming in across our private bank, across our premier banks and also premier clients.
And I think the -- also investment in the wealth platform, that is now uniform for both our POS and OCBC Bank, also allow customers to do their own investment much more effectively, also without the need to necessarily talk to an OEM. So I think that helps to sustain our marketing to and our dealings with our customers.
And on asset quality and credit costs. Portfolio quality is resilient. NPL ratio decreased -- declined to 1.2%, but our coverage is still NPA coverage ratio is above 100%. We have been proactively managing our book and indeed doing stress testing.
I think one thing that helps to reduce the NPL, of course, is relief loans which was relatively high last year, or in the beginning of COVID. It's now -- has been existing in an orderly manner.
I think the book is now about 0.2% of our total loan book. I think it was as high as high single digit at one point of time. So we continue to see orderly exit. Customers are starting the repayment, and that's why there's some -- also some write-back on [ ECL ] as well.
Of course, I said -- we said that there is no systemic stress. But I won't be surprised, I think the world now always gives a surprise. So any idiosyncratic occurrence, I wouldn't be surprised.
But depending on what it is, if something does happen. But generally comfortable with the quality of our book. And on expenses, we continue to have investments to drive our franchise growth, raise productivity and deliver operational efficiencies.
And this would -- we have continued to see new results. I just mentioned about deposits. And indeed, this is through investments over the year, and we'll continue to target our positive operating jaws.
Turning to a page, the next one. And I did mention that I am comfortable and quite confident. And so we will continue to build on the momentum. So we are hoping to continue to reach our targets towards the end of the year.
Loan growth, mid-digit, single -- mid-single digit, the fourth quarter NIM, with an exit NIM in the third quarter of 2.15%, and the average NIM of 2.06% for the third quarter.
We are expecting fourth quarter NIM to be about 2.1%. For the full year, expect NIM to be between 1.8% to 1.9% for the full year, likely to be in the higher range of that -- in the higher part of the range.
We expect 2022 credit costs to be low to mid-teens in terms of basis points.
Performance, I will say, should provide good base for us as we move into next year.
About the market, everyone talked about the uncertainties, inflation and slower growth, but I'm still more optimistic on the resilience of our key markets, in particular, ASEAN.
So if you look at Singapore, we know that employment situation remains very firm, traveled and consumer-facing sector benefited from the reopening. I was at the SFF this week. And wow, I'm so happy to see the flood of people, and it's really very normal.
Right, in 2020, I remember going down 2020, we were really saying that you should sit at this table, and 5 people, and you cannot cross to the other table, and the tables are like 3 meters apart, I remember. And there was very, very few people going there.
Last year, we see more activities already, but I think this is really normal. And we do have in the next 2 weeks -- next 2 weeks on other types of conferences, et cetera.
And I have never received so many requests for meetings because a lot of people coming to Singapore, right? So a lot people saying, hey Helen, I want to talk to you. So I'm excited about it.
Malaysia, Indonesia are part of a steadier recovery, so expected to continue to next year. China, expect policy measures to support growth. And of course, we hope that the opening up will be sooner than later in next year.
Hong Kong, gradual reopening, and it's just a hell of a conference, which is quite well attended, I was told. And the messages have been very positive from the Hong Kong government about reopening and the support for the economy to [ recover ]. Of course, we have to be watchful of global macro vulnerabilities.
We stay cautious on near-term vulnerabilities from developed markets, which could have a tender impact on the overall asset quality, growing divergence in growth indeed, and inflation outcome is yet to be seen. So that is rising risk of policy miscalibration by central banks to tame the inflation.
So the recession risks remain high, elevated in Europe and the U.S. We'll remain also watchful in case it spill over to the Asian economies. A -- geopolitical tension and issues could not be understated, that could also further complicate business matters.
I think the -- in a way, our positioning for next year is good. But of course, we remain very watchful for how the market turns and switch in the coming year.
On the opportunities, definitely, we see opportunities from the strengthening intra-Asian [ banks ]. And indeed, our driving 1 group approach to capture opportunities from cross-border regional closeout, from supply chain and wealth migration.
We do see quite obvious examples that we have won mandates for cross-border payments which can be in between China, Singapore, Indonesia and Malaysia, as an example, and continue to see wealth accumulated. And as we said, we are able to bring in net new money for our wealth business.
We also [ tipped on ] relationship with a new economy industries, such as digital services, mobility, advanced manufacturing. I met quite a number of fintech companies' CEOs and owners at the SFF.
Pretty robust, I think discussion is they are keen, continue to invest more into Singapore and from Singapore to rest of the countries. And in a way, these are indeed customers for us, and we have opened accounts of many of these new companies coming into town.
We continue to focus on strengthening our core. When I say core, this definitely means investment in technology. So indeed, so digital platforms work well. And this is to meet the evolving needs of our customers and also to enhance the banking experience and to instill trust.
Last year, you may remember, I set up the COO function with Khiang Tong heading that [ role ]. And we built -- we strengthened the transformation office. We strengthened the data office. And we strengthened the customer experience office, all under the COO.
So this all -- is an investment for us to, as I said, I'm sure that our platforms are sound, and that we will be able to meet the needs of our customers.
Benefiting from the digital progression, we saw in the third quarter a strong pickup in the number of times deposits placed digitally. So customers don't need to call us up.
And they find it extremely fast, it's simple and convenient, and also do not need to queue up in the branch and can simply open one on our app, on our digital app.
We're also first in Singapore to enable CPF account to top up and directly from digital banking platforms as well.
And as part of our innovative drive and evolution towards new technologies, we will be minting the same -- I used the word minting and issuing NFTs, nonfungible tokens, to our employees through our own in-house blockchain platform.
This is to commemorate our 90th anniversary. We just passed -- we entered into our 91 -- 91st year [ our birthday is on ] the 31st of October. So this week as well. So very happy. And we indeed need to deepen our talent pool. And the investments will be in wholesale banking, in private banking and in technology.
Stepping up the ESG efforts. I think this is a big topic. I always talk about it in all my analysis. We'll make further strides towards SGD 50 billion of our 2025 target. Mid year, you will remember we said that our commitment was at SGD 37 billion, and now it's SGD 40 billion by end of September.
So this is a commitment, but the drawdown has reached SGD 28 billion of out of the SGD 40 billion commitment, and it is about 9% of our loan book.
I think it is quite a happy number and -- it's -- I think it's relatively high in the industry where banks choose to disclose the composition of the green and sustainable finance in the loan book.
We announced just last month that we joined the net zero banking alliance and reflects our commitment as a group to achieving net zero, not just in operations, but in lending and investment business by 2050. We will announce more details on how we [indiscernible] our book in the coming months.
In celebrating of our 90th birthday, we wanted to give back to the community, and pleased to have launched Singapore Mangrove Park in Pulau Ubin and this is Singapore's first, large-scale, ecological mangrove restoration project. And we also have start-up one in Malaysia at the same time.
So together, as they have continued to grow the mangrove trees, and mangrove trees in a way store more carbon than carbon trees, like 3x to 5x, let's say, 4x. So the 2 projects together would be able to reduce about 13 million kg of CO2 in their lifetimes.
So I think reducing carbon emission is one of the key factors to help fight the climate change. So I'm very excited. I was -- I was in there planting a tree. And hopefully, go back every year to look at how the mangrove plants have grown, and it's very interesting ecology.
So I think I'll stop here, and thank you very much for coming today. I'll pass the time to Ching Ching for our Q&A. Yes.
Thanks, Helen. Yes, indeed, we had a pro business also we seen mangrove park.
Visit.
Yes, please. You let me know how you want to do it, we'll reach because of a straightforward.
Straightforward.
So question just from what Helen said, you say full year 2022 net interest margin at 1.8% to 1.9%?
Yes, full year.
I didn't catch that. Okay. So we open to questions. Sorry. Okay.
So outlook. So for next year, what are you expecting in terms of loan growth and net interest margins and credit costs? That's the first question, of course. And where do you expect -- and what's your pipeline like for the loan growth?
And then, of course, the question on credit costs. So have all the released loans been a bit -- I'm happy all the word. You had Malaysia, Indonesia, into the share sale for loan book Indonesia, I think.
Many bonds, one at a time you remind me for the something. Since we're on relief loans, we talk about that, for us, we think that the total amount is about 0.2% of the loan book. So it comes down really substantially. And when we say NPL and that impacts the NPL, right? So once customers start to repay, we apply like a 6-month criteria, meaning customers continuous pay for 6 months, then we can be [indiscernible].
So but the total size is also strength, right? Its strength is 0.2%. So meaning that there's still that, right, there's still some of that. But in a way, they -- exit of the mining, they start to be paid. So they have not all matured because we still have outstanding. So that's really for us.
You talked about into next year, what is the loan growth, right? Loan growth, I think it's a bit early to tell, but I think it will be -- again, we are thinking more again single digit. So whether it is mid-single or high single, I probably have more color by the time we talk about our final results. So by February, I give you a better target, yes. But I think we have momentum to -- and customer demand to bring us that.
Of course, it's all subject to a lot of the external environment. We can't be sure, but that is the plan.
You ask me that about...
When is they're going to sell, raising...
Yes. Well, I think the market did talk about potential still one more in December and one more in the first quarter, right? And so that means we expect that share for interest rates to remain high. So the high NIM environment also potentially can hold next year. And then I think as a whole, you will naturally see more line, if it is time to [indiscernible] all the while and if market investment sector is also still quite uncertain, then you will continue to see the deposit costs and funding costs will pick up as well.
So it's 2 sides, right? One side is further interest rate pricing and it's a full year impact. On the other side is the deposit cost rising or your funding costs rising. So I think, hopefully, next year will hold. I also will give you after the -- at the full year results maybe a better target of our estimate of NIM.
And so we're saying that the full year is 1.8% to 1.9%. So it is withhold, that means I hope that, that range will be there potentially higher depends on how we look at next year as we finish this year. So -- but hopefully, it will hold. So that's on NIM.
And then you were asking on credit cost -- credit costs. Credit cost, we are talking about the meetings for the full year. I do not see systemic risk. We have done a lot of stress test. So again, hopefully, that can hold as well. So next year, as again, I give you a clearer target by the time we meet again to talk about the final results.
So I think these are the 3 numbers you had.
In terms of like [indiscernible] quarter or 2. So there's been a lockdown in China, et cetera, et cetera, and then there's been a new 7-man [indiscernible] community, et cetera. So how does this -- how does this change? I mean has this changed your Greater China strategy and in way -- or how would it change our Greater China strategy, if at all?
Yes. First thing, we just generally don't comment on politics. I mean -- but when we look -- when we look at our Greater China business, the strong story is about how we make up Greater China with us, which is what we call a [indiscernible] group approach. I think in the past, we were not doing as much. But over the last few years, as I said earlier, we've been investing a lot on our product [indiscernible].
If you can only serve customer cross-border only when you have the product capability. And that is what I mentioned, right? You have some Chinese company coming over to ASEAN. And I mentioned fintech companies, but also, again, the China plus 1 story continues. And we have seen the advanced manufacturing in [indiscernible], which I mentioned the other day, I was talking to a micro manufacturer, a chip manufacturer, who has a big factory in Penang and he told me the company is local, and the company has been there for 60 years. Of course, they are seeing more investments into demand. And I said that so how is international competitors competing with you? Is that we are all building, right? We're all manufacturing, and we are all more -- and more all exporting. And in a way that if there's more investment into the areas better because your supply chain will be feature as well. And this is where we are saying that where the opportunities are, where there is investment into manufacturing, the local supply chain also got more business. So this is the opportunity I talk about regarding China plus 1.
And to our China story, in a way, you may remember, we also talked about our onshore bookings action not very big. It's about 2% of our total loan book. The reason is we don't intend to compete head on with the other big banks domestically. Our advantages to be able to meet the Chinese government, Chinese clients into us. That is where we are strong, yes. So I cite Malaysia, I cite Indonesia, I cite Singapore. And that is exactly where we are strong.
So to an extent, every $1 we lend in China, we potentially are banking with all these Chinese companies overseas, will potentially land $4. So you see where the opportunity lies, right? So in a way, total Greater China book is not small, if you look at -- if you look at our pie chart, right, it's not small. Because Hong Kong, the big very substantial, big Hong Kong customers have been with us. And we -- but the loan book in Hong Kong definitely much bigger than the China book.
And so that's how we look at China opportunities. So in a way, for our strategy, to serve Chinese companies and China wealth companies overseas, that does not change. And we see the opportunity will continue. And so -- and Singapore is our hub, our strong hub, what came with the Hong Kong hub. And I think this is exactly where we think the opportunity lies.
And you also may recall that last year, we also integrated our regional OCBC Hong Kong branch business with Wing Hang. So it's now 1 team. And have a Greater China team now. So that the Hong Kong team are working very closely with the China team. And we continue to see China companies bringing business to Hong Kong and [indiscernible] business. And so I think the strategy is not impacted by the situation in China. But of course, if China economy is not growing as fast, it has also been playing effects on the rest of Asia as well.
But I think the company is to continue to see that China exports stay strong, right, and potentially also helped by the [indiscernible] renminbi. But in a way, when that is straight, but that is investment, so that's exactly what we are [indiscernible] and the wealth as well.
So the property sector that -- the property sector problems and the debt problems of the property sector haven't affected...
We have made whatever positions we have -- we have decided to make, but we expect exposure for China NIMs are very -- if you look at our China book, I think I can disclose that. I talked about the China book, it's about 2% of our total loan book. But only 1/3 of onshore, only 1/3 of that is in real estate. And even having said that, that exposure I think a bit about...
More than 90%.
More than 90% is network customers. So that's why we are saying that our exposure to domestic real estate companies are really low. And even if it is domestic real estate companies is potentially more SOEs.
You ask our first question -- just be confirm there. Can I just answer -- I know that you just talked about Greater China exposure. But that seems to be a 24%, 25%? The Greater China exposure at 25% of total loans need to be monitored. And that's a report that mentioned that, that's the default of -- by the customer in the third quarter. Could you talk about it a little bit?
This is a network name which invested in China, and it's the loan is secured, fully secure, yes. So that's why we have to look at it as an NPL because we are looking at the security to repay the loan. And so the same process.
It's network name?
It's a network name. It's a customer from Singapore invested in China.
Oh, I see. But the loan is fully secured.
Loan is fully secured.
[indiscernible]
With Chinese [indiscernible]
With Chinese assets. Yes.
And I'm sorry, I have 2 other questions. Can I get some new outlook on Greater China in general? For the Mainland, do you see lockdown to people at all, how many quarters? And you say that you don't see any systemic rates, but you also reflect a lot of uncertainties. I mean, in your view, what are you preparing for the unknown?
China, first, I think my -- it is everybody's guess and potentially, you guys get more than I do from China. So I think there is an intention to look at how to open up in a good manner. I do not have any particular insights. I just hope that it will be earlier than later. Earlier, meaning, hopefully, it will be first -- end of first quarter, or early second quarter.
But I think China always do it in the orderly manner, right? So I think taking perhaps Hong Kong and Singapore as examples, how do you manage that? And whether there's differentiation between cities, I would not know. But again, I think China has listened to a lot of views. So I think they are working on it, but when would it open up, I do not know.
To add a question, sorry, you talk about inflows at the Wealth Management unit. Could you share light which regions that may be significant contributors to those inflow? Do you see AUM growing significantly next year?
You also mentioned in your outlook about deepening the talent pool. But to share a little bit, we have seen lots of management changes. Which units or which operations that you will continue to strengthen?
Okay. Well, first, right, the first question as well. I think we've seen quite a balanced growth of net new money. Yes, that is good to China clients. But also, we have -- I know Singapore has presence in the Middle East. We are in Dubai. We are in Europe, London. But I think -- and even I mean notably, Singapore, Malaysia, Indonesia, we do all cover.
And so in a way, it's quite even, like perhaps less so from Europe. Europe has their own situation to manage. But in a way, we do see quite even increase in wealth customers.
So of course, the Singapore book is always stay. If you look -- you can talk about growth in net new moneys, in premium prices, in premium that would be more Singapore. So that is for the wealth piece.
Then you asked about talents and management change. Yes, I think, we were happy to have a peak long journey earlier in the year in March. And he is also continue to invest in people. I mentioned earlier on, next year when he is also looking at having more people for the wholesale business. Wholesale business is customer coverage, and indeed he's building this link, right? Because a lot of the -- what we talk about, the investment flow and the products capabilities are very much wholesale and improved treasury as well.
So we're also investing into technology, continuing investing in technology. We need to grow our core. We need to continue to make sure our digital capability continues to serve our customer well. We need to invest everybody is in the defending from cyber. I think that's -- depending from fraud. That's everybody every time is doing. So we will continue to invest as well.
And I think the other opportunity as well. So it is not restricted to Bank of Singapore, but it would be in CFS, in front line, RM, who can be certain customers in the wealth inflow as well.
[indiscernible]
So in general, more RMs.
Any colors?
No.
I think we have about 400 RMs as of year end.
That what you're talking...
Bank of Singapore.
Bank of Singapore.
But then you need to look at wealth, not just for Bank of Singapore because the retail has a very strong premium private client, which is like private banking business. In line with what you said before.
But that match the strategy as well. We talk about our 4 growth areas in the refreshed COVID strategy. The first one is the intra-Asia investment and trade flow. So I talk about that's why we want to strengthen our wholesale banking unit, yes. And then we have the wealth piece. So that is the -- I talked about so much already. And the third piece is new economy, meaning I talk about all the potential new customers from the fintech sector, the niche commerce sector. And we have other parts of new company already in China. There are small licenses given out by the MBS or some of the fintech companies, which we work as a partner as well. So they open account with us, but we also work as partners with some of them.
We are also looking at the fourth one which is the sustainable financing and investments, which we set up, we continue to grow the book. And that part is indeed growing faster than the book. So next year, what we crossed the double digit, it'll be safe to say that it's 9% of our total loan book. In the next year, it will be 10%. I'm not sure now, but we do see customer continued demand as we have done the transition.
And I have a question on the metro also. Do you see a kind of tipping point at which the U.S. might kind of enter a recession? And what would the extent of the impact be on Asia and growth in sales? And also, your SGT provisions of about $70-plus million this quarter compared with the same quarter last year when there was a [indiscernible] what are the possible areas of strength that you see in the bank?
My third question is on the NFTs that you mentioned. Could we have some color on that as well? What type of NFT?
[indiscernible]
Offline, I'll give you more information.
Yes. So macro, I think you earlier asked a similar question, but not exactly the same thing, I've not taken the quality. But indeed, I think your main concern is inflation, right? So how does inflation, the pressure goes, I mean what's the stress is going to be like? And we say that do I see U.S. going into it? A lot depends on whether the effect of interest rates rising and further mentioned. So it's, again, everybody's guess, right? That is, in fact, potentially the biggest uncertainty is how does inflation eventually -- is it -- has it peaked? Will it continue to go? And would that become what we call a saturation environment, right? So if U.S. and Europe both go into a separation environment, I don't think Asia can be spared.
Spared meaning?
Meaning we will be impacted. But again, with the continued economic recovery as a lot of the Asian economies get out of COVID, I think compared to 2020 or even to some part of 2021, so next year, I think Asia is still more resilient.
Because there's quite a lot of pent-up demand, right? As you say, traveling has resumed, all the conferences have resumed. You talked about people really need to spend some money after the few years are not really doing much, right? And so -- and I think if there is no systemic risk happening of obviously we're talking about geopolitical tension and how long does the Russia -- Russia-Ukraine war continues and how does energy prices react to that continuously, all these are the uncertainties that we are facing.
I just hold on to the point that Asia still do relatively better than U.S. and Europe. But of course, if something truly back up then everything will be impacted. We go back to -- you think about over 2020. Nobody expect COVID coming, and then COVID came. And of course, the market reacted to it, right? And -- but with wealth accumulated in Asia for a pretty long time, and governments able to have and come up with relief measures and having salary, health and all that.
So in a way, the market -- a lot of the Asian economies managed to bounce back after COVID. So -- but inflation is a different impact, right? But I think the world has to continue to trade, manufacturing still have to go on. And so hopefully, for Asia, then it does react better. But we are in -- as I said -- I always said, we have a 3-pillar business. We are not just in banking, we're in insurance and in wealth as well.
So in days when people feel that they need more protection, insurance come in play. And then wealth, as I said, it's a continuing even over COVID, we also win more wealth customers as well. And that is why we say that investment in digitalization is so important. And it is because customers do not need to travel to see you. They also do not need to come to your bank to see you. But the branch that was still important because customers still want to sometimes do more in-depth discussion on managing their investment and wealth. And that's where the RM come into play and helping customers to think an overall picture of how to manage them well.
So it's difficult to say when you say how do we look at what is the main stress, I would say inflation is the main stress, and then geopolitical tension is the second one.
So just to pull up on this macro questions, is it right -- is it accurate to say that you don't see the region, ASEAN region headed for a recession?
And also I have another question on technology investments. So a lot of things now I was exploring like organizing [indiscernible] whether OCBC is looking at exploring that at scale. I know that was something you did with the carbon credits. Just wondering whether there's something that would be expanded.
And also, I think on the -- there was mentioned on expanding the RMs. Is there -- how much are you looking at growing that?
The third one's macro would recession in nature would happen, is it, on separation that happened to inflation. Yes. I do have a firm will. And when that's what we say uncertainties about, right? I'm just generally saying that Asia is what we [indiscernible] so -- but it depends on how big the impact of the overall impact of the world is. If the whole world goes to minus or negative economic growth, Asia would not be spared -- would not be spared, if it goes to negative or is it pretty low single digit, right, or it's pretty flat, right? So that will be difficult to say. It's just that it should do better than the rest of the region. That's your first question.
The second one about tokenization. It's something we continue to work out. So we actually have a task force working on it. Looking first thing on what is the customers' interest and demand. The second thing is the technology supporting that. We -- as we said, we are already using blockchain technology. And we have done tokenization before. So is tokenize or to break it into smaller part to sell to customers. So this will continue to go on.
When you say large scale, it also depends on customers' demand as well. We're generally not supportive of speculating -- speculative demand. Meaning, if they want to buy into something that is maybe volatile, that is not exactly what we want to do for our customers. But to use the technology to support, to create products, that is a good investment for our customers, that we continue to do. So that's your second question.
Your third one about...
[indiscernible] what China was a case with the number of RMs we expect to how many -- I don't think we give because, I mean, we are hiring across all the core areas, but it is also hard to say like by this certain number. Okay. My last question -- sorry. I just ask whether online maybe or on going to ask questions. Okay, it looks like they are happy for you to represent them. So Gula, yes, last question.
So in terms of the structuring technology, I mean -- do you have any view on whether you want to join DBS and JPMorgan in part to your -- or they are also doing that pilot in Project Garden, which once again, those 2 banks. But would not give other 2 local things. So if there's any view on that? And would you partner any of the other local banks in some of these pilots?
And the second question is on your CET1. Maybe Chin Yee, does it include the Great Eastern Capital Card? Does it include the Great Eastern card in your CET1? Because U.S. is always a lot higher than the others. And then you won't pay back some of our -- some of the investors in dividend, that sort of thing. So that's -- so could you those?
Okay, tokenization and assets end. We have been working actually to establish ourselves with the ecosystem. Outline, I say that. We announced 12 months back that we have worked with a company, which is a license, [ MS ] license company, called Metaverse Green Exchange, company called Metaverse Green Exchange. They are working together to consider tokenization of green assets. This comes into our sustainable play as well, right, our sustainability play as well.
So are we working -- are we working on certain things with that. But this is something that we have announced. That's why I want to use this as an example. So eventually, what is that -- what that's going to be like, whether it is -- whether it will eventually be a joint-venture platform or whether it will be an investment in the platform and whether it is a cooperation, we will have more to -- we will have more to tell as we continue to work on that. So that is one example.
We have been on other form of -- working on other platforms as well. So some of the industry made initiative on using blockchain to look at trade data. And I think these are all ongoing. And this, we definitely are working with the other banks.
So using -- we're very keen to use the technology, right, to serve the best -- the trade platform, we're talking about using blockchain, is to ensure that every piece of trade data can be traded, right? So this is to help to defend any type of fraud in the process of trade documents, right. This is a long growth. So this is -- we are as active as any other bank, and we are one of the leading banks in that as well.
So we have a few of these initiatives. So as things mature further, we definitely would want to share with the media.
So no [indiscernible] seems to be doing thing you're not interested in part opportunity in the JPMorgan TPS across border that they're using blockchain.
I don't want to comment on that.
You don't want to comment. Yes. Okay.
Thanks, Guna. Maybe we leave Chin Yee to answer the last part of [indiscernible]
CET1 ratio, right. Your question is that higher than bank. Firstly, on [indiscernible] the treatment of insurance company, we go according to the regulatory [indiscernible] Yes. So as MAS 637, 637.
In terms of our ratio in a year, yes, we do have -- we have been optimizing RWA over the years. And as a result of which, some of our RWA ratio is fairly -- kept at a fairly good level. And also driving the return on RWA as an other -- so that sort of adds to the CET1 ratio. They have a very healthy level. And I think that would be -- not sure of the year before. Because of changing the applying RB to [indiscernible] that was a jump, that was a jump.
IRB to bring up, right?
Yes, yes. [indiscernible] 0.6 percentage points of [indiscernible]. Roughly, roughly.
0.6 percentage points.
Percentage points.
Okay. The other thing, of course, was that [ DPS ] and you both said that the securities portfolio, there was a hit from the securities portfolio. I mean OCI. Was that an impact on yours or [indiscernible]?
Yes, we also have -- but we looked at that we need to manage and to hedge that. So as we talk about like rebalancing for your reshape, we do look at that as well. This ones holding, those pre rate high has impact on the sales in. So we do look at that will see and managing that hedging that can. And you also have been selling off some of those pre rate hikes portfolio. And that's why you see some losses in terms of investment gains in our second Q other noninterest income. That's part and parcel of our -- reshaping our portfolio and managing of our [indiscernible].
Okay. We will end.