We have two big announcements. The first announcement is on our results for the first quarter 2024. The second announcement that we made this morning is for our general offer for Great Eastern. So there'll be two segments of today's briefing. We will do the first segment on our results first, and we get that over with, and then we will proceed to the offer for Great Eastern. So therefore, any questions you may have, may I seek your understanding to hold it off till we are done with our results briefing. So because of the general offer, I need to say this: we are governed by the Singapore Code on Takeovers and Mergers. So in order to comply there, we're not able to give any additional information. It's beyond what we have already read in all our documents in the actual announcement.
Present with us is our financial advisor for the offer, J.P. Morgan. All right, we will start with our results. Our CFO, Chin Yee, will take us through the slides.
Thank you, Chin Yee. Good morning to everyone. Thank you for taking time to join us at OCBC's first quarter 2024 results briefing today. We are pleased to report a record performance for the quarter. I will now share the highlights of our results. For the first quarter of 1Q24, we achieved record net profit of SGD 1.98 billion, up 22% from a quarter ago. This drove our return on equity, or ROE in short, higher to an annualized 14.7%. The quarter-on-quarter rise in our group net profit was underpinned by three main factors. Firstly, total income reached a new high. Secondly, expenses were well controlled. Thirdly, allowances were lower. Total income grew 11% Q on Q to SGD 3.63 billion. Net interest income was SGD 2.44 billion, 1% shy of the previous quarter's record level, largely due to the effect of a comparatively shorter 1Q.
Non-interest income rose 47% to SGD 1.19 billion, driven by higher fees, record trading income, and an increase in insurance income. We continued to exercise strict cost discipline, with cost-to-income ratio improving from 40% in 4Q2023 to 37.1% this quarter. Loans grew 1% during the quarter, and portfolio quality remained sound. Credit costs were benign at 16 basis points. Our strong balance sheet position was also maintained. I will share more details in the later slides. Drawing your attention to our group net profit of SGD 1.98 billion, this was 22% higher than the previous quarter and 5% above the prior year. Our banking operations and insurance businesses both performed well for the quarter. Moving on to slide 5, I will elaborate more on the performance of our key businesses. For 1Q2024, our three key business pillars of banking, wealth management, and insurance continued to deliver resilient performance.
Banking operations net profit was SGD 1.72 billion, up 15% Q on Q from an increase in operating profit and lower allowances. Compared to the previous year, net profit increased 3%. Wealth management income rose to a record SGD 1.29 billion and contributed about one-third of the group's total income. Assets under management grew 4% Q on Q to SGD 2.73 billion, led by net new money inflows. While net interest income has more or less peaked in line with the interest rate environment, GEH profit contribution to the group doubled from the prior quarter to SGD 260 million and comprised 13% of the group's profit. This was driven by improved investment performance and claims experience. Insurance sales were also higher Q on Q and year on year. With a diversified franchise, this enabled us to deliver balanced earnings growth through economic cycles. We continued to maintain our strong balance sheet position.
This puts us in a firm position to support franchise growth and handle uncertainties. Moving on to more details on our performance trends, starting from slide 3. Net interest income for 1Q 2024 was SGD 2.44 billion, up 4% from a year ago. Compared to 4Q 2023, the first quarter of 2024 was a shorter quarter. On a day-adjusted basis, NII was steady against 4Q 2023's record level, as a surging SGD 5 billion increase in average assets compensated for a moderation in net interest margin on NIM. NIM was 2.27% for the quarter, and as at end of March, it was also 2.27%. Non-interest income for the first quarter was SGD 1.19 billion, rebounding 47% from a quarter ago and up 17% year-on-year. The improvement was underpinned by higher fees, trading, and insurance income. I will share more details on our fees and trading income in the next few slides.
Fee income for 1Q24 improved Q-over-Q and year-over-year to SGD 479 million, led by an increase in wealth management fees. As observed in the chart, wealth fees rose to the highest level since the start of 2023. Customer activities increased across our various wealth segments, as we saw higher demand for wealth management products such as structured deposits, structured products, and unit trusts. Trading income surged 45% year-over-year and 67% Q-over-Q to a record SGD 370 million, supported by an increase in both customer flow and non-customer flow income. Customer flow income reached a new quarterly high, driven by both corporate and consumer segments. Cost-to-income ratio for the quarter was 37.1%. This reflected our continued strict cost discipline on discretionary expenditure. With increased variable compensation associated with income growth, staff costs were higher Q-over-Q.
We continued to be focused on investing in our franchise and people to build capabilities in line with our corporate strategy. On asset quality, our asset quality remained sound. NPL ratio was 1.0%, lower than a year ago and steady against the previous quarter. Allowances for the quarter were SGD 169 million, 9% below 4Q. Total credit costs for the quarter were an annualized 16 basis points. The group's cumulative allowances rose for the quarter as we continued to prudently set aside allowances. NPA coverage ratio remained above 100%. Our loan portfolio continued to be well diversified across geographies and industries. Group loans rose SGD 4 billion from the previous quarter to SGD 301 billion, driven by higher corporate and consumer loans. By geography, the increase in loans was led by growth in Singapore and some of our overseas markets, such as the United Kingdom.
In line with our corporate strategy, we are focused on supporting our customers' sustainable financing needs. Sustainable financing loans rose 34% year-over-year and 12% quarter-over-quarter to SGD 43.1 billion. This comprised 14% of group loans as of 31st March 2024. Customer deposits were up 2% quarter-over-quarter to SGD 370 billion as of 31st March 2024. We will continue to adopt a proactive approach in optimizing our balance sheet and liquidity. Loans-to-deposits ratio was steady quarter-over-quarter at about 80%. Moving on to my final slide. We maintain our strong capital position. CET1 ratio was 16.2% as of 31st March 2024, up 0.3 percentage points from the previous quarter, largely from profit accretion. Risk-weighted assets, or RWA in short, rose quarter-over-quarter, largely driven by higher credit RWA in line with loan growth.
On a pro forma basis, CET1 ratio would be 15.3% after paying our 2023 dividend later this month. Our capital headroom places us in a strong footing to support business growth, navigate uncertainties, and deliver returns to shareholders. With this, I end my presentation. Thank you for your attention. I will now pass the floor to Helen Chin Yee.
Good morning again, and welcome to our office this morning. We have a group of our representing shareholders' interests and also the media with us, so good to see everyone. We also have people online, I believe, so good morning to all again. So following from what Ching Yu has just said through the presentation slides, I just want to. Recap that we started 2024 with a good footing. So total income net profit don't need to repeat that, it is at record highs. All ROE also improved from the previous quarter to 14.7%. So all business do well, and this is reflected in the operating performance across banking, wealth management, and insurance pillars. Our banking operations achieved record net profit, wealth management income reached a new high as well. AUM grew SGD 10 billion this quarter, and wealth fees were also up.
Profit contribution from our insurance operations improved significantly, and insurance sales were also higher. This reflects, again, the strength and quality of our diversified franchise and progress we made in our strategic initiatives, which I will touch on a bit more later. NII, Ching Yu talked quite a bit about it, a shorter quarter with loan growth and a bit of weakening in the margin. So, we are rather flat on NII, but this is, of course, compensated a lot by the non-interest income. We continue to be very focused on growing our loan book. We added SGD 4 billion of loans during the quarter as we continue to support our customers in Singapore and also in the international markets. We focus on growing fixed-rate mortgages as well, and we put in interest rate hedges to lock in current high yields. Continue to optimize our funding base.
We are pacing deposits growth with loan growth and strengthening our deposit franchise. This has allowed us to preserve our first quarter NIM quite well, as we said earlier. If interest rate cuts are less than earlier expected this year, 2024 NIM could come in at the higher end of our range of 2.2%-2.25% target. Non-interest income set earlier 47% up against the previous quarter, and fee income were higher. Trading income jumped 67% to hit a new high on the back of record customer flow income. So that is very important, and that is part of how we realize our strategy in building more income in trading through working with the relationship teams with our clients. We have been keeping quite a tight control on expenses, and cost-to-income ratio improved to below 40%.
And of course, we continue to invest in our people and also in our digital capabilities. I, I do, from time to time talk about, to the media in particular, about our investment in people and what amount we invest in order to, continue to allow our people to develop. We're also obviously constantly monitoring our loan portfolio to detect any portfolio or potential concerns. We're comfortable with our book. I want to reiterate that. Asset quality is sound. NPL ratio was steady from the previous quarter at 1%. But we always remain prudent, especially in the current environment. We maintain our credit allowances and coverage ratio, and that is at 146%. Credit cost target continued to be 20-25 basis points this year.
Looking ahead, I think turning the page, we see some recent economic indicators looking more favorable, but nonetheless, we have to keep a close eye on what is happening in the world. Of course, there's heightened geopolitical risk as ongoing wars in the Middle East and Russia-Ukraine remain a concern. And indeed, we have a number of upcoming key elections around the world. We continue to be positive, though, on the resilience of our key markets in Asia. Our corporate strategy has a strong focus to capitalize on the vast opportunities in this region. We have been seeing good results from the steady execution of our strategic priorities. Remember we refreshed our corporate strategy in 2022. We talked about growth areas.
Last year, mid-year, we also announced that we aim to deliver additional SGD 3 billion revenues, based on the initiatives, that we design and that we identify coming out of the corporate strategy. 2023, we realized around SGD 500 million. We meet our target. This year, we're talking about meeting one third of it, meaning, SGD 1 billion this year. And we are tracking well, and this has actually contributed to our record performance for the first quarter. I apologize a bit. I have a little bit of a sinus problem today. So what, what else, right? I want to share with you that, we just last week, I was in Jakarta. We completed our acquisition of, PT Bank Commonwealth. I think we call it PTBC. We did a town hall in that bank, and, the integration is starting. So we hope to be able to integrate, this bank.
At the moment, they are a subsidiary of our Indonesian bank, but we hope that will be completing the integration, taking the people and taking the customers, by before the end of the year. This provides more than 1 million customers to our bank in Indonesia, and that is not a lot of duplication. So we are quite happy to gain a new customer base and also to indeed have more product capabilities that can be shared and that can be integrated with what we have in Indonesia and offer to an even bigger customer population of customers. So to conclude, we had a good start, gave us a solid base to deliver on our targets. A strong balance sheet position provides us the flexibility to capture growth opportunities, to buffer for uncertainties, and the capacity to deliver on our 50% dividend target payout ratio. Thank you.
I think we will move on to Q&A and, just, I think I pass it back to Chin Yee. Yeah.
Okay. Questions on results? Oh, so maybe Jimmy can let you know first and first.
Thanks, Helen. Thanks, Ching. I've got 2, 3 questions. The first is, to do with loan growth, which is decent, right? You're still sticking to your low single-digit guidance for the year. If you accumulate 1% every quarter, that gets kind of to mid-single digit, and one would expect the second half of the year should be better given the whole rate decline environment. So are you being conservative on this, or? That's my first question, because you haven't changed the guidance for the quarter. The second is, in terms of, new NPAs over the past year, there's been quite a jump. So if I can get some color on which markets or if they're in specific sectors, or it's, it's systemic and across the board or not, that sort of. The third is, on allowances. So again, the guidance is unchanged.
If you were at 16 basis points for the first quarter, would we expect for the remainder of the quarters to be at the high end of your 2025?
Okay. For loan growth, I think the market is still very uncertain. We're working very hard to deliver the growth in the first quarter. But loan demand has not been—no, no clear signs of it rising. But of course, we are watching very closely. We do see, around the world, I think, China in a way starting to come out of a non-inflationary situation. So that indicates that we can look at potentially growth in trade, in particular, between China and Asia inside Asia. But again, we say the uncertainty is still there. We haven't heard customers saying that they are coming back to do major investments into their business yet. So you can say we are more on the prudent side, but I think second quarter can tell a lot. Yeah, can tell a lot.
Of course, whenever we look at our book, there are constantly repay repayment of the book, right? So it is not like it would always be growing very fast because you have to grow to replace what is repaid. So I think we try to be prudent. Doesn't mean that we don't work hard on it. But at this point, we don't see there is a very high opportunity to say that I change it to mid-single digit. That's it.
And a quick follow-up on that, Helen. So what you saw in the first quarter, was it what type? Was it more like?
We have seen some increase in trade loans. Yeah, but trade loans are typically short-term. Yeah, trade loans are typically short-term. So we have seen some pickup in trade loans. We continue to be successful to do refinancing. That would mean that we keep our loan book, not losing the customer, right? And we have taken some new customers as we perform on our corporate strategy. So we see some results of some new drawdowns. But it is a very competitive market out there, I have to say.
Not much on FDI-related or?
Not so much on FDI-related. I think we see a lot of flows of wealth into Singapore. Together with that, we see people looking for business opportunities. But initially, if you see flows into this part of the world, they're not asking for loans per se. They are looking for the business. They are building up a team, looking for investment opportunities. You bank them with providing them banking service and the FX. So that benefits customer flow quite a bit. Yeah. But it will be later on when they find what they want to do as they begin to build the book, they bring in capital first. And then maybe later on, they would look for borrowing. Yeah. So on the NPL, we said our book is sound. It's due to a couple of accounts in ASEAN this quarter.
No particular relationship to any form of systemic risk. It's just happened that we have 2, 3 corporate clients that have a particular loan that has an issue. Not concentrated on any market.
Sector, if you can?
Sector, we have one in services. Yeah. And we have one in real estate. And allowances.
So she didn't say this one?
Yeah. Yeah.
Okay.
Yeah. So allowances, we, as we say, the world is very uncertain. Again, we want to see into the second quarter to see how the allowances is going to be like. But in a way, we still continue to hope that we maintain a very stable, that NPL ratio is not rising fast. I mean, it's our duty to protect our book so that we continue to generate the returns to our shareholders.
Thank you.
Nick? Yeah?
I just ask about the wealth performance. It's obviously a very strong sort of fee performance. Helen, Chin Yee, did you quantify the net new money in the quarter? And if you didn't, you wouldn't mind doing. And then can you just talk about what's driving that? What is customer appetite like? What type of products are driving it? Are you seeing that continue into the second quarter?
Okay. Thank you. We do see net new money, as, as we said. And this is across our home wealth portfolio. We always talk about when we talk about wealth AUM, it is the higher end of our consumer finance customers and also basically down in Singapore. So we're seeing net new money coming in this quarter. And, of course, part of the AUM growth of SGD 10 billion is also due to some of the revival in the value of the portfolio. We do not see a big jump in leveraging, though. I think people are still cautious about the market, right? So this come, as we said, across both the BOS and the bank side. But we do see wealth is growing up, meaning as the market has become more favorable, we do see more action among our customers.
I think that reflects how we have been growing our wealth in this.
Have a net new money.
If you look a bit, roughly, across the wealth business, about SGD 6 billion.
6 for what?
For.
For this quarter.
For wealth.
Yes. For the.
For wealth.
For wealth.
Net new for.
Net New Money.
Net new money.
Net new money.
But AUM grow faster because there is increase.
There's also market impact.
Yeah, market impact.
Is this in Singapore dollars?
Singapore dollars.
Yes.
Aakash?
Yeah. How much time do we have today? Because I think we'll be short of time if you're going to cover the GE as well later.
So we hope to end by 10:00 for results?
I think it might be very short. Just quick questions. So trading income pretty.
Not half an hour.
Another question. We will move to the offer. Any other questions or results?
A couple more questions on results.
Results?
Yeah.
Yeah, go ahead.
Yeah, go ahead.
Trading income was pretty strong, SGD 330 million or so. Is that sustainable? Because I think some of the comments that you made suggested that you made some efforts to improve that. Is that a number that can sustain, or is it, one-off for this quarter?
Well, I hope that customer flow would sustain, because as we said, the last two years seems we're getting everybody working together so much more closer, and we are able to actually serve our customer across more markets as we bring everybody together, as I said. So that reflects quite a bit on the initiatives when we said we see incremental revenues for the group. So I hope it will stay that way. But again, customer flows also depends on the economy, depends on the business as well.
Fee income, I mean, it was a pretty strong quarter, this quarter. But if you put it in a historical context, right, if you look at the OCBC overall fee income, it hasn't actually changed much since 2017, 2018. It's roughly the same level.
You mean the proportion to total income?
The total absolute number. It's very similar if you look at it on an annual basis. And when I look at it, UOB and DBS, they're 30% higher, 50% higher. And obviously, a large part of it is coming from the Citi business that they acquired last few years, right? So my question is, like, are you planning to go down the same route? Because, you do still have a lot of excess capital. And I think even this GE acquisition doesn't really change that picture materially. You do still have a lot of excess capital. And I don't think there's a very clear plan to return the capital to shareholders. So if that's the route that you're seriously considering, because you that will help you catch up with the peers in terms of fee income.
Okay. I think, there were years where the market where the equity market and the bond market are really, really volatile. So you'll see a lot of these coming to very active, of our wealth, of our wealth customers, that they do a lot of investment trading, leveraging up, and all that. So we see, COVID has brought that down generally, but we are beginning to pick it back up. But if you, if you look at the market today, compare the sentiment in the markets today compared to those years, I think it's still very much behind, right? It's a lot of uncertainty in the market still. I mean, when we have higher fees, those years, we don't have wars in a way in the world. So I am what we're doing is we'll, we'll continue to bring in more customers and, make our whole wealth platform even better.
We'll talk a bit about that when we talk about the GE offer later. So in order to build a truly, you know, leading, wealth management business, and that should be able when opportunities are there, we capture more of the business compared to the past. So that is what we're working on.
Meaning organic growth and unpredictable?
No, no. We, I never say only organic. In the past, we always say we look at inorganic opportunities, right? But they have to be right. They have to be right. There has to be complement to what we have. So when I talk about PTBC last year, it's small, but it fit very nicely into the Indonesia business. It's not a huge amount, but they do have more than one million customers. But of course, they are retail and SME-based, but that's actually strengthening the Indonesian business. It is inorganic, yeah, because we are acquiring additional portfolio and people. I don't know how you call the offer for GE. Is that organic or inorganic? To an extent, it potentially is inorganic because you're making an investment, right? So, but we think that's the right thing we want to do.
I will continue or we will continue to look at opportunities in the market. Yeah. Of course, there are always options, building the business faster, which we have done. We have beginning to do but much better. So, organic will lead the capital. If there is right inorganic, we will also look at it.
Really crucial time. I'll move on.
Okay. Questions from wealth? Maybe we go before Chanya. Chanya goes first. Yeah, please.
Just one question. Sorry. Suddenly, so many questions arose from what Helen just said. Just to be 200% sure, you are saying that you are not excluding, inorganic opportunities?
Yes. We are not excluding.
For wealth, right?
Oh, no, for things that suit the group.
Not just for wealth?
Not just for wealth.
Okay. I see.
Yeah. I mean, PTBC is not—it's not just wealth. It is also SME. They have a good auto-financing portfolio. Yeah.
I mean, like, are you done with acquisitions in Indonesia with CBA?
If we are looking for opportunity, we will continue to look for opportunity in Indonesia. Because it's our core markets. I talk about core markets, right? So Singapore, Indonesia, Malaysia, Greater China. These are the core markets.
Yeah. But for wealth and Indonesia, which one is more important to the group?
You cannot, cannot say one is more important than the other because they both sit in our strategy. It's then if what opportunity comes up that you mix it, mix us, look at it to say, "This is the one that is more important." Maybe that's a wealth opportunity come up first that actually fit us, right? But again, capital, we have to can manage our capital. So how do we put the capital to work? We know how much we can spend. We know how much we need to continue to build our organic business with our plans and our targets. So, the rest is leaving to what opportunities come up.
Thank you. Okay. I'm just going to go now.
Yeah.
Okay. So in the SGD 3 billion that you talked about last year, was it all based just on the organic? This is your organic growth. Is that right? You mean you said you had SGD 3 billion?
Yes.
In your one OCBC?
Yes. Yes.
Okay.
Organic means we are we are doing a lot of things, including, of course, you're putting in more customer, looking into a new economy, looking at sustainable financing, which we are quite strong at. We are digging into deeper into our customer's wallet, meaning by improving ourselves to serve them better, they give us more business, right? So this you call organic. But it doesn't, it doesn't actually, take away potentials as we manage our capital, what that will bring along, for that SGD 3 billion. But yes, there's no because you cannot just say, "This is an opportunity." We say we would actually get it and then put it into the SGD 3 billion. No, no, not like that.
So then, because you have this flow business, you want to attract flows out of China into this region. So how much of the SGD 3 billion is likely to come from that? Or would that be over and above this additional SGD 3 billion?
We, we can't break it down like that because when you identify, you have to think about what capabilities you have. You look at all the markets we're strong at. You look at the economic growth. So of course, in terms of flow, we see a lot of China flow, right? But you cannot just say that because China flow is this amount, we're going to capture this wallet, and then this is the amount. It is not like that. It is on how our teams all think. If we do this, if we make this investment, for example, into payments, into the payments capability, right, then we will be able to serve more customer. We know there will be more customer. I think necessarily in China, not necessarily.
Because domestically, if you look at what we have announced in the past, we also have gained a lot more traction in serving the Singapore, the Singapore companies, in payments. And part of it is SME, right? We know that if we sharpen our SME offering, our digital proposition to SMEs, then we can apply it very much faster in Singapore. But for some of the clients coming into Singapore from China, they can be classified as SMEs. Yeah. But you don't then go and say, we must achieve so much, so much in China. Because it's more about what products we can offer, what customer base we can tap into, and the growth in the economy.
You mentioned this a little. You mentioned that the credit cost in the first quarter came from real estate. Is it commercial real estate, or was it residential? And was it out of Hong Kong, or was it out of Singapore?
It's not in Hong Kong. It's ASEAN.
Oh, ASEAN.
All in ASEAN, yeah, but not Singapore. No.
Sorry.
I have one more question.
The real estate is in ASEAN. Yeah. You're asking about the real estate.
Yeah, the real estate.
I have another question. I'm not because I noticed in the last quarter, your RWA fell quite a lot, but it went up quite a bit this quarter. Is it because of the loans you took on?
Yeah. It's in line with the loan goal.
Oh. Okay. Maybe we just go yeah, maybe we go there. Then we come to Christophe.
I'll join him.
Yeah.
Two questions relating to real estate, but on the redevelopment of this site. So firstly, I think this time suggested putting the property in a redevelopment. It makes sense because there will be called tax savings. What's your sort of initial thought on that suggestion? And then secondly, when you redevelop the site, would it have hospitality component, residential component, and will you be tapping on some of the incentives, like CBD incentive scheme, strategic development incentive scheme? So these are my two questions.
You really look into it very deeply, huh, Jonathan? Thank you. Thank you for that question. We, we are indeed exploring a possible redevelopment of this site. I mean, when we said this site, it will be this site, right? We have a few buildings on this side.
Yeah.
So but the purpose is to rejuvenate the area, right? And this is a strategic area in the Central Business District. So but any redevelopment plans being explored, we will want to increase serving the rich heritage of OCBC Centre. So that is what we want to do. This is, of course, a widely recognized landmark. So in essence when exploring, that means we will talk to the authorities. What will we have to do? If we develop this, of course, there is guidance from government on rejuvenating this area. So we will follow those requirements and guidance, right? So this is what we are exploring now, meaning thinking about what we can do, what we have to produce if we really be redeveloping this, and whether it is required to produce residential.
I mean, you read as much as what we understand, right? So this is part of the things that we are doing at the moment. So there is no certainty that our how we're exploring this will result in a very fast plan to say that this transaction will take place. When we actually have reached that stage, of course, we will advise all of you. But we are still at the stage of exploring what we can do. You can imagine that this will be a very big project. Yeah. And this is our iconic building.
Building this.
So you're talking about REITs, the possibility of a REIT. Of course, we look at all options. At the current plan, we don't have planned for a REIT. And I think REIT, you do understand that you have to inject the buildings into the REIT, right? And then it will be run by a management. Yeah. Our aim when we develop this, we still want to own our properties. Yeah. This is to continue to own properties in a rejuvenated area. That's how we look at it. And also to hedge against our future rental income. If you put it in the REIT, obviously, the REIT has to independently manage that property.
Building is really 900,000 sq ft. So it is still possible to add another 30% to this 900,000 sq ft?
We can't comment on that. We're exploring it. We're discussing with authorities, right? So not until we finish that plan, we are certain what we can do. We really cannot say what we can do.
Okay. Yes. I would. So your ROE targets for this year is actually between 30%-40%. But I mean, this quarter is obviously doing better than that. So are there any changes to your targets, or is there any, like, outlook on how this will result?
I think, we will also mention ROE when we talk about the offer. So, with what we have seen in the first quarter performance, at the moment, we see that this year will be towards the high end of that 13%-40%.
Any more questions or results? Oh, yes. Yeah.
Hey, Melissa.
Melissa?
Yeah. I just wanted to add on, you know, you talk a little bit about your hedging that you have done. Can you just share a little bit more detail about how much you hedge? Will you continue to do that? And then, you know, when we do see interest rates fall, what is the new sensitivity to your NIM? So what are we expecting for, you know, 2025 NIM? And I have one more question.
Okay. On hedging, as part of our rebalancing of our balance sheet, you know, we do look at, for example, cash flow hedging. We make a budget ourselves, and first weeks, increase all. We started that last year, and then we continue to add on to that. Okay. On NIM sensitivity, one basis point will be about 5%-6%.
One basis point is for the whole NIM or for, like?
I guess your other peers do it, like.
Yeah. It is based on four major currencies.
Do you have it for Fed? If you want a comparison, 1 bps, 25 bps Fed currency to commercial bps Fed.
I mean, that's a parallel shot down four major currencies of 100 basis points, right? That's how the one basis point to translate to 5%-6% million.
Then maybe just going back on to refresh that. What would you ask? I guess one portion that is a bit lackluster versus peers is your credit card side. Just wanted to understand your thoughts on it. Like, you know, what are you going to do about it? Are we going to leave it as such, or? And then tendencies to it?
Yeah.
Yeah. Credit cards.
Credit cards.
Yeah. We do realize that our peers have made acquisitions in that space, right? So, in terms of numbers, we are behind that. But whenever we look at credit card, it's part and parcel of the whole customer proposition. If you look at card fees, card fees is one thing, but very important thing is the merchant side. If you acquire the merchants and then, of course, that will be other fees that is actually included in the SME portfolio, right? And if you look at whether you build a loan base on the credit card, that will be NII. So it's not shown on the fee side. But yes, we do recognize that our credit card business is smaller than our peers. Are we doing things on it? Every day, we're doing things on it.
But I mean, seriously, they did acquire a portfolio. So when you say you want to trace them up, other than doing better in your services and increase the card number, it does not say that you can have something that turn a miracle to say that we'll suddenly increase credit-sized credit card business that is equal to our peers are. I think I just have to be factual about it.
Okay. Helen, this one question, not related to results. It's from one of our writers. Helen, you have recently been highlighted as one of the potential strong candidates for HSBC CEO. What is your comment on that? Will you give the job a try? Thank you.
That is something so personal, huh? And we're in an OCBC gathering, not an HSBC gathering. But I do want to take this question because I have been asked by some of my friends, okay? So if you read—I don't know whether you read—one particular report which shows a ranking of the candidates. Have you seen that? They rank the possible candidates. I'm one of them on the list. So they cite something like seven people, and I'm one of the seven. And this report somehow ranked. Well, I do a lot of research somehow, but I think it's just judgment, huh? So they rank you according to understanding of Western culture, understanding of Asian culture, your management expertise, your what else? Your wholesale banking expertise, and then your availability.
So they put you in a scale of 0 to 5. So I didn't rank top, okay? I think I'm number 5 or 7. It doesn't matter because they ranked me 2 on availability. I was telling my friends, "Availability, meaning availability to do that job." So 5 is the top. They ranked me 2. So they recognize that my availability is quite low, okay? They recognize that, I mean, whoever is doing that table. So I said, "I'm going to amend that availability to 0." So I'm not available for that job.
Sorry. I'm trying to answer.
Availability.
Available, which is not available.
So I said, "I want to change that to 0." No matter how I score 5 over everything, if my availability is 0, I'm 0.
Okay. With that, we are happy that Helen is not available.
Okay. Just two very quick questions on results. One is on the NIM sensitivity. How has that changed with the hedging? Has the sensitivity come down? And also, what is the duration of the hedges? So can you keep these, higher NIM, the lock-in? Is it a couple of quarters? Is it more four to six quarters? That's one. And second question is on cost, fantastic cost control. Do you see your ability to continue doing that, or do you foresee any pressures on cost rest of the year?
Actually, on NIM sensitivity, I remember disclosing that in the board Q results presentation as well, which was, like, one basis point translates to SGD 60 million. So now, yes, we do, you know? So it depends on the balance sheet we make, as well as some of the hedges, right? We say that we want to sustain our NIM.
Then the duration.
So, yeah. So, the duration is, like, we normally will look at renewing some of the hedges as we progress. So yeah.
It's a rolling rate. On costs, do you see your ability to sustain this very good control, or are there anything upcoming in terms of investment strategy?
Yeah. I must, I must say that maintaining strict cost control is going to be ongoing. So it's a matter of really deriving efficiencies from our, you know, business-as-usual sort of activities and how we could get those efficiencies up and use them for our strategic investment, you know, while still maintaining costs at a level.
Yeah. Because 37 looks like a very good number in Boston Translation, like X30. So do you see yourself being able to sustain? I don't know. There is numerator and denominator. But if there is some normalization on, let's say, non-invest income, can you still keep it 38, 39, or do you think you can get closer to 40?
You will be 40 to 25 once we come to the short range. If you look at our banking just, just look at banking equation, it's usually around now, it's about low 40. And that's because really we do have very strong NII over the past two years, right? As that starts to pay, you know, then costs also will start to build up, although we are going to maintain that sort of a moderate growth level as we derive efficiency from business-as-usual and make investment into it, sort of investments that we want to undertake as part of our corporate strategy. We do see costs continue on a steep growth trajectory while income will moderate in terms of the growth rate due to the interest rate cycle. So 40%-45% cost-to-income ratio is what we have. Okay. So with that, we will move on. Oh, sorry.
Go ahead. You have one more question?
Yeah.
Okay.
I have one question. I think you mentioned earlier that the trading income, which was a huge growth this quarter. Did you say you can sustain it for the year? Or the level? I mean, not the growth. I mean, but the. We hope to sustain the customer side of the flow, right? But, of course, you know, non-customer flow trading depends really on how the market is performing, yeah?
And then the last question on the CRE portfolio in Hong Kong. Your peers have said they've sort of made allowances for the lower valuations, etc., etc. Have they done the same thing? I mean, have you marked the valuations, the collateral?
Of course, we of course, we do that. But we do that. But our LTV has always been quite low on our portfolio. So we haven't seen a big I mean, I mean, from time to time when we look at the real estate, we do I think last quarter, Colin, we do some of our, ECL 1 and 2 on the Hong Kong property market. I think we will constantly look at that and see if we have to do anything else.
Yeah. We need to have more forward-looking view on this. Yeah.
Is it very big? Is it small? I mean, I think it's the Hong Kong. There's so much concern about the job.
You talk about real estate loans exposed to real estate. I wouldn't say it's very big compared to the total loan type of the group. And for our Hong Kong real estate sector exposure, we're also lending to most of the better companies, the bigger companies.
Okay. Okay. So with that, we will move on to our second segment, which is on our general offer. I don't think I need to sorry. You want your results again? Results?
No, no. GE.
Oh, no. GE, Helen, as a presentation, maybe give her a chance to better take through her presentation. First, we will have time for questions.
Yes. Yeah.
Okay. I tried to actually summarize what we have made in the offer, and the offer announcement into a PowerPoint, hopefully, to just highlight the key points. And I think, as Chin Yee said earlier on, the offer is governed by the Singapore Code on Takeovers and Mergers, right? So we cannot disclose information that has already been made public. So you have to bear with me on that. But I just want to use these slides to summarize what we are doing, actually, in this particular offer. So I just want to give some context to it. I talk about corporate strategy all the time because I believe only you have a strategy, you know your direction, then you build your business accordingly, right? And even if you are doing inorganic, you know what inorganic growth you want to target on and focus on.
So from when we first launched our corporate strategy, I think in 2023, we see our strategy gaining momentum, right? That's when we say, "Oh, we want to have incremental revenue." So we're seeing it gaining momentum. One of the big pillars in our corporate strategy is indeed capturing Asia's rising wealth. I think that is given. We do know that the wealth in Asia is continuing to rise. And the flow and the flow for wealth is also going faster. So because there are more and more people who decided to have a second location, park some of the wealth offshore, etc., so that is not limited to any any country in that sense. So we have been moving intentionally to build up a strong franchise in wealth management. So we talk about hiring people. I think you remember we talk about Bank of Singapore hiring more.
You talk about our retail network hiring more RMs, right? We are instituting best-in-class practices and processes, and we increase our investment in the Great Eastern as well. Investing in Great Eastern is an ongoing process. You can you can see it, right? Of course, we need to look at opportunity to best use our capital, which is the question you put forward earlier. Inorganic, will you still look at it? This is what we all look at in order to deploy our resoldces into businesses that is earnings-accretive to OCBC. This is exactly what we're trying to do, right? If you look at the first page, offer price for each GEH shares is SGD 25.60 in cash. We specify that that is in cash. This offer is unconditional in all aspects, right?
So the offer is open for the GE shareholders who I mean for those who are owning shares, the shares not owned by us or our group, so for other GEH shareholders to consider, right? So when we look at this premium, the offer price sorry, when we look at this price, the price represents a premium to the historical trading prices, right, this page, right? So we are saying that it is from the price traded yesterday, it is a premium of 36.9%. But we also look at the last you see on these slides, right? We also look at one month, three months, six months, 12 months, and five years.
So if you look at that, the offer price represents roughly about 30%-40% premium over the last five years if you look at different parts of that time frame. So why GE then? Because if we turn the page, I think you all know GE. I mean, if you're in Singapore, you know GE. It's a very old name. It's actually older than the bank in that sense. It's 115 years old. It has more than 60 million policyholders. I mean, these are numbers that we don't always repeat. But I just want to highlight these. And this is, GE has been a trusted brand, and it's served multiple generations. It is the number one life insurance brand in Singapore, Malaysia, by sales, and has the largest agency forces across these two markets, right?
We're talking about something like 35,000 agents. In Malaysia, we're very well recognized as also the oldest insurance company life insurance company there. Our relationship with GE is 66 years, meaning we have been in partnership with them since 1958. We are top two in the bancassurance market in Singapore, right, based on what we do with them. There has been a strong synergistic relationship. With GE always working with us, we are able to customize a full suite of investment insurance and estate planning solutions for its customers. It is always like because this is part of us, we see them as how we work with, for example, how we work with Bank of Singapore. We see them how we work with the global markets, right? When we look at offering products to our customer, insurance is intrinsic.
It's not like we just call it bancassurance. It's not like because our insurance company incentivizes us, we sell more insurance. It's always like part of the whole, synergistic value when we look at Great Eastern. And of course, Great Eastern has also benefited in that sense to have access to our extensive retail and also commercial customer base. And the general insurance benefited from our corporate customer base as well, right? So it's not limited to bancassurance in that sense. And of course, more importantly, there we own them, and they contribute their earnings contributed to us over the years, right? And as we continue to increase our investment in them, we recognize more of that earnings as well.
So if you talk about rationale, simply put, because we believe we're confident this exercise will reinforce our long-term strategic visions to continue to build ourselves as a leading wealth management player and deliver a more integrated value proposition to our customers as well. So I talk about rising Asian wealth, and this is showing demand for more wealth enhancement and not just enhancement, but also preservation solutions. Actually, insurance come neatly into, in particular, about preservation as well. And so, this is strategically positioned to capture the wealth opportunities in our corporate strategy pillar. So also, our one-group approach has also allowed us to group everybody together to form that holistic product offerings over the years. And we believe that in increasing the investment in Great Eastern, we will actually fortify this approach even stronger, right?
So we look to and at the same time, we look to deploy capital into a key business pillar that is attractive and valuable. I think we, we cited in the announcement, how much they have attributed to our earnings over the years. So if we say turning the page to page seven, this is how we look at it, right? Our, our scale, what GE looks like, 16 million policyholders. And of course, we can also dig deeper into that and make sure that they will be able to bank more with OCBC as well. I mean, at the moment, I can say it's not 100%. I'd be very happy if we, we bank with all those 16 million customers. And of course, they have they have, they are a good-sized company on its own. They manage over SGD 100 billion assets.
GE, sorry, Lion Global, which is a subsidiary of Great Eastern. Actually, OCBC also owns shares in it. It has SGD 70 billion of AUM under management, as at the end of 2023. The right-hand side of the slides is just to illustrate how we have been growing our wealth management AUM, wealth management income over the last 10 years. We have been using 10 years to illustrate how GE has contributed to us, right? That is what we have been talking about, why it is important to us. Slide eight shows a bit of the opportunity. I'm not spending time on this. We're just saying that GE is in the markets of Singapore, Malaysia, Indonesia. This is also our core markets in OCBC Bank. We're still positive.
We remain very positive to improve our presence in these markets and continue to help GE grow their business as well. Hopefully, they grow alongside with the bank. We rely on each other to generate even more business and more customers for the overall group. 1 slide down, slide 9. One-group approach, again, it is just very readable. It is our approach to capture the rising prosperity and wealth flows within Asia, right? We do it with our insurance, banking, and asset management. In a way, I can always say everything is linked, right? When we even for insurance policy, you can leverage it. You can actually lend against insurance policy.
When a customer has started a lending relationship with us, they probably will then stop to say, "Of course, other than buying insurance, life insurance, they think about the mortgage they have with us than the mortgage insurance," right? So and in a way, we also work with BOS and introducing actually insurance products to the BOS customers. So this is not just a bancassurance which we sell over-the-counter as I put it. Okay. So the next slide. We just want to recap what we said because we said we have the rationales why we want GE because we can synergize further. It is also earnings accretive to us. So this slide shows how, how that means, what that means in being earnings accretive. So we use the 2023 full-year number, and we do a pro forma.
Assuming we acquire 100% of the shares there that is available at S$25.60 in the price, then it will be actually generating 0.2% to our ROE. Yeah. And ROE is actually on an average basis across 2023, right? But as at the end of 2023, if we look at our CET1 ratio CET1 CAR ratio, that is going to be an impact. The offer will have an impact of bringing down our CET1 by 60 basis points. Yeah. We just put that illustration that 15.3 is not the end because we have already declared dividend for 2023. So that would bring it further down to 14.5. But again, this is before we add on the first-quarter earnings. But just want to use this to simply illustrate how we see why we see it is earnings accretive. So the last page.
Just want to, we have found that we are financially well positioned to execute the offer. We intend to use internal cash. We are well capitalized. You see how our CET1 ratio is like as at end of 2023. We did say in the offer that the dividend we declare for GE shareholders, we will pay it. I also said earlier that we still target for OCBC the same 50% dividend payout. Okay. Chanya, you have your first question.
Yeah. Helen, this has gone on for a bit. Why do you think it could work this time? I mean, the minority shareholder.
Oh, okay. I really can't comment on that because it needs the shareholders of GE and GE themselves to be advised by an appointed IFA, right, an independent financial advisor, to tell them how they see this offer.
If you ask me, we launched the offer. Of course, we want it to work. We want it to work, right? But of course, we launched the offer, with a wish. We state it very clearly to the listed. Yeah. So if we manage to get everyone selling to us, then I'll be happy 100%. But I cannot comment on whether we think we will be successful.
Okay. Maybe we go to. Yes. Maybe we can back yeah.
Sure. Thanks, Annette. I think it's pretty clear. GE is a great business. And a lot of the benefits from GE I think you were already leaving those, right, with 88.4% stake in it. So the question, I think, any OCBC shareholder would ask is, with this SGD 1.4 billion that you're spending, you're earning something like SGD 1.9 billion net profit, extra profit.
You look at the UOB Citi deal, like-for-like basis, they earn SGD 140 million because their synergy is there. They can drive synergies between two banking businesses, right? So I think the question is, like, why is this the best use of your capital? Why is it better than maybe acquiring a credit cards business or paying back capital to shareholders? So as a shareholder, like, how should I why should I be excited about this deal?
I think there is a couple of things. The first one is we position ourselves for long-term sustainable growth. If we of course, I shouldn't comment on dividend, right? But if you say that an option is to distribute dividend to shareholder, after you distribute that, that means your business growth will be lower because you have less capital to use, right? If you just pay out. Capital to use, right?
If you just pay out dividend to your shareholder, then we don't have the capital for future opportunities to grow. We want our growth to be sustainable and for long-term growth, right? That's why we have a strategy for medium-term. That's why we have medium-term targets. So compare to that. Then compare to buying something different. This one, we don't have any integration risk at all, right? We don't have integration risk. We're not buying a business. We need to integrate it. Doing integration, of course, there is integration risk. Yeah. So this one is a very natural increase in a business that we know very well, that we have synergized value already. But also, you're looking into a potential even further, synergizing the relationship because there is still a difference between working with a listed, independently listed company compared to a non-listed company.
Yeah.
I think there's that. What is that? What is that extra synergy that you get from taking 200%? I'm so curious. I just want to understand that a little bit better. I think that there's not a lot of things I can say to infer how the market shareholders would take the offer, right? So I cannot go into details what I say. But in the offering, we did say that we retained the flexibility to look at reviewing the GE business further in the future and look at other possible synergy values and maximize it. Efficiency is one possibility. Can we move to the media side first? I think, Goolam, you had a lot of questions. But the first one has to be, have you spoken to the minorities? And then there are some other questions. So, oh, okay.
So the first question is to them. I mean, it, it because the EV, the embedded value is 36 36, I think someone sent it to me, SGD 36.59. So I'm just wondering how you treat this on your own balance sheet because the NAV is a lot is, is lower, right? It's about SGD 17. So will you will the additional offer above the NAV be goodwill? That's my own question. And for the minorities itself, I mean, would you be willing to go to the embedded value for them at any point? Because you didn't say in your, document that this is a final offer. So that's a one question. Then the second question with the impact on CET1, you said. And then you, okay. So Great Eastern is big in Singapore and, and Malaysia.
It says that it can't go into Hong Kong because it didn't have the license. One of the growth areas and maybe it's not a question for you, but it could be a question for you. One of the growth areas in Asia was Hong Kong for AIA and Prudential because we've seen the FY 2023 results earlier and, and also their first-quarter results. So why and, and you and OCBC has owned Wing Hang for 10 years. So why has Great Eastern not been able to tap that huge potential that, you know, AIA and, and Prudential have got? So yeah. So that's the second question. So the first question is, why do we talk to the market shareholders? Of course, with this offer. We will because before we before we launch it, we cannot go and prepare that for an offer. Okay. All right. Yeah. Yeah.
They will be advised by the IFA, as I said. And then, of course, they can still trade on the stock exchange, right? So that's where we will be dealing with them. If they want to trade on the stock exchange, we will buy because that is our purpose, right? We want to acquire the shares. Yeah. So that is what is about the market shareholders. Would you be advising the offer? I mean, would you be open to a? That is exactly what I cannot comment on. Okay. Then there's the Hong Kong question. And the last question, next immediately. Okay. Hong Kong question. When we say we don't have a license for GE to sell into Hong Kong, it's true.
If you ask me about history, also, this is not the right forum to talk about history, right? Okay. But it doesn't stop us by selling insurance in this market where the Hong Kong and the Chinese customers come here to open an account, yeah, with the bank, right? So we can sell it to them, right? As into the future, of course, I also cannot comment because that means that means I'm telling market shareholders something that is not in the in the document. But you know GE is in Indonesia. So what stops us? This is our core market. What stops us continue to support GE if we become, you know, the, the parent, the ultimate parent, or what do you call it? Sorry. We are already the parent.
But what is it to stop us in supporting GE in their strategy to develop and grow their business? That is what we stated in our intention as well. To develop their business in Indonesia. To have them grow and develop their business. And Hong Kong. But you will can't comment on Hong Kong business. I can't comment on their plans. Yeah. But we commit to have them to continue to develop and grow their business. And, of course, I mean, this question is probably for the banker. So why, you know, why don't you get an open market bid to get a fair value with you given the right of first refusal? Or maybe it's a question more for Great Eastern. Yeah. Yeah. That would be what's the question again?
The question is, why couldn't GE have gone to the open market, you know, put yourself up for sale to get a fair value, and then OCBC gets the right of first refusal? Is there such a thing in M&A?
That would be up to GE, right? If they you said it's an action by GE. You're the owner. Well, they are as independent as GE. It's a separate listed company. Wait. The question, why doesn't GE put itself for sale? Can we wait for it? We are open to get a market value for it. We own 88.5%, 4% of it. They can't put themselves for sale. They can't, right? They can't. We're not a seller. We're a buyer. Okay. Fine. Okay. I'll back to the analyst. Sorry, Nick. Thanks, Helen. Can I ask a couple of questions?
First is just on, I mean, the capital position at GE, from my understanding, is very strong. You know, if you own 100% of it, does it give you more flexibility on GE's ability to dividend capital? Or does it need less capital if it is 100% owned by the bank and therefore intercapital flows between businesses are much, much easier? My second question is, you know, the majority of the banks who have insurance companies over the last 20 years have decided to divest rather than buy. So what is it that you're seeing that they're missing? Okay. Whether we will do anything to the capital, that's also something I cannot comment. But what we did say is we commit to continue to develop and grow the business of GE, right?
So that means if in this growth and development, they need the capital, that means they need the capital. But we, we, we have the flexibility to rebuild it after this if we if we and can get 100%, right? We can then help them together with developing their plans going forward, right? The intention is not to the intention is not to make major changes to the business of it. This is what we stated in our offer, right? There's no current intention to do so. So my advice is here. But that means we, we are telling people this whole thinking of attaining 100% gain control and then strip out everything sour, that is not that does not in our intention, right? So then it comes back to your second question, why are we not selling it? Because other people are doing it.
Because it has always been one part of the group. We talk about a diversified franchise. They contribute earnings to us in the economic cycle. And it has always been the intention that we have this as part of our integrated wealth business, right? And I did say that I believe we have more synergies already comparing just to buy products from another insurance company. That's how we see it. And it has been a very strong member in the OCBC group over the years. So I think there is no shortage of examples where there are other banking groups also have insurance embedded inside them. And there is, as we evaluate these investments we have over the last 60-something years, it is very clear to us that we want to retain this business. And when we believe that, we can realize even further value as well. All right.
Can I just add? I mean, obviously, at the moment, the way that it's treated in the capital structure of the group, you sort of get this 10% free ride into 10% of your core equity tier one. You can count about it as part of the Great Eastern. And then you get deductions, which potentially gives you a leverage benefit in terms of your, in terms of return on Great Eastern. So, Great Eastern in your capital structure at the moment, you can count up to 10% of your equity from non-banking businesses. So Great Eastern is in there as part of your CET1 capital. And then, obviously, you get the deduction above that. So there is a leverage aspect because you can get earnings, and you can double-count or double-use capital.
But it seems to me that from your tier one structure, that actually, MAS doesn't allow you to get away with that. So it asks you to hold more capital because you have that double leverage on the insurance business. Is that a fair comment? Does your ownership of Great Eastern mean that your minimum capital ratio, in reality, I get the way that it's actually calculated, is higher than it would be if you didn't own it? For treatment of insurance, you know, in the bank, core equity tier one participation, we see good core equity tier one participation instead of de-recognized. So the entire insurance is, like, de-recognized from the bank core equity tier one. Yes. Yes. But not. That's how banking, sort of, group core equity tier one is computed. So we will just de-consolidate what you call insurance.
So, what is your banking? So we. So, what I'm it, it's not like banking solo. It's an OCBC group, but without the, you know, because overall banking operation because for technical, right, for group core equity tier one computation, insurance is sort of de-consolidated whereby we have to deduct, you know, our carrying costs in Great Eastern in our core equity tier. So you can carry up to 10% of your CET1 capital, can be non-banking business, correct? Or can be associated. Can be holdings in other financial. Right. There, there's a sum of that where you can convert to RWA and convert for insurance, we. So, what we would mean is sorry. Because she raised her hand earlier. Sorry. Do you want to continue? Sorry. Chin Yee, you want to? Yeah. Yeah. Ready? So you finished or? Ready. Oh. Yeah.
Could you comment on the timing, rationale of the timing of this offer? Why now or earlier or later? What, what the consideration for the timing? And secondly, with the potential acquisition of this business, do you see insurance sector as the next right spot that, OCBC would be, you know, putting more resources or investment in in terms of acquisition of other plans? Thank you. Timing. I, I think timing is quite central. You said this is not the first time we do we do this offer. So, of course, we have, done it in history. And even over the previous years, when shares is available and if, a shareholder approaches us, we're willing to acquire. And we have and we reported the change in our, in our acquisition. So there is no now best timing for this.
It is when, as we look at our capital, right, because we said we need to look at our capital management. When we say we have capital to use, so it has been one of the options that we can do it. So it is just a natural move as we strengthen our wealth propositions, as we strengthen when I talk about strengthening is, again, we're not just looking at GE. We have been investing in the Bank of Singapore, as I said earlier, right? We have been investing in the way we provide our products. We've been looking at digitalizing our channel. So that's why we continue to grow net new money, AUM, and all that. So we have net new money coming in. You want them to invest, right? So in a way in a way, it is a continuation of our capital management and our corporate strategy.
So yeah. Meaning we want to do it. So as we look at our capital position and everything, so we say, "Yeah. This is this is the right time. We think this is something that we can do." So we decided to do it. Then about where is the bright spot? Oh. Okay. It is always one of the three very important pillars. But insurance has that particular I mean, it runs of course, GE runs insurance on its own, right? But then, as we said, it is always part of the wealth platform as we see it because we talk about rising trend. We talk about wealth enhancement and also preservation. So it is indeed a very important pillar. So we still call it insurance because it is an insurance business. But it, it will be considered in altogether in our corporate strategy among wealth.
So would we increase our investment? Potentially, yes. But again, it comes back to we have to develop our plans. What are the what are the right which are the growth area and where we want to put in investments in those areas? So it is always possible if we invest more into insurance. But this is among part of our whole corporate strategy. Anyone else? Jayden, are you on the call? Are you going to ask a question? Yeah. Thank you very much for the opportunity. Apologies, I couldn't be there in person. So just wanted to follow up on some of the questions before that, that Nick was asking about, the dividend policy. I note, Helen, in the overall dividend policy for the group, we have 50% payout ratio, which is affirmed. But as you mentioned before, if we privatize GE, then there's more flexibility.
If I look at GE, there's about SGD 3 billion of retained earnings that are on the balance sheet. Does this give you the flexibility to sort of manage the capital more efficiently across the group? And then if that's the case, does is there any sort of potential upside for OCBC shareholders, in terms of future dividends from this move? I'm just sort of trying to see if that's one of the upside levers. Thank you very much. I cannot comment on that. I mean, the intentions stated very clearly. To say that I have further plans, I'm inferencing what I said in the offer. I'm sorry about it. But when we say flexibility, you have to realize that for the last two years, we keep on telling we keep on sharing that we are looking at our capital. We are making our capital in a better positioning.
We rationalize our RWA. Yeah. We turn the old Wing Hang Bank, meaning Hong Kong, business. We changed it from standard to IRB. So that is equivalent to our CET1. So we've done quite a lot of things to continue to look at how we maximize the capital. So with GE, we of course, if you say, "I don't look at the capital," is wrong. But this has always been something that we look at, right? Is that potential to make sure that we maximize the use of our capital? Yes. It's always there. It's always there. So but I cannot tell you what plan I have because I just cannot tell you. So sorry about it. But this is indeed we don't look at capital on one specific entity. We're looking at all our entities and our overall capital position. Yeah.
We promise we'll continue to make sure that we rationalize and provide more return to our shareholders. This is what we exist for, right? We will deliver, hopefully we will deliver. Some of the capital, we're obviously putting into growth, right? And seriously, when we say this offer is earnings accretive, it's because then we realize more of the profit, it goes to our bottom line, right? So if we commit 50%, that means we're paying out more in that sense. Okay. Thanks. And can I, if I could, just follow up. So let's just say if it's closed and we've taken it private, and this has all succeeded, which would be wonderful. Does that mean we'll have sort of some update on what the capital management strategy for the group would be later?
Or we just would stick with the status quo? Just to really understand the point about the payout ratio. We do intend to communicate with our investors on a frequent basis. We obviously, potentially, we can structure something when we're ready to share. Yeah. So it's not like that. Don't think something like, I mean, making an offer is not status quo already, right? So in the sense that we commit to better communicate with all of you going forward. Okay. We move to. Okay. Thank you. So I've got a couple of questions. My first one is all on timing, if I may follow up on that, because it was just a few months ago that we heard about the request from minority shareholders. So I just want to know if those requests influenced this decision in any way.
For example, did it expedite the decision to take GE private, or did it have any influence on the offer price? I have another set of questions that are non-GE related. I'm going to squeeze that in now because I'm worried about time. So it's on the medical claim misconduct at BOS. Can I find out if similar investigations have been carried out at OCBC since OCBC previously processed claims from the same clinic? If yes, were any OCBC employees disciplined or dismissed? On the same issue, do you think the incident has had any impact on BOS or the wider OCBC group, for example, a reputational hit? That's a very different question. Thank you. Let me address the first one first. Whether it is because of the minority shareholders' questions, the answer is no. Yeah. Our strategy is always to solidify the wealth management leadership position, right?
So, acquiring more shares in GE is an ongoing exercise. But as we said, we always look at our capital position, how to best use it. So, this is an option, this is one of the options investing in GE by a through a general offer, right? Okay. So, then again, the second question on that particular write-up about the claims, medical claims, we cannot comment on any staff matter. We cannot, right, because they are our staff. We cannot tell you details about staff matter. But what we can say is, we take our we take what how we do things very seriously. If there is anything, any wrongdoing, we investigate. And if there's wrongdoing, we investigate, and we investigate thoroughly. But based on what we have set up, we have disciplinary framework and investigation framework.
If there is any gaps or whatever, anything that we need to do, we have already addressed. So what we're saying is, we do not see something like that repeat again. Is there a chunk here for me? Sorry. You, you're listening. You can tell us. We're still hiring, and we're still doing our service. Yeah. Thank you for that. Can we move to the analyst side? Listen. Just on the ROE. So I think earlier, also in the guidance slide, the ROE guidance was in the staff. And I think you showed here as well, the ROEs would be much richer if we had the full, you know, GE stake. So in terms of if we do get GE, what is or what do you think the ROEs? I think earlier you said high end of 14%.
The GE offer, it is 100% successful, meaning acquire all the shares, has an implication on ROE, right? Yeah. We did say that. But this is before we account for this year's profits. Yeah. Yeah. Yeah. So, so as in this year's guidance for ROE, earlier you were saying was. Yeah. Because our target has been 13%-14%, we're saying that at the point we feel we will be closer to the high end. Yeah. But at 14%, I mean, clearly, like, this quarter, and then if you add additional GE, we'll clearly hit over. I think I'll be, and then, like. You want to take. Would the guidance be, like, 14%-15%, and we're higher at 15%, you know, versus, you know, being conservative at only 14%? You know, what can we anticipate?
We are not changing our guidance at this point. That is a strategic answer. Movement of equity is not just because of earnings. So you're saying that the 13-14 will likely maybe still end at 14 high because of the. Because of how we see our trajectory of our business and with this one. Maybe we'll move on to Prisca from Straits Times. Just a bit more color on the new business earnings objective. You mentioned that it will generate 22% ROE. Could you also maybe give a bit of color on how it will play into the S$1 trillion incremental revenue target as well as the impact on near-term net profit? We have talked about targets about NIM. We have talked about targets on NPL. We have targets on growth. So that's how we eventually have a target for ROE.
But in a way, ROE—I think the important part on our strategy is really to focus on growth and manage our capital position well and make when the opportunity come, to make investment both organically and inorganically, right? So eventually leading to an estimate plan of return or income, right? But income, of course, this is, again, subject to the market, subject to interest rates, right? And also subject to the investment we make. We say we try to control costs, but we're still investing. So it's—I can't give you, like, my business plan is because I should not be. Then it's very difficult to take your question as to say then how that it eventually shaped into ROE. I'm not sure whether I'm saying the right thing, Ching Yee. And it seems that I'm not taking your question right.
Oh, I guess you're asking that the trillion that we had. Yeah. Yeah. That we articulated as a. No, last year. Does it include the GE? Yeah. I think it does not. It does not. Sorry. Didn't take your question right. Okay. Okay. And it's the NIM? So it's not related to GE. But I remember last call, they had mentioned your baseline thinking about this year was two rate cuts towards the end of the year. Does that still hold? We were I think end of year, we were talking about three to four rate cuts. End of year. Three rate cuts. Yeah. Three. Sorry. Three. So, your expectation now is potentially moving to two. That's why we did say that if interest rate is cutting slower, we think our NIM would be higher. At a higher end. Okay. Ninood, BT?
So the offer price is still 30% a discount to GE's embedded value. So in the instance where the IFA thinks that the offer is not fair or reasonable, right, what would be the next steps for you? Or is there, like, a way, you know, room to raise the price, offer price? I mean, yeah. Okay. That is a timeline, which I did not go through there. This one. Yeah. This is the timeline, right? So what I cannot share is exactly what I cannot share, meaning I cannot tell you I have a plan after that because I cannot say anything that actually caused the minority shareholders to think otherwise. This is what are the facts on the table. Yeah. They have to be advised by the IFA. Yeah. So this is a timeline.
So if you look at this timeline, then supposedly, we probably will close. But it's no earlier than 28 days. Maybe the slide on the price event. Just to say that when we look at this, did we also if you look at the other multiples. Yes. Yes. You have been looking at EV, but price to book, and then price to earnings. I think these are good reference points as well. But what about other transactions that have taken place, like things like with you know, what sort of price to EV? I think we can't comment on other transactions. But one thing I can say, we are not buying a new insurance license. We are not buying a new insurance license. We're increasing investment in our insurance company. There is no integration.
We're not buying a new license to gain an insurance pillar. We have an insurance pillar. We are increasing our investment in our insurance pillar. Yeah. But the other one also, I think that there was not a licensing issue. No, I don't want to comment on other things. I think, you know, because someone the bankers I mean, someone must have looked at this and said, "This should be the valuation." So, I mean. Or it should be addressed to the valuer rather than the bankers. Yeah. I see. The bankers didn't look I mean, they would have told you, "These are the advisors." They are not here to take questions about. Yeah. I know. I mean, because I can't ensure we can say more than what we have said. No. But in a they would have always there's always a comparable, right?
Can we say it at that? This is what we can show. Yeah. We have price to value. We have a price to EV. We have price to earnings. We show you what the premium is. Yeah. Yeah. Your own? Yeah. Maybe just on capital but not on GE. I think they'll be more active to allocate more capital into treasury markets because I think when rates are still high, one of your peers has been putting some duration into treasury markets because you still have the capital to do so. And at the same time, that will allow you to increase your interest income and ultimately more earnings and higher dividends. You'll see more opportunity. Investing capital into treasury markets? Market income durations.
I think because you are thrust, you have, like, some, you know, some excess capital to do this. Managing our managing our own money, our own book. Yeah. Of course, we look at opportunities all the time. But we also we also adopt a prudent view. And, and, and we do have, built up what we say are the parameters for us to invest, right, and, the duration of our investment, etc., etc. So I yeah. I have nothing more to say on top of that. Just, you know, I think if you put into I think this is pretty much risk-free and no money at duration. And this will, you know, add to your NI, then, you know, sequentially, you can expect NI to grow, then potentially more. Thank you. I think I should introduce actually introduce Ken Lai to talk to you. Hush.
Has more three-year question on capital allocation. Anything would be getting in line with your peers in terms of CET1, let's say, over a period of time? Or a running slightly higher capital compared to peers is a comfortable position for you? Do you think you could tend to kind of come closer to in terms of CET1? This was because there is this, Basel 4 as well as there's a lot of capitals in World Accounts. How do you think about that? Just want to make it clear, Basel 4 or Basel 3, whatever we call it, there is, some impact on the capital, but it will be erased out over a period of time.
You cannot rely on that, early part of which is equivalent to plan on how you use your capital because eventually, that benefit will be erased off, totally erased off, actually. So that we would observe that, but we cannot really use that because it's not a real increase in capital. It's just Basel 3 reforms at application, okay? So would we actually bring CET1 down if we continue to grow organically as we plan? And if we continue to invest, if we continue to look at possible other inorganic investment, yes. Yes. It will not be for long term, but fundamentally, we also want to protect our credit ratings, right? What is that sweet spot?
So, one we should look at is the final number, the transitional number, if you make 150, 200 rates higher, we should completely ignore it for that transition period. And maintaining your credit rating while still being more efficient on capital, is there a number? Is 14 a number, is 15 a number? Like, where should we think is the number below which you would not go because of credit rating? I think 14 is a number. 14 is a number. Oh, Melissa. Just housekeeping. Like, if you definitely acquire all the shares in terms of accounting for it on the P&L statement and on the balance sheet itself, is the P&L similar, and then we just don't have the minority line? Now, on the balance sheet, you only have this one asset line, one liability line. Does that change?
Does that change the equity number? Like, is there would there be a change? Because I'm just thinking in terms of your ROE targets, like 14%. Like, why is it 14%? Like, does that something on the balance sheet that we need to take note of? Okay. Based on the assumption, right, 100%, that's when the minority, the what we call the non NCI, non-controlling interest, we will take into account without having to count that. So that's 100%. Yeah. And then on the balance sheet? Balance sheet will depends on, you know, the how much that we eventually will take in as an investment. Somebody? Just one last question. Can I ask about Bank of Singapore, how much earnings attributed Bank of Singapore is doing for OCBC?
I mean, if you look at how we disclose our overall wealth management income, right, it also includes private banking, right? I think you can actually see that, you know, it's gone up, right? I think the earnings are very good this quarter, right? That also has been contributed also by the wealth side in addition to the insurance side. So I think if you look at it, you know, I think in the chart that I think we showed earlier on the increase in AUM, I mean, it's gone up from in 10, over 10 years, right? We've gone up, you know, multiples. So I think that should sort of show, you know, how I think Bank of Singapore has contributed to the growth. Sure. I'm sure.
But I mean, for Great Eastern, your rationale, you stated very clearly in terms of hundreds of millions of dollars that GE is contributing to bank to OCBC now and how much %. Can you just do that for Bank of Singapore as well?
I mean, if we disclose, you know, like, our peers in our financial statements, you know, contributions for the consumer and private bank, I think that also is part of, you know, how we look at it from a management perspective, that the wealth business are so included in that number also in Bank of Singapore. Okay. For us, our peers, their private banking is part of their consumer income business. So for competitive reason, we for Bank of Singapore, we will only then another. It's part of our. Share information that is also in line with our peers.
So therefore, when we do comparables because I think the three banks, you know, they also do disclose, you know, their performance by business segment. So when we look at our private bank, it's also part of our consumer/private banking. It's also comparable to, yeah, how, you know,
how the other banks disclose. I guess Helen can say whether Bank of Singapore is contributing to us. The answer is yes, but maybe Helen can just. Just one question. My question, because Bank of Singapore also has a is.