Hi, everyone. Welcome to iFAST Corporation Results Presentation for Q3 2023, and nine months 2023. My name is Jean Paul from the Corporate Comms team. I'll be running through the key summary in section one , before inviting Mr. Lim Chung Chun, our CEO, to go through the subsequent sections. Starting with key summary. Our assets under administration, or AUA, grew 1.7% Q-on-Q, and 12.6% year-on-year, to an end-of-quarter record high of $19.12 billion as at 30 September 2023. Despite volatile market conditions, net inflows remained positive and increased 34% Q-on-Q to $751 million in Q3 2023. For the nine months of this year, net inflows stood at $1.62 billion.
The group's non-banking operations continued to show strong growth in 3Q and nine months, 2023. Net revenue increased 37.9% year-on-year to SGD 38.4 million in 3Q, 2023, while profit before tax increased 141.8% year-on-year to SGD 13.27 million in 3Q, 2023. On a year-on-year basis, net profit grew 149.5% and 57% in 3Q, 2023, and nine months, 2023, respectively. The Hong Kong ePension division made an initial one-month contribution during the quarter, and helped to drive contributions from the overall Hong Kong business. Overall, the group's total revenue increased 23.8% year-on-year to SGD 66.22 million in 3Q, 2023.
Net revenue grew 38.7% year-on-year to $41.72 million in 3 Q, 2023, and increased 18.1% year-on-year to $104.53 million in nine months, 2023. The group's net profit increased by 308.4% year-on-year to $8.52 million in 3 Q, 2023, and increased by 194.2% year-on-year to $15.09 million in nine months, 2023. Even though iFAST Global Bank, our banking operation, is still in the initial build-up stage, the group is seeing encouraging progress. Net revenue from the banking operations grew 49.4% year-on-year to $3.32 million during the quarter, driven largely by the new divisions of Digital Transaction Banking and Digital Personal Banking.
Deposits and balances of customers grew 140.4% to $232 million as of 30th of September, 2023, which is higher from the $96.5 million at the end of last year. Going forward, we expect overall revenue and profitability to show marked improvements. The group expects profitability in 2023 to be substantially better than in 2022, while the revenues and profitability in 2024 are expected to show robust growth compared to 2023. The expected improvement will come about as the group makes good progress on our three-year plan, which was announced earlier in the year. The group's wealth management platforms are expected to continue to progress, while the ePension division will contribute more substantially going forward.
Profit contributions from iFAST Global Bank are expected to still be negative in the next three quarters. However, the group expects iFAST Global Bank to play a major role in the growth of the group in the medium to long- term, particularly beyond 2025. For the third interim dividend for 3Q, 2023, the directors declared a dividend of SGD 0.013 ordinary share, which is similar to 3Q of last year. Moving on to our AUA chart. So you can see the group AUA increased by 1.7% Q-on-Q and 12.6% year-on-year. So it stands at a record high of $19.12 billion, with a rough split of 70% from B2B and 30% from B2C.
In terms of net inflows and gross unit trust subscriptions, on a quarterly basis, the 3Q numbers this year were the highest for both net inflows and gross UT subscriptions. For nine months of this year, net inflows stood at SGD 1.6 billion, and for gross UT subscriptions, the nine months 2023 numbers stood at SGD 3.3 billion. Moving on to section one, the financial results. Starting off with the non-banking operation, the financial indicators for 3Q of 2023. Net revenue grew by 37.9% to SGD 38.4 million in 3Q 2023. Operating expenses grew by 9.4% year-on-year to SGD 24.95 million.
Net profit grew by 149.5% year-on-year to SGD 10.62 million in 3Q 2023. Similarly, for non-banking operations for the nine months period of 2023, our total net revenue grew by 15.9% year-on-year to SGD 95.45 million. Operating expenses grew by 5.2% to SGD 69.7 million in nine months 2023, and net profit grew by 57% year-on-year to SGD 21.93 million. Next, the financial results for the whole group for 3Q 2023. So I shared earlier, we saw total revenue growing by 23.8% year-on-year to SGD 66.2 million in 3Q 2023. Net revenue grew by 38.7% year-on-year to SGD 41.72 million.
OpEx grew by 11% year-on-year to $30.6 million, and net profit grew by 308.4% year-on-year to $8.52 million. EPS stood at $0.0288 in 3Q 2023, which is a 305% year-on-year growth. Financial results for the group in nine months 2023. So the total revenue grew by 8.7% year-on-year to $174.3 million for nine months. Total net revenue grew by 18.1 million, 18.1% to $104.5 million. OpEx grew by 12.5% year-on-year to $85.5 million, and net profit grew by 194.2% year-on-year to $15.49 million.
EPS grew by 192% year-on-year to SGD 0.0512 for nine months 2023. The next slide shows the overall, results in the last four financial years and nine months of this year. I won't go through the details. Just wrapping up for section one on the dividend. Third interim dividend, at SGD 0.013 per ordinary share, payment date on 17th of November. Similarly, compared to 3 Q of last year, the, dividend per share rate is the same at SGD 0.013 per share. I'll now invite, Chung Chun, our CEO, to carry on with section two and, the subsequent parts.
Thanks, JP. Hi, everyone. For this section, I'd like to start off by giving a recap of the three-year plan that we have been talking about. I feel that it's good from time to time to take a step back and take a look at what we're actually trying to achieve. This is more than two years ago, we have actually been talking about this direction. We used to talk about five-year plan, then four-year plan, and then this year, talk about three-year plan. So just to recap, as far as our three-year plan is concerned, firstly, I think in terms of our existing core business, certainly we continue to aim to grow bigger and get better, and be more profitable.
Second, it would really be with regard to Hong Kong, which is to accelerate the growth of Hong Kong and effectively deliver on the ePension services. Thirdly, the iFAST Global Bank, which we acquired early 2022, slightly over 1.5 years ago. We want to develop that. We feel that that's important for the next phase of our growth to have a bank within the group. So we acquired that, and we have actually been working on that. And we of course also aim to develop some adjacent capabilities, such as payment along the way.
Fourthly, to have a more truly global business model, which is something that will actually allow us to be more to be able to grow more effectively in a more scalable manner. So I'll just have some brief points on each of these areas in subsequent slides. So firstly, with regard to the core wealth management business that we have, I'll say that broadly speaking, what we have seen is that in recent times, Singapore and Malaysia have actually progressed better. Both Singapore and Malaysia have actually seen the AUM hitting a record high. The market conditions have been volatile or negative in the case of some equity market, especially the China-related stocks.
But, despite the volatility, Singapore and Malaysia have been able to continue to see positive net inflow, and with that, we've been able to hit a record high AUM. Hong Kong, in terms of the wealth management platform that we actually have, Hong Kong has been negatively impacted by the poor market conditions more than the other countries. I would say the reason for that is because China has been one of the worst performing equity market, and Hong Kong being a part of China, has been hit harder. I think that affect the overall environment in Hong Kong more than for places like Singapore and Malaysia. So that's what happened.
But you put the three markets together or four markets together, including China. China has been something that continued to be tough for us, offshore business in China. But if you put the overall four markets together, in terms of AUM, we have actually managed to just achieve a record high at the end of third quarter. U.K. also started to contribute somewhat to the AUM, even though that's still at the initial phase. Moving on. Yeah, with regard to the wealth management business as well, it's probably worth also pointing out that in recent quarters, one of the positive trends has been the volume that we're seeing on the fixed income, on the bonds business, right?
I think in a rising interest rate environment that we have actually been seeing, you probably find that the general perception of equity have taken a hit because investors become more cautious. The attitude towards bond funds generally has also been more negative, because you start to see the performance of the NAV of the different bond funds are taking a hit as well. But for bonds specifically, you actually find that the interest has actually picked up. The reason for that is very simply because investors now realize that you can get much better return from various bonds, including government bond, treasuries, Singapore Treasury, U.S. Treasury, and investment grade bonds as well. Now, you get actually much higher return.
So it's increased to the level where the general level of interest and awareness from individual investors have actually increased quite a bit, and we have actually benefited from that. Moving on. Moving on, with regard to the bank, I think for iFAST Global Bank, there are essentially three divisions. We have the EzRemit division, we have the Digital Banking division, and the Digital Personal Banking division. EzRemit business is a business that actually have been there all these years in the bank. So when we acquired that, business continued. I would say that year-on-year, the volume is probably somewhat flat in terms of EzRemit.
But the new divisions that we launched after taking over the bank is Digital Transaction Banking and the Digital Personal Banking. These two divisions are new, but in the last one, two quarters, we've seen some encouraging progress from this. So, because of these two divisions, we actually find that the overall revenue of the bank has actually grown by 41% year-on-year on the 3Q. And net interest income for the bank has also grown. The amount of customer deposits we have as a bank have also grown by over 100% from end of last year to this year to end of the 3Q.
So of course, it's still early days, but we are quite hopeful that, you know, there'll be very encouraging trends for iFAST Global Bank as a whole, especially from the Digital Transaction Banking as well as Digital Personal Banking going forward. Thirdly, with regard to Hong Kong, I think ePension business is something that we have actually been talking about quite a bit. If you recall the last two years, essentially, the PCCW, our partner for the ePension business, they've been building the platform. I think in recent times, you might have seen in the news that MPF Authority have actually mentioned that the system that PCCW is building is already substantially completed.
And, in fact, in the last four months or so, they've been very intensive testing for the system, and iFAST is, you know, have been extensively involved in this part of it. So we're basically, we have come to a phase whereby the business is about to contribute in a much bigger way. 3Q, we saw some initial contribution. There's a one-month contribution from that, so going forward, then we expect that the ePension business will become a far more substantial part of the overall group business.
I think several quarters ago, there were probably some concerns about whether the system development, et cetera, will, you know, come out well, and whether there's any potential delay, et cetera. I suppose as of now, yeah, we'll wait for MPF Authority to be the final judge of the whole thing. But from our perspective, I think there's a yeah, 99% chance that things will be going ahead as currently planned. Moving on. Yeah, so this is just a slide that talks about the guidance on the targets that we have for Hong Kong as a whole. That was produced in April 2022.
Yeah, going forward into next year, we may have some fine-tuning in some of the guidance, but I would say that our commitment to the PBT target that has been stated there doesn't change. This slide here is just something we have shown before, and we're just putting out here again just to remind investors about the iFAST Fintech ecosystem. So currently, we have over 825,000 customer account. We have, for the B2B side of the business, we have over 640 companies that are using our platform. Within them, there are over 12,500 advisors using our platform across five markets. So it's an ecosystem [audio distortion]
Yeah, that would be the end of this section two. I don't think I'll be running through the other statistics. I think the numbers are there. They're self-explanatory. At this point in time, yeah, we'll be happy to move on to the question-and- answer section. Now, we're happy to take any questions that you may have.
Yeah. Hi, everyone. Okay, so, we are in the Q&A segment, so if you are interested to ask a question, you can raise your hands in Zoom, or you can leave a text message in the Q&A function. Okay, so we'll wait for the questions to come in. Okay, we have a first question from Kelvin: "Congrats on the great quarter! How can iFAST secure regulatory approval to market iFAST Global Bank to existing FSM users? It will be great if iFAST can cross-sell IGB to 825,000 FSM customers.
Yeah, so for iFAST Global Bank, I think, yeah, the expectation is that among our customer, there will be groups of customer who clearly will be very keen on iFAST Global Bank's and services. I think among the Singaporeans, probably not so, the Singaporeans, by and large, are quite happy with the banking services they have in Singapore. But I think, investors, consumers from other country, I think there's a very strong demand for the ability to have a bank account outside their home country. And that accordingly has shown up in some of the recent trends and demand and account openings that we actually see. That is something that is encouraging for a start.
Having said that, I would say that, actually the bulk of account opening that we have seen today for iFAST Global Bank are not coming from existing customers that we have. They're not coming from the existing 825,000 that we have. In a sense that, I see that as being something that's positive, because that is actually, that actually means that the overall customers that we actually have is expanding in terms of the base. And that indeed has been the thinking that we had when we decided to acquire iFAST Global Bank.
Because, the thinking really is that, the bank will allow us, as a group, to be able to grow our business better, including helping, investors from various country who are not currently our investors, to open bank accounts. And that will then, allow us to, allow them to actually use our platform services better. So that is, the intention, and I think we're seeing, that, indication that the account trend is actually happening. And, so, so that, is something that we, we hope to can, to, to potentially be, something that will be a major, driver for growth over the next few years.
Yeah. Okay, perhaps to clarify, the 825,000 customers are across our B2B and B2C divisions-
Yeah.
And not just limited to FSM. Okay, so we have a follow-up question from Kelvin on the U.K. bank. Why is the third quarter U.K. loss, loss almost unchanged, despite the big quarter-on-quarter increase in deposits? Was it because of high customer acquisition costs?
Yes, the revenue went up, but the profitability hasn't improved. But I suppose if you look at it in terms of the absolute number, you're talking about a loss of about SGD 2 million, or slightly over SGD 2 million, which I think, by any standard for any digital bank that you're aware of, that's been launched around the world, it's actually a very small number. So in a sense, it's some, yeah, some of these costs are actually necessary. And in fact, we feel that the overall cost that we're incurring to try and build a digital bank is actually, in fact, a very small number by any standard.
We are happy to say that we're able to keep it efficient because, partly because of our in-house IT capability, et cetera, that will allow us to deliver on the technology solution at a fraction of the cost that most of the digital banks seem to be incurring. So yeah, so essentially, there's some increase in cost, but I think the important thing is that we see a positive trend in terms of the revenue and deposits. In the short- term, I think we made a comment somewhere in the fact that, in the short- term, the next three quarters, we still expect to be loss-making. But certainly, going beyond that, we do have a high hope for the iFAST Global Bank.
Okay, we have a question on bonds from Paul. Did bonds and bond-related products contribute significantly to the growth in AUA?
I think bonds have grown well. The bonds category on its own have actually shown quite a significant percentage growth. So that certainly has been a significant factor in helping the overall growth of the AUA. But having said that, we're also seeing that unit trust as a whole is also growing. Stocks and ETF AUA as a whole are also growing. But I think bond in the recent quarter have seen a more rapid growth.
Okay, we have a few questions on our ePension division. Okay, the first question from Benjamin: Could you share what is the rough net revenue and PBT contribution from ePension in the third quarter this year? Do you see upside risk to the overall Hong Kong business guidance?
Yeah. So, we're not able to give too much breakdown in terms of the actual contribution from ePension on a quarterly number basis. I think there's some confidentiality requirement on our side, which is why we report the numbers for Hong Kong as a whole. But, if you take Hong Kong on its own, then the ePension has been a very significant driver to the growth, or probably a major driver to the growth during the quarter. Do we see upside risk to the overall Hong Kong business guidance?
I think, yeah, we're still in the midst of preparing for the whole business going to 2024 and 2025, so I don't want to make too much comment about 2024, 2025 at this point. But I think for 2023, I think we're quite comfortable with the guidance that was given for 2023, and probably for this part, there's some upside risk in 2023.
Okay, another question on our ePension division from Heidi. Just wanted to clarify on the ORSO platform, any updates on partnerships thus far?
At this point, we have firmed up one main partner for the ORSO. We expect to contribute by first Q2025, as was previously mentioned. That in itself is going to be a significant contributor. There are other discussions, et cetera, that are ongoing. In the meantime, yeah, we don't have immediate further update at this point.
Okay, we have a question from Ryan: What level of operating expense growth should we expect across the group in FY 2024 as the Hong Kong ePension product scales?
I think there will be a substantial increase in operating expense for Hong Kong as a whole and for the group as a whole, because of the scaling up of the ePension business. All right? Because we are still in the process of ramping up the headcount that's required for the ePension business. Having said that, I would expect that the increase in expense will trail behind the increase in revenue, or increase in net revenue, right, for the group. So that should lead to better operating margin for us going to 2024.
Okay, we have a question from [Eking]. Questions on sustainability of margins. Can we expect net margins to be in the low to mid-teens going forward? Are costs for the ePension division mostly factored in? What is the net margin for the ePension division, similar to existing business?
I think, if I take the current situation, I would say that 2023 as a whole, as a group, as a whole, in my mind, we're still not seeing the optimum margins yet, because there has been volatile market condition. And we're still at the initial stages of seeing the contribution of the ePension. So we are in a situation where 2023 is not an optimum situation yet. But as we progress on the ePension business, then we expect that there should be improvements that the group will see to the margin as a whole. What is a sustainable level? I would say that we are quite upbeat that operating margins-...
that we are seeing today can be improved, and that is a sustainable level, at least for the next few years. And yeah, the exact level is probably not something that I can pin down, because it really depends on the overall scale that we have for the wealth management platform business as well. But yeah, I think in terms of the next one, two years, you can expect that there'll be improvements in operating margin.
Okay, we have a question from Paul: Equities was not particularly robust in the third quarter. What helped increase investor appetites for funds and ETFs and grow your AUM?
Yeah. So, if I take the funds business, yeah, historically, we have tended to find that the bulk of the AUM for funds actually come from equity-related products, whether it's equity or a balanced fund, but still equity. I think in recent times, we are also seeing that contributions are coming in other asset classes as well, in terms of funds, but in different asset class. I think the most obvious one would actually be for the Auto-Sweep service that we actually have, right? JP, you want to just give a bit of flavor on this Auto-Sweep?
Yeah, that's right. Just to add on to Chung Chun's point, yes, so indeed, our investors have been investing more into some of the money market and short-duration funds. So for the Auto-Sweep that was launched by us on FSMOne in Singapore in July, it's essentially into a fund that we call the iFAST Enhanced Liquidity USD. And the response from investors has been positive. We have also launched it on our iGM Singapore platforms since. And I think the attractive features from investors' perspective is the net yield.
It's been in the region of about 4.7%, and also there's a T+0 settlement and redemption cycle, which also means that investors can receive their U.S. dollar very swiftly within the same day, subject to some you know time cut-off times. But essentially, the convenience of having a net yield on idle money and also the convenience of getting the money quickly if the investors need to use it for investing, let's say, on the U.S. stock markets. So I think we've seen good flows and responses in the Auto-Sweep.
Yeah. So if you look at this Auto-Sweep service, essentially, underlying that is a money market fund. Basically, the money market fund of other fund houses, as well as one fund that we created ourselves for the U.S. dollar. So the way this service is created, we essentially are able to deliver a very high yield and have liquidity that is like savings account, right? Because it's basically T+0, T+1. And for U.S. dollar, you're looking at 4.7% currently.
Right? So I don't think investors will be able to get that 4.7% from any bank in a savings account unless you are from-- unless you are a private bank client, perhaps. But if you're talking about for the normal retail client, that won't help. Even Singapore, like, right, currently is about 3.2% Singapore Auto-Sweep, so that itself is also attracting a good amount of yield. Yeah, so these are examples of funds that are not directly correlated to the equity market, and they actually are seeing a good improvements in appetite from the client, especially as interest rates become higher.
Okay. We have two questions from Uma. Okay, the first question: Has iFAST considered a dual listing on another stock market, the Hong Kong, because of the pension business? If so, could you share a little more about the plans for this? And the second question: Given that net profit is expected to increase next year, is there a guide or forecast for how much the company's dividend payout?
On the first question, I would say that it is a question that I've asked myself from time to time. And internally, we sort of think through some of these questions from time to time, whether it's worthwhile. I think there are some positive consideration for some of that, because if you look at some of the business that we have, if we have a local listing, you know, in certain market, then that could be beneficial for our business in the country. So there's some this consideration. But at the same time, in my mind, there are a number of negative as well for us to watch out for.
I think the key negative in my mind, really, is that we end up having to have a more... have to worry a lot more about various issues that are not directly related to the business of running the day-to-day operation. And it's whether the additional negative can actually outweigh the positive. But by and large, I would say that the ability for the stock to perform well and to generate good liquidity on a certain market, I would say the primary factor is probably not so much which market you're in. I think the primary factor should be about whether the company is able to communicate well to the investors.
Whether the company essentially is able to articulate its vision properly, such that the investors generally can understand. That we feel is a primary factor. I think the liquidity of some of the bigger markets can be very good at certain times, but it can also suddenly turn to quite a negative situation. So overall, at this point in time, I would say that we are not in a hurry to be looking at a separate listing. We focus for now on ensuring that our overall business and profitability continue to improve, continue to grow. We focus on also ensuring that within Singapore, we are able to communicate well to investors, broaden the base of investors who understand our business.
Hopefully, as we go further, then we become a bigger fish in a not so big pond. That probably might be more beneficial for us in the medium term. That's the latest thinking. That's the first part of the question. Second part of the question, is there a guide or forecast as to the dividend payout? Okay. I think, yeah, if you recall, a few years back, I think the company had tended to pay out about 50%-60% of the profit as dividend. But I think in the last two years, because of the fact that profitability took a hit, but we actually maintained the dividend per share number.
So because of that, you find that the overall dividend didn't grow, and the payout ratio was actually quite high. So now, going into next year, as we expect profits to grow substantially, then there's certainly room for increases in dividend. I would say that in the past, we essentially have a business where we essentially generate fee income. We don't need a big balance sheet. When we didn't have a bank, we don't need a big balance sheet. So that's why I think 50%-60% seems to be something that we can do quite comfortably. Now, going forward to the next couple of years, I think the new consideration is that now we own a bank.
So banks are generally requires more capital. We want to ensure that we have one of the strongest bank around. I think we are quite serious when we say that. We want to continue to strengthen the overall balance sheet of the bank and of the group. That's a part of the thinking. But having said that, having said that, if you look at our business overall as a group, even with the inclusion of the bank, you actually find that the bulk of our revenue and profitability still come from fee income.
So on the, for the group as a whole, we will still have a business model that allow us to generate very high ROE, return on equity as a group on a combined basis, especially if you get into 2024, 2025, and beyond. So the implication for that really is that, yeah, we can continue to increase the size of the balance sheet for the bank as well as the group. At the same time, we should be able to pay a good and increasing levels of dividend. Yeah. It's a long answer. I just wanted to talk through to just, yeah, talk through the kind of thinking that we have without pinning down a specific percentage.
But I think fair to say that, yeah, a percentage or something along the line of one third to half of the net profit should be something that we will consider as we move into 2024, 2025, and beyond.
Okay, we have a question from Andrea. I noticed the timeline on the migration of ePension accounts to commence in the second quarter of 2024 per MPF blog post. Is it reasonable to expect ePension contributions from now until then to stay broadly stable per one month contribution in the third quarter of 2023?
Yeah, so third quarter, of course, we only saw one month. So going forward, we'll see the three-month contribution for quarter-on-quarter. We will see the three months contribution. And then, of course, on its own will mean that there will be a bigger contribution. Yeah, in terms of the actual level of contribution that we actually see, yeah, at the start, then we see a certain level. But as we move on, there are other factors that will affect the actual level of revenue that we have. That includes the actual onboarding rate, the amount of the AUM that's been onboarded to the platform. The more that's been onboarded, then the more work that we have to do, so the higher that revenue will be.
I think if you take on a longer term basis in the subsequent couple of years there are also some inflation factors to consider that make some of this difference. Yeah. So yeah if you think in terms of the contribution going forward then yeah. So from one month it become three months and then after that there's some upside revenue because of a higher onboarding risk et cetera.
Okay, we have a follow-up question from Paul. What is the current bottleneck for a global customer in opening an account with the iFAST Global Bank? Are there restrictions for certain countries?
I think, yeah, opening up a bank account, typically, the bottleneck I would say is really would be KYC considerations, right? Considerations on ensuring that the sufficient AML steps, AML screening, KYC procedures, et cetera, have been taken before we open an account, or approve the account. I think, for the financial sector as a whole, that has generally been a factor in terms of whether you can open accounts well and open it efficiently. I think that would probably be the key considerations for us to handle. Because we need to make sure that we are extremely robust in our procedure. AML steps cannot be compromised.
At the same time, how do we make it sufficiently smooth and sufficiently painless for the customer? I think this generally would be the considerations for account opening. So if you look at it from that perspective, then I think quite clearly the... There will be some customers from some countries that can't open an account with iFAST Global Bank because there's a certain internationally accepted standard in terms of the risk level of people from the various country or countries are rated high risk or bound, et cetera. And for those, then we can't open. For others, you know, we can open, but additional due diligence need to be done, so that make it more troublesome, et cetera. Even after opening, there's ongoing monitoring of the account.
So these are all considerations. I think for most banks, you actually find that because of this KYC consideration, AML consideration, most banks actually choose not to allow customers from other country to open unless they're high-net-worth individual. That is the path that many, many banks have taken, or probably majority of the banks. And they typically will allow customers from mainly their own customers in their own country to open properly. But that in itself is what we feel is creating the opportunity that you see. I think because most banks prefer to rely on account opening procedures that have been put in place for these decades, right?
So, that's why even as the world has evolved, even as the world business model has been changed by the internet, many banks haven't progressed in terms of embracing the new opportunity in the world. A lot of banks, in fact, choose to focus on high-net-worth individual. You need to have, you know, several million dollars before you can open an account if you're not a domestic resident. In my mind, that in itself actually introduce greater risk in some way. Because I think AML risk, on average, I would say, is higher for higher net worth individual. If you're bringing in $5 million, $10 million, there's always a bigger question of where do the $5 million, $10 million come in?
Banks that only opens account for high- net- worth individual then will actually be facing this question a lot more. They're having to weigh whether, despite some of the risk, they have to, they still want to open an account. In our case, because we're basically targeting a broad section of customer, then we can have a very clear-cut decision, right? If it is through AML risk, then we just don't open. That is essentially thinking, and without taking the AML risk or minimizing AML risk, will still allow us to have a very good and robust business model. That is broadly the thinking that we have.
With that consideration, then, of course, it means that we will be looking at many different individual customers open account with us. So the volume, the number of people that we should have to handle will be quite high, quite substantial. So that in itself then create another bottleneck, because how many people can we handle each time? How many people do we need in a customer service center, in the back room, in a compliance team, et cetera, to be able to ensure that we can deliver our services effectively and properly? So that is the other part of the bottleneck. That is something that we have to. It's an ongoing process for us to ensure that we can deliver that well.
But for us, as a group, we feel that that is not a new challenge for us, because the business that we have all these years, as an investment platform in trust, et cetera, we have actually been opening account for investors of all sizes. There's no minimum size that you need to have before they open an investment account with us. To put money in unit trust, it can be SGD 100, and we'll open an account. So we are quite used to managing this segment of the bottleneck. Banking, there are additional procedures, typically, that's needed, but it's not a new category of challenge. So, broadly, we expect that we'll be able to do that well.
And of course, as we move on, I think, we're also looking at deploying the AI to help us to manage this potential bottleneck better, just handling big number of customer and just handling the back room requirement that we actually need to sort out as we grow.
Okay, we have a question from, will FSM be offering U.K. stocks soon?
Yes. Yeah, we're gonna take this question as well as perhaps the next one. So to Reggie's question, yes, FSMOne Singapore will be offering LSE trading stocks and ETFs pretty soon, so do keep a lookout on our website and mobile app. And also the next question from Kelvin. The Auto-Sweep, when calculating it as part of the AUA, so it will go under the unit trust part, essentially, and the cash account will go under the cash part of the AUA.
Okay, we have a question on China. China operations seem to be in a state of decline in the last few quarters. Are there any task force to look into scaling it up? And with IGB, will iFAST be launching a B2C segment in China?
Yeah, China... Yeah, certainly, if you look at our China onshore business, it has done quite poorly as about this. I think the state of the market certainly has hit certain market pretty hard. China, obviously, of course, and even Hong Kong has been negatively affected. So our expectation at this point in time is that in the immediate term, I think the market will remain challenging. So cost control, reduction cost is something that we've actually been looking at it, and It's something that we'll continue to work on. Yeah, offshore, we do see some increase in demand, and that's something that will help the overall business somewhat.
But on the immediate term, on the onshore, then, there is some of that's a poor situation that we have to handle at this time. Will we be launching a B2C segment in China? We are, we, we have no immediate plan to launch a B2C online business for China at this point.
Okay, we have another question from Brian. As he mentioned, product scales and iFAST begins to generate a lot more cash, should we expect an increase in M&A activity? If so, what types of businesses would you be interested in acquiring?
Yeah, M&A is something that we will consider from time to time. But I think we are generally quite clear that when we look at this area, it should be something strategic to what we do as a group. That is something that we will stick to. We even though as a group we have been evolving all these years, we started as a fund supermarket back in the year 2000, just online unit trust distributor in Singapore. But today, of course, we're in five markets, having multiple products. We have a bank, as I mentioned, all the business, et cetera.
So we have been evolving, but we see all this development that we have been taking on as being something that is still strategic as a whole. So we are essentially an investment platform. We just evolve as we need to tap into the opportunity that we see, or even ensuring that we remain relevant as a company, and ensuring that our revenue stream will remain robust, because the nature of our revenue is third, keep evolving as we move on. M& A opportunity that's strategic is yesterday was in, is now fine.
So over the years, we have done some M& A, but not too many, because, yeah, we find that the business we're in, the number of direct competitors, they tend not to be too many. So not too many B2B or B2C platform to acquire along the way. So, yeah, M& A is something that we will always consider, but there hasn't been too many. As we move forward, I think that will be the kind of mindset that we have will continue to evaluate the possibility and so on.
And as to what type of business, I think to me, the best is if it fit in nicely with what we are already doing, and then there are some suitable companies to be acquired, and then that can immediately boost our overall revenue and profitability. That I think will be ideal. But I would say that there are other parts of the consideration as well, which are still strategic. I think one example perhaps would be in payment-related space. I think as we get into banking, we know that once into banking, then we also need to ensure that the services that we provide for the customer will allow them to use our banking service as well.
That being a consideration, then we should look at some of these adjacent services, such as a payment. That's where our debit card, et cetera, account services come in. Yeah, and of course, you know, if you think from that angle, then perhaps it's also room for thinking about whether some kind of M& A is opportunity is actually available in that space that will allow us to move forward at a more rapid manner.
And yeah, hopefully as we move forward into next year and beyond, as our overall profitability and balance sheet become even stronger, and as the world starts to grapple with the fact that you can't just continue to run unsustainable business model for the start-ups, I think hopefully a lot of opportunities will pop up along some of these lines. So yeah, it is something we'll be able to look up.
Hey, we have one question from Reggie: When can we expect direct links to U.S. markets to be launched?
We, yeah, the current target that we're shooting for will be later part of 2024. That's what we are working on at this point. Yeah, yeah, so it's something that we definitely want to, you know, put on, but along the way, yeah, I think some of the application process and, you know, getting certain part of the steps already has taken longer than what we originally expected, but, yeah, we're still working on that. I suppose importantly, I think in the meantime, it doesn't stop us from, yeah, doing what we need to do, in terms of growing the U.S. stock and ETF trading for the business.
That's something that kind of progress and in terms of the pricing, et cetera, we continue to tweak as well. That's where we are.
Okay, we have three questions from Seale. The first question: For bank deposits, you mentioned paying investors over 4%. What do you do with the deposits? Are they reinvested in investment securities, and if so, what kind of instruments and what kind of spread are you earning? When might you start lending, and what strategy and segments might you have?
Yeah. Yeah, so firstly, I think if you look at the balance sheet, the latest balance sheet that we have published, you actually see some big increases in certain category. One category is actually cash, right? I think another category it would, in terms of increase, would be investment securities with essentially bonds. All right? So in terms of what we do with the deposit, at this point, two main areas. One, actually cash, and two, investment grade bonds. So when I say cash, what actually happened is that a large part of this cash are in fact cash that resides with Bank of England at the U.K. Central Bank.
So if you look at our DPB business, look at the app, you'll find that if you put money in our account, overnight money, right, the savings, essentially, we can take off overnight. You're getting 4.25%. So we take 4.25, and then today, Bank of England is paying 5.25. So we take a deposit of 4.25, we place it with Bank of England, and we get 5.25. From our perspective, that is certainly a good thing to be doing.
Because we're taking the risk of Bank of England, effectively a risk, risk-free, and then we're making a 1% margin for this particular part of it. So that in our opinion is actually a very good model to be doing. And in a sense, there's an advantage of being a bank. You have access to the central bank, right? You can just aggregate the money from retail investors or depositors, and then you give it to Bank of England. They don't take any balance sheet risk, and you get 1% margin. What we need to do, essentially, is to be willing to do the operational and administrative work of aggregating the small amount of money from different depositors.
Many banks prefer not to do this, but we see that as a good business model to have. That is essentially a safer business model than a business model that many banks, especially sort of digital bank, a safer model than what many other banks are actually doing. Other than the cash with Bank of England, then the other part would be investment in investment-grade bond. So we place it in a combination of sovereign bond as well as a corporate bond, but investment-grade bond. And we keep the duration low. I think our portfolio at this point in time average 0.9 years. So less than one year into the duration.
And we probably make about 0.5% spread on that. Yeah. So that's what we have done with the bulk of the deposits that we have collected. Will we be lending? Yes, we expect to be lending, but we intend to be conservative, and we intend to do it slowly. One area that we expect to be going into would be margin loans for our investment platform business, so for unit trust lending secured on unit trust or loans. Even though we have an investment platform, although, well, we haven't done much of that. We're just in the initial stage of doing that. So generally, as a group, we prefer a business model where we don't take too much risk.
I think many banks, when they think of the business model of a bank, they think in terms of lending, and they think of lending to smaller corporates, et cetera. We actually don't like that because we feel that that's very risky. As a group, we like to collect customer assets. We don't like to lend out. That's been the way we run the business all this while. But of course, as a bank, we expect that we will be doing some lending, but you can expect that we'll take a quite conservative stance on lending.
Okay, the second question: Are you still targeting profit breakeven for banking in FY 2024? If so, can you clarify what are the milestones required to drive that?
We are still targeting that for second half of 2024. What are the milestones required to drive that? I would say the key revenue growth that we are expecting for the bank, for iFAST Global Bank, will be net interest margin, net interest income. And that is a function of the amount of deposits that we have. And as I, you know, explained earlier, after taking the deposits from customer, both DPB and both the Digital Transaction Banking as well as the Digital Personal Banking segment of the business. After taking that, then we put that in investment grade bonds, as well as some of that in the with Bank of England, et cetera.
So as our amount deposits and assets grow, then our net interest income will grow accordingly. That essentially is what is how most banks make their money, right? I think, including our Singapore bank, I think they have a massive amount of deposits, and you can expect consistently they are making profit. So we want some of that benefit for ourself as well. So that is the broad thinking and planning that we have.
Okay, we'll answer one bank-related question first from Akash. On the deposit spread business, is there any FX risk, and how are you hedging it?
So generally, we try to have a bit of a natural hedge. So if the deposit is in sterling, then we'll place it in sterling assets. So as of now, the majority of the deposits are in sterling, and if we place a Bank of England or we buy a GBP bond, then there's a natural hedge. And then the second biggest category will be the U.S. dollar deposit. And U.S. dollar deposit, then we buy USD investment grade bond, or some of it given in the USD money market funds. Right? And yeah, so we don't take too much FX risk from that perspective.
Okay, moving back to the question from Tina. What kind of fee models will ORSO contracts follow? I think ORSO is like one-third to, what, half the size of MPF by AUM, if not wrong. Do you see ORSO contributing earnings at the same proportion relative to MPF earnings in the future, if you can convert all ORSO customers?
Yeah. I think ORSO is a big opportunity for we can see. I think the size of the market is over HKD 300 billion in terms of AUM. Of course, that is the market, but it is a sort of a fragmented market. I think in our case, because some of the agreement that was struck with our partner, our initial partner, then we are going to start off, yeah, early 2025 with really a good good level of scale that will allow us to be profitable straightaway. So that's a good opportunity. We are looking at building upon all that and then growing it from there. So the opportunity is substantial.
Of course, it's not possible to convert all ORSO customers because it is a fragmented market. I think we just need to... Yeah, but if we can, you know, go for that 10%, 20% of the market over years ahead, then that itself is actually a big opportunity. For ORSO , the revenue stream for us is actually a proportion. It's a bit like our platform business, where we earn a revenue as a percentage of the AUM, right? So for ORSO , then that the AUM, the AUA that we administer will be added to our group AUA number, and then the revenue that we have will be a percentage of that AUA. For the eMPF, part of it is just a service fee.
We don't include the AUA number into our group AUA numbers.
Okay. That's all the questions that we have for today. We'll end today's session. Thank you everyone for attending, and we'll see you next quarter.
Thank you. Thank you.