announce our results this morning, and we are pleased to report a robust performance for the quarter, which contributed to record net profit for the nine months of 2023. Moving on to our financial highlights on slide four. For the third quarter of 2023, or our Q3 2023, in short, group net profit rose 21% from a year ago, and 6% from the previous quarter, to SGD 1.81 billion. The group's annualized return on equity for Q3 2023 improved 2.1 percentage points year-on-year to 14%. Total income rose 13% from a year ago to SGD 3.43 billion, underpinned by record net interest income and growth in non-interest income.
Net Interest Income was SGD 2.46 billion, up 17% from the previous year, supported by asset growth and a 21 basis point expansion in Net Interest Margin to 2.27%. Non-Interest Income of SGD 973 million was 4% above Q3 2022, with fee income rising to the highest level in the past four quarters. We continue to invest in our franchise to support business expansion while keeping costs well controlled. With income growth outpacing the 5% year-on-year increase in expenses, Cost-to-Income Ratio improved to 39.1%. Credit costs for the quarter were an annualized 17 basis points, and our loan portfolio remains sound, with NPL ratio further improving to 1.0%.
Loans grew 1% on a constant currency basis to SGD 298 billion, while deposits were 1% lower from the previous quarter as we proactively managed our balance sheet by reducing higher cost deposits. Our capital position remains strong, with Core Equity Tier 1 ratio at 14.8%. Moving on to slide five. Our three key business pillars of banking, wealth management, and insurance continue to deliver resilient performance. Banking operations net profit for Q3 2023 was SGD 1.66 billion, 31% higher than the previous year and 7% above the prior quarter, on the back of record net interest income and fee growth. Wealth management income was also higher year-on-year and comprised one-third of the group's total income.
Assets under management were SGD 217 billion as at 30 September 2023, up 8% from the previous year from net new money. Our insurance business registered higher single premium sales in Singapore during the quarter, with total weighted new sales or new business annual value up quarter-on-quarter. Moving on to slide six. We maintain our strong balance sheet position, placing us on a good footing to support growth opportunities and to buffer for uncertainties. Regulatory ratios were all well above requirements. Moving on to more details of our group results from slide eight. Net nine months 2023 net profit for both the group and banking operations were higher than the previous year, and I will cover these in the next few slides. Moving on to slide nine.
Group net profit of SGD 5.4 billion for nine months grew 32% year-on-year, on the back of record income, which exceeded SGD 10 billion. Income growth was largely driven by a 35% rise in net interest income. We achieved positive operating jaws, which drove a 7.1 percentage point improvement to cost-to-income ratio to 38.2%. Allowances rose year-on-year as more general and specific allowances were prudently set aside. Turning to next page. For the third quarter, net profit increased 21% year-on-year to SGD 1.81 billion, largely attributable to a record quarterly net interest income and higher non-interest income. Compared to the prior quarter, net profit rose by 6%, mainly from a rise in net interest income and goodwill allowances. Moving on to slide 12, where I will go through the group's performance trends.
Net interest income for nine months of 2023 rose 35%, exceeding 7 billion mark for the first time to reach SGD 7.18 billion. This was driven by a 6% growth in average assets and a 50 basis point uplift in NIM to 2.28%. For Q3 2023, net interest income was a record SGD 2.46 billion, up 17% year-on-year, and 3% from the previous quarter. We continue to actively manage our balance sheet. Quarterly NIM was 2.27%, a 21 basis point expansion from a year ago, on the back of higher margins across our key markets. Compared to Q2 2023, NIM was up 1 basis point, as higher asset yields outpaced the rise in funding costs. Moving to slide 13.
Non-interest income for nine months, 2023, was SGD 3.05 billion, 3% above the previous year. The increase was mainly driven by higher trading income, net gains from sale of investment securities and insurance profit. These more than compensated for lower fee income, which was largely due to softer wealth management fees in the first half of this year. For Q3 2023, non-interest income rose 4% year-on-year to SGD 973 million, supported by improvement in fee income and investment performance. Insurance income was lower year-on-year, largely due to an increase in medical claims, which was partly compensated by improved investment performance. Moving on to slide 14, where I will cover fee income in more detail.
Q2 2023 fee income of SGD 461 million was the highest in the last four quarters, 2% above a year ago, and 7% higher compared to Q1 2023. The quarter-on-quarter growth was led by increased wealth management, credit card, and trade-related fees. The improvement in wealth fees underscores the strength of our wealth management franchise. Customer activities were higher in Q3 2023, and we also saw higher demand for wealth management products, including insurance, bonds, and structured products. Turning to slide 15. Trading income, which mainly comprise customer flow income, was SGD 783 million for nine months of 2023, up 5% compared to the previous year. For the quarter, customer flow income continued to trend higher.
Non-customer flow income was lower as compared to the prior quarter, mainly attributable to a drop in mark-to-market valuations of fair value through PNL securities and derivatives. Moving on to slide 16, on operating expenses. In line with our corporate strategy, we continue to invest in our franchise across people and technology, while still maintaining cost discipline. Operating expenses for the nine months and quarter were well managed, up 5% year-on-year for both periods, and 1% higher quarter-on-quarter for Q3 2023. With positive operating jaws and year-on-year income growth outpaced the increase in expenses, cost-to-income ratio for the last three quarters were below 40%. Moving on to allowances on slide 17. For the nine months of 2023, credit costs were 20 basis points on an annualized basis, in line with our full year 2023 guidance.
For the third quarter, total allowances were SGD 104 million, 27% lower than the prior quarter, mainly due to write-back in general allowances of SGD 36 million, as compared to a SGD 200 million charge to the Q2 2023. The group had prudently set aside general allowances in previous quarters, and the write-back in Q3 2023 included migration of general to specific allowances. Specific allowances for the quarter were mainly attributable to corporate accounts in our key markets across a range of sectors. We also saw reversals. For example, in 2021, we made allowances for a project in Greater China from delays due to supply chain disruptions brought upon by COVID-19. The project was progressing well and has since been completed and is generating revenue. Turning next to slide 18.
The group's non-performing assets coverage ratio continued to rise higher to 139% as at 30 September 2023, driven by a decline in non-performing assets. Turning to next page on asset quality. Our asset quality stayed resilient, with the non-performing loan ratio further improving to 1.0%. Total NPAs, as at 30 September 2023, were lower year-on-year and quarter-on-quarter at SGD 3.1 billion. The drop in non-performing assets were across our key markets of Singapore, Malaysia, Indonesia, and Greater China, mainly due to higher recoveries and upgrades. Previously, in Q3 2022, we shared that the group downgraded a single network customer name that was real estate related in our Greater China portfolio, which was highly secured against property. To provide an update, this account since been fully repaid during this quarter. Moving next to slide 21.
Our loan portfolio continued to be well diversified across geographies and industries. Group loans grew 1% in constant currency terms from a year ago, and from the prior quarter to SGD 298 billion. Non-trade corporate loans and housing loans were up quarter-on-quarter, while trade loans declined. We remain focused on supporting the increasing customer needs with sustainable financing solutions. Our sustainable financing loans rose 28% year-on-year, and comprised 12% of group loans as at 30th September this year. Moving on to slide 22. Our commercial real estate, or CRE for short, office sector loan portfolio comprised 13% of group loans. The portfolio remained resilient and largely secured with comfortable LTV of between 50%-60%. Two-thirds of our CRE office portfolio are in our four key markets of Singapore, Malaysia, Indonesia, and Greater China.
The remaining are primarily to developed markets, including Australia, the United Kingdom, and United States, which accounts for 4% of total group loans. They are largely lending to our network names with strong sponsors. Moving on to deposits on slide 23. Customer deposits were SGD 369 billion as at 30 September, 1% lower than the previous quarter, as we continue to proactively optimize our balance sheet. CASA balances rose 1% quarter-on-quarter, and CASA ratio increased to 46.3%. The group released excess liquidity in the form of fixed deposits and certificates on deposit. Moving on to my final slide. Our capital position remains strong, with Core Equity Tier 1 ratio at 14.8% as at 30 September, putting us in good position for strong growth and to buffer for uncertainties.
CET1 ratio reduced by 0.6 percentage points from a quarter ago. This was mainly due to third quarter profit accretion being offset by the payment of our interim 2023 dividend in August, and an increase in credit risk-weighted assets. With this, I end my presentation and will now pass the floor over to Helen. Helen, please.
Thanks, Chin Yee, and good morning, and good morning to those who are on the call, and for those who are physically here, welcome to the OCBC offices. Chin Yee has done quite a detailed presentation on the third quarter results, so I won't repeat it, but just want to highlight a few things that I feel are important and which is encouraging to our team and to the bank. So, first of all, I'm very glad that our total income has surpassed the SGD 10 billion mark, and also our net profits also surpassed the SGD 5 billion mark. These are record highs, and so we're quite happy, good numbers. Of course, our ROE has also been trending up, so it's at 14.12%.
We are on target to achieve our full year target of above 14%, 14%. I think the performance continue to reflect where we are, what we are in banking, insurance, and wealth management. Of course, I think our insurance business have some changes in the way we account for their numbers because of a new accounting standard, but which we have been dutifully follow up, and I think this will be quite a change, although we did actually rebase last year. But if you need more information, understanding of GE, feel free to ask the finance team or of course the GE team directly as well.
So, net interest income cost is high, because of how we manage our NIM, and, of course, we benefited from high interest rate environment, enabled by the foundations we laid for the bank the past few years. This is regarding proactively managing our balance sheets, including how we do our loan book, and which sector we grow, and also how we manage our funding base as well. One important thing over the years is, we've been managed to work hard and win some new cash management mandates and grow our corporate banking operating account space.
This is the area where you will be hold on to the cash, the money of the clients, and if they need to run their business, they need to maintain operating accounts with us. So in that sense, because we have acquired so many more SME clients as well, the SME is typically very little of their funds in fixed deposit because they need to manage it, their money on the for their capital, for their working capital. So we also enhance our digital proposition, so that helps us to acquire customer faster, easier, more effectively, and in a way, also allows our customer to continue to use us in the doing their business.
So, this is important, also very important for the retail deposit franchise. I'll talk a little bit about that later. Again, because of all these, we also allow us to build a more resilient deposit base. So, as Chin Yee has covered for the third quarter, we still see customer balance increase. And also we are able then to partner with some of the higher cost of fixed deposit in the managing our funding costs. We have just revised our full year, 2023, target link to the 2.25% region. Fee income also have rebounded in third quarter, as Chin Yee covered earlier. But I wouldn't paint too rosy a picture. We need to see that momentum flowing.
I think investors still sitting a bit on the fence as regards to whether they would go actively into a bigger into more wealth management activities. And one more point I want to mention, that we continue to invest in people, in technology so that we strengthen our businesses. And in a way we still want to also be diligent in maintaining expenses as well. So we're refining our 2023 cost-to-income ratio target set to be lower at around 40%. So I think I don't need to talk too much about how current market conditions are like, right? And before this quarter we were talking about one war, now we're talking about two war around the world. Geopolitical tension continue to remain not very healthy.
In a way, the tensions is quite big. I think it reflects a lot on them, on the macroeconomic, conditions and also on demand of loans in a way. So we do see, loan demand to be quite muted. Trade loans is not doing very well because, I think the trade volume around the region also has not rebounded as people had hoped for. So, in a way, we still manage to grow, our corporate loan portfolio and Singapore housing loans for this quarter. And, delighted to say that one of our big focus is on sustainability financing. Sustainability financing commitment, as Julie earlier, talked about, has already surpassed our SGD 50 billion goal by 2025.
So, we are playing an increasingly important role for our customers in helping them transition to a more low carbon environment. Loan portfolio is sound. We do not see systemic risk, but need to be continued to be prudent as interest rates stay high. And, also need to be prudent regarding how we look at the portfolio and make appropriate definition of NPL and make definite appropriate level of provisions as well. So our full year, we are targeting credit costs of around 20 basis points unchanged. So if we flip the page to the second page. I'm just trying to reflect a bit on the three-year plan that I talked about earlier in July.
We talked about, hopefully with a lot of the initiatives and under the corporate plan, we want to deliver SGD 3 billion more revenue over the period of 2023 - 2025, right? So just want to report by September, we are quite on track to achieve our 2023 incremental revenue. When I said that, I also have indicated, with all the initiatives, the first year you see the smallest amount, right? And, indeed, but for those that we planned for in 2023, it looks like that we should be able to achieve those, by the end of the year.
I want to touch base then to express what has been done, well, and what are the examples to bring in additional revenues according to plan. So going back to our corporate strategy, we talk about growth in three, four areas. The first one is wealth. So what are the key initiatives or the changes we made in order to deliver more to strengthen our wealth management franchise? So one thing that is very important is increase the collaboration. How we drive, in particular for retail, how we drive Premier Banking and Premier Private Client segments across, across the group, right?
So, the whole fact about allowing easier account opening, I think we did announce that, and we're allowing people to do online account opening around the region, and we've seen quite a good number like that. It's not just in any particular country, but we do see quite a lot of account opening from individuals around in the region. And with that, with more accounts and also we have invested also into products, we're able to offer, also digitally, roll out some more new products to our client base. So that includes, for example, ETFs, right?
and a client overseas with an account with us can just use the digital channel to conduct equities products and some other products as well. I think the one thing that I also want to mention is that we're really regionalizing our brand. So, you're very involved when we launch our brand. And, I'm glad to say that, in July, we have done Singapore, Malaysia, and Hong Kong. Recently, we completed Macau. We're also going to look at China and Indonesia, so more news to come.
I think, being one brand with a new logo and OCBC recognized across the banking world is very important for us as we continue to group everybody together so that we increase our business on a regional basis. So, on capturing trade and investment flows between ASEAN and Greater China, it's a very important pillar. And again, I did mention before that we have strengthened our China business offices, able to allow customers coming to ASEAN in particular. And, of course, we have also improved how we engage ourselves in the capital markets. We've been a big player in Singapore, but this year in particular, we have done more syndicated loans for our customers in Greater China.
We climb up the syndicated loan big table quite well, in particular in Hong Kong. So these are some of the things that we effectively act as a team, that we can pull in regional borrowers and help them, okay, and serve them. I want to cite one example as well. In the third quarter, we have brought 10 high-end tech companies in from China who want to look at the Indonesian market. So we brought them all, and working with our Indonesian team, we introduced them to a lot of the clients that are interested to work with them. And of course, Of course, they open account with us in Indonesia, and eventually, hopefully, as they embark on doing business, they will bank more with us.
So that, this is one of the way how we say we can still grow, because you increase the wallet, increase the share of wallet of the customer. So we don't just bank them in China, we bank them in Singapore, we are now starting to bank them in Indonesia as well. So, the third pillar we talk about unlocking values, new economy. One of these is really, getting heavier on onboarding, new to bank customer across the region through our digital SME model. So we have by now launched our SME, pre-approved, loan platform, in Malaysia as well. And, also, applying that to our Al-Amin unit, which is the Islamic Sharia financing, that we are launching this as well.
So, with this powerful development, we'll be able to continue to capture more market share by banking more customers. New partnership is also new economy, as in a way. I just want to say that one example is the e-procurement platform of Sesami, which avails same-day digital invoice financing approval to Singapore government SME vendors. So, it's so much easier now to finance what they sell, and because the platform allows the recognition of the invoice really quickly, so that we do know that by financing them we'll be repaid by the buyers on due date. And, another area I just want, also want to mention, we have launched a number of first to market capabilities, enabling ongoing enabled by our ongoing technology investment.
One of the things, a lot of customers get quite excited, saying that, now they can use, do cross-border payments via Alipay+. And, I actually have a friend who talked to me and said, "Helen, I'm not yet an OCBC customer." Of course, I said, "How dare you?" But in a way, they, he said that, "But I do travel to China a lot. I now need to open an account with you." So, we opened him an account. Not bad. So I do feel that, such capabilities will continue to help us to bring in more customers. And, another, one thing that, we have invested in technology is, really to roll out generative AI, to, all our employees globally.
So we now have an in-house, in a way, OCBC ChatGPT system. But this is very much, very much focused in helping our colleagues to be much more productive. We tested it. There are use case, successful use case, and the feedback is very, very good. But of course, meanwhile, we also manage the risk. So this is more a platform that all OCBC data is not released to outside. So we contain our own data while we actually adopt data in the outside world. So these are exciting development. But again, more importantly, you must have heard me talk about one group for a long time now.
In a way, this quarter, we also make two more appointments to my top team. The CEO of China and Greater China CEO both are existing colleagues, OCBC colleagues. And together this year, we, if you count from January, we do have five appointments to the senior management team. And I'm very excited work with all of us in order to deliver this solid growth in our business and also good results. So looking ahead, I think to wrap up, I did say earlier on, nobody expect in second one, there's a second war in the world. How does the whole world's economic situation come up? Macro, there are a lot of uncertainties.
Are we saying that interest rate will certainly come down, and if inflationary pressures have already been paid, would the high interest rate continue to make credit conditions difficult? And indeed, would geopolitical tensions continue to escalate? These are all the uncertainties that we're facing. And that's why, while we are firmly on track to deliver our 2023 targets, with some adjustment, as you've seen on the slide, again, we need to continue to be very prudent and make sure that our capital, our liquidity, our funding base are strong as we continue to embark on growth, and, indeed, continue to improve the ability of how we serve our customers as well.
Indeed, broadly, for initial thoughts for 2024, potentially NIM would be staying at current levels for first half. But again, barring unforeseen circumstances, you can plan all you do, but things can still don't turn out as you wish, right? So, loan growth, we don't see a sudden jump in demand, but we'll see how we manage to continue to grow, maybe not on the high, high, but on a high note. But, in a way, we will go in through our thoughts more in details, when we report the last quarter results, and the full year results are in early February. So I think with that, we're open to questions. Yeah, Chin Yee .
We'll take some questions here first before I move to, Amber from Bloomberg. She had three questions. But we start here. Yeah.
Thank you for your presentation. Do you have guidance on the ROE for next year? I know you, you didn't have the specific, but what is your outlook of the ROE for next year? And are you able to put, you know, continue this momentum of breaking the total income for next year? Just some outlook. And on the second question, I would like to ask, what is OCBC's exposure in the recent, money laundering case in Singapore? What is the specific allowance allocated to this, and do you see, you know, the allowance to increase? On the third question, with regards to the recent disruptions in the application, have you identified the main issues, and will you all be making more investment in terms of technology or manpower to manage this kind of issue? Thank you.
Outlook for ROE, as I said, I cannot give you a time. It depends, of course, ROE depends on your level of equity and your return. So, income, we are committed to continue to do all we can to identify new customer, new area, under the One Group strategy. So, we do hope to be able to bring in the, what we call above BAU, business. But, you're also aware that that interest income is quite subject to, the interest rate environment, whether interest rate will come down. To a certain extent, you have to plan that there potentially will be interest rate coming down, potentially second half of the year. But of course, that view may change. It depends on how things unfold, right?
So, in that sense, whether we'll be able to keep the same return, we hope to, because this is what we try to do, right? Always growing. But again, where it will be, at this point, we're certainly working on that. So, no, no target given yet, but hopefully, the momentum we build, especially on the new initiatives, that we can keep that. And I think, having the whole group to work together has been powerful, as we have seen. So-
I guess, stepping on what Helen said, I mean, because we may not be able to be at this stage, I give you the ROE target for next year, but we did set out in July, you know, we outlined our strategy that over a million term, we're looking at ROE of 14%.
So the second thing is about exposure and allowance to the recent AML case. We have insignificant exposure, I have to say. So we will make the allowance as appropriate, but because it's insignificant, yeah, it's nothing much to talk about, you know. So disruption. We have seen the recent disruption. We have seen a technical issue that impact on the performance of a certain software, and in a way that results in slowness in the system. So we have detected it, so the way we have been in a way fixing it, so it's now all okay. And I think we will be able to manage a similar risk in the future. But as to your question, are we investing? We're certainly investing.
We continue to add more headcount, add more people, specialists in technology. We continue to improve our technology infrastructure and we continue to invest in new system and upgrade. So it is, whenever we say technology investment, it is very much investing in current system, upgrading, and also investing in the technology that allow us to have higher capabilities and new products as well. The third part of this is investing in technology to make ourselves more effective and efficient. So when I cite generative AI, it is about to help our colleagues to work more effectively and to be more productive.
It's the issue that happened that day, affecting the software component that was intermittent experience. And so it was not across the board, so there were transactions coming through, in quite a high percentage of transactions coming through. So that has already been fixed. So on that day, it was fixed. Next question?
I think-
Yeah. Okay, Audra from Reuters.
This one, I have two questions. The first one will be, can you please give us the main reason behind the raising for the target for NIM for this year? And what's your outlook for global interest rate for going forward next year? And the second question is, what's your view on China? Do you see the environment there for the new part of the business? Thank you.
You take the first one?
Yeah.
So we raised our, from what I mentioned, as above 2.20%, right? Because during the second quarter of 2020, now in the region of 0.5%, right? If you look at our nine-month NIM, on average, is 2.28%. We are sort of, now our outlook for fourth quarter, taking some form of prudent, as well as we expect, some competition fund year-end, you know, which may drive up cost, right? So as a result, which we are still in the region of no, no, you know, further deterioration in the macro environment of the war that Helen mentioned, that's also, you know, certain. Yeah. Yeah.
Okay. Second question on China, right?
Yeah.
Yeah. Yeah, I think, third quarter GP growth surprise, a few people that it's growing better. In a way, we do see, China, trying to have a lot of measures, to encourage the economic, growth. I think the... They start to see some momentum there. But whether next year I can predict, I think it's up to everybody's guess. Hopefully, the measures continue to yield results. And, but also, I think the good thing, we also see manufacturing numbers going up and trade slightly pick up as well. So hopefully, all this momentum can carry through into next year.
Of course, we watch very carefully about any sort of headwinds. I think geopolitical tension, as we mentioned, and also whether they are rebounding at the speed that everybody hope for. So, I think to that extent, to that extent, we are—I think we still think China is a very important market that nobody can ignore, and in a way, but our strategy for China is also very, very clear. We are helping Chinese customers and individuals as they venture overseas. I think that's where we can play the most effective assistance to these customers. And on that, I still see a very positive momentum on that.
Are you okay with it?
Sure.
Okay. Maybe I just go to Bloomberg. I think Bloomberg, Amber, again, if you are not satisfied, but because your money laundering question has already been answered, so I will not ask that. Talk about your capital position remains strong, so is there any M&A considerations in China? That's the first question. Second question, are you still benefiting from the credit risk collapse in wealth management? Your fees are up quite a bit. So two questions. The money laundering, we have already answered. Yep.
M&A for China, very specific question, huh? So, I must say, we hold on to what I have always been talking about. We look at opportunities, especially in the markets that would supplement to our core business. So, in a way, if you apply that across the core markets, that's include China. But, I have nothing on the horizon that I'm going to be able to talk about at all. So I hope that answer your question. For the funds flow, actually, we do see net funds flow earlier in the year in the private bank, but also see that also equally flowing in for the retail side, mainly on the Premier and Premier Private as well. So I wouldn't say comment as a continuous flow.
I think trying to grow-
It's not about credit risk.
Yeah, it is not about credit risk. So trying to continue to grow customer and grow AUM is something that is in our DNA. We continue to do that. So I think in the early part of the year, the market did see some control, and I think we talked about it in the first quarter already, so nothing more to add on. By now, we are already in the website. Yeah.
It's more attributed to credit risk. Okay. Emma, if that is okay, I will move on to Priscilla.
Oh, okay. Back on the current thought. So yeah, I just wanted to follow up on the, the fund flows. I think, Helen, you mentioned previously that you saw SGD 10 million in the first quarter, SGD 6 million in the second. Just wondering what was the volume in the fourth term, in the third quarter as well, did the momentum continue? So far on the slide, Q on Q did in twelve-
Yeah.
Was there an impact on the income there? Also curious about your thoughts on the impact of the money laundering saga on the wealth management industry here, whether you see a longer term impact there. Also wanted to follow up on what you said about the generative AI and helping productivity. Like what specific tasks and functions have, has it been used for in the bank?
I think Ching talk about the function the best. I had him talk about it first.
If you look, in terms of, you know, as you noted, I think in terms of the AUM, right? On a quarter-on-quarter basis, it declined by about SGD 4 billion, right? So, while we saw fund flows in this, some segments of the wealth business, I think including like premier banking, the DTC segment. We also saw from the private bank some rather large outflows, as clients have reemployed some of their funds for their own business purposes. I think, which is usual for private banking. At the same time, some of the decline in AUM was also a result of market valuations, as before, due to investments. Yeah. So,
I think that handles the first two questions.
Yeah.
But you have the third one on impact of the AML case on wealth management business. I think it is a good thing that that the industry is dealing with it, because it ensures that this center, this important hub of us, is a center that can deal with cases like that. So in a way protect the reputation of Singapore, I think, in that sense. So if you ask me, is there any clients saying that they are—they lose confidence and take their money out? We haven't seen it. We haven't seen it at all. So if you ask me the impact, I would say the impact is minimal or none, but to an extent, personally, I feel it is actually a good thing that we're able to handle it.
So, the fourth thing, fourth question is on generative AI. What sort of areas that we use it for? I think, one thing is on research, because you can access information much more effectively. Another area is on coding. That's for our engineers, programmers, and then for our... Actually, even for frontline, if you think about an RM, who always have to track information on their customers in the public, in the public market. So this helps them more effectively track all this. And for them, if you are an RM, you're writing a account plan for the clients, you can access to those information. And because generative AI is a creative, more than just giving you the data, right?
So I think that helps them as well. We have actually done quite a lot of testing and what we call successful use case before we decide to launch it to all the colleagues in the bank. We see high interest, so in a way, we say that we-- this is not about you do less with your work. It is for you to be able to be more productive. Everybody is still accountable to make sure that as you use it, the information and the work you produce, you have the same level of diligence, and also you make sure that whatever you use, it is also correctly and accurately projected in your results. Yeah.
Right.
Congratulations on the results. Just a few questions here. I think my first one is just about the NIM you're doing on there. So I think looking at fee income, SGD 461 million for this quarter is higher than the last four quarters, but this is down from, I think, SGD 569 million at quarter of 2021, for example, two years ago. The bulk of this was from wealth management. So when can we expect wealth management or private bank return to form like in the second quarter of 2021? And I think further on this, a follow-up question. I know that wealth management income every fourth quarter. So is this seasonal market situation as maybe managers are trying to be positioned for the year ahead?
Can we expect this for the fourth quarter of this year as well?
Yes. Paul?
I can take it. I mean, if you look in terms of the wealth management fees, currently, the outlook for clients is still risk-off, right? Given the current climate. So, if you look again, like the trend is, clients are still predominantly holding about their assets in cash, right? I think so that's one reason. I mean, this quarter, the fees again, through a variety of channels, so like private banking services, the sales of wealth management products, right? Including structured deposits, unit trusts. So, I think we hope that, you know, that trend should continue. But again, you know, it's really dependent on the current market environment, given the outlook of inflation, geopolitical tensions.
With your second question, seasonally, not just us, but I guess, of course, industry as well, you know, fourth quarter does seem to be a bit more softer compared maybe to the rest of the year. Traditionally, again, it's a year where, you know, clients do go on holiday, you know, so I think there may be less trades. Yeah, on, on, in that respect.
So just one question as well. So I think I, I know that the fee income was lifted this quarter by a higher wealth, credit card, and trade-related fees. So we heard UOB come up with plans to have two global partnerships a year, and payment-led, lifestyle-led core concepts. So what are OCBC's plans to grow income credit cards, whether or not that is within lifestyle?
We are indeed working on lifestyle. So, you'll see, you'll see it when we announce it.
I mean, we also did some points of view.
Yeah. Any other questions?
I have a few more.
Sure.
Yes. I think on non-performing loans, I note similar patterns from second quarter with, Singapore, Malaysia, Indonesia, Greater China, NPLs falling quarter-on-quarter. But the rest of the world, NPLs are increasing since fourth quarter of last year. So was this also from the main reason from last quarter? Because last quarter, the quote we got was, this was mainly from the downgrade of corporate account in the commercial real estate sector in the U.S. Yeah, so what is the reason for this, rest of world NPL increasing?
So this quarter, increase in the rest of the world actually relates to one corporate name in ASEAN.
Okay. Which market? But this is in ASEAN.
In ASEAN, Malaysia.
Okay.
I mean, within the four markets. Yes, ASEAN.
Okay.
Please hold on.
Just on related to ASEAN, I see loans by geography almost entirely unchanged from quarter, except for a slight increase in the rest of world. This is very small. Where is this increase from? I think it's just one-
At least the beginning, what you...
So, this is from loans by geography.
Loans.
This is like in the-
Turn it up? Yeah.
Yeah, turn it up. Yeah.
Yeah.
This is almost unchanged, like, except for a slight increase in the rest of world segment. This is very small, but where is this increase from?
That's. If you look at this, we continue support through our network clients in the rest of the world. So the likes increase is really, you know, some of the, some of the opportunity that is booked, that is booked in the rest of the world. Yeah.
Yeah. Yeah, I think on CASA-
We still want to, we still want to grow our loan book, of course. So but depending on where the opportunity is and where our customer need us. So if the customer need us in the rest of the world, that, that means we will, we will increase off the loop will be booked there somehow. Yeah.
Just a question on CASA. So I think there's a slight, 1% rise in CASA quarter-on-quarter. This didn't retreat very far over the past year. It's been quite stable. But, what have customers done? Are they retreating away from fixed deposits, away from T-bills? What do you make of this, figure for CASA? I think you mentioned something earlier about, SMEs keeping funds in current account.
Yeah, I do hope that by the fact that we have invested so much in onboarding new customers, so the CASA reflects some of the mandates that we have won, hopefully. But again, it's a one-quarter change, and we do want to see whether it is on the uptrend going forward, right? But in a way, you could also assume that because interest rate will stay higher for quite a while, it's very difficult to say that CASA will just bounce back like before, because it's still good to be able to put deposit. In particular, if you are not investing, you would want to put the deposits, put it in fixed deposits as well. So, but because we have, we actively manage our funding base, right?
So where we have a choice, we can always manage down fixed deposit if we feel that we don't really need that funding. Fixed deposit is quite transparent in a way. You pay for it, and the customer will put it with you. So it's really CASA that you really need to hope that you can add more customers that use you for the operating accounts, then you can build your CASA up better.
One question about dividends here. So your divi is still above your medium target of 14%, even after paying the higher interim dividend from earlier this year. So I know the dividend payout ratio of 30%, but some analysts are really hopeful of a special dividend by the end of the year. So what are your thoughts on this?
We can't really talk about it. But we always say that this year in particular, we committed since for 2022, we committed to pay 30%. We remain committed. Whether there's any upside, it all depends on how we look at our capital positioning for the next year as well. So it is not because we have high CET1, then we'll definitely need pay a special dividend. But we will talk about it as we're ready to announce our dividend for the full year.
Okay, any other questions? Yeah.
What's your outlook for fee income next year?
That's a big question actually. As we say, we're trying to, according to our corporate strategy, we have a lot of initiatives focusing and in growing the business. So when you grow the business, obviously the fee should grow alongside it, right? Meaning, you have more customers, you should have more fees. But fees is quite subject to, as we say, investment sentiment. So it is, it's really related to how the market is going to be like next year as well. Because in particular for wealth management fees. Other than that, you talk about a lot of fees is on transactions. So, trade in particular, remittances, you know, money flowing cross-border as well.
So, for our initiative, capturing more of the customers' wallet across country, so we do hope that that part of the fees will go up. Yeah? But again, the trade situation in Asia in particular, we still hope that it will grow, it will grow back lah. So we see some uptick this quarter, but then this is... If we see another uptick in the last quarter, I'll be quite happy. Hopefully, the momentum will continue. Yeah. But it's very difficult to project how much higher it will be. Or if, unfortunately, there's some other event and investors are going to sit more on the sideline again. So we hope that it doesn't happen.
Is there a particular sector or arm of the business that you're most positive about the next coming year?
The more positive sectors? I think I will see segments first. I'm still quite positive about wealth flow.
Mm-hmm.
And then, of course, we are strengthening our proposition, right?
Yeah.
I think I'm still quite positive about the segment, but the performance is, as I said, will be more subject to market conditions.
Yeah.
So... But as to sectors, you know, we have a focus on new economy.
Mm-hmm.
Yeah. So in a way, the playing bigger in the ecosystem of doing more with the new tech. It's not just fintech anymore, you're talking about more new tech, which is in medicine, in biology. You are talking about different types of new e-commerce players, et cetera. So, these are the segments that we feel we have more opportunity to win, because there's more flows in ASEAN across the country. And, I think sustainability is an important part, it's not a particular sector, but it is a particular product, right? As we support our clients to go green. So I think that would... We're still very positive about that, it will continue to grow fast.
One last point.
Okay, maybe go to Octopus.
Yeah, sure. Just one quick question.
Yeah.
Does OCBC has any direct exposure to the property in the Middle East? Like, any accounts or nothing, thank you.
We are really not operating in that part of the world.
Okay. I think you're third.
So just I think the question is about sustainable finance, like you mentioned. So I think six months ago, when we were here, the quarter you mentioned that you have no plans to raise the target any further because we're just chasing the numbers every quarter. So now that you have said that you're confident you're going to hit SGD 50 billion by the end of the year, what's next in terms of defining success in this sustainable finance area? How would you measure whether it was easy to do or not?
I think we measure ourselves in, actually, all the while, the sustainable finance is one of the measurement. But because it's very prominent, right? We see that growth in the local. That's why we like it. And we continue to measure the growth. We're still thinking that growing double digit is the right way forward. Yeah. Then, another thing is you know, you will know that we announced our decarbonization plan for our book this year. This is one very big commitment. How to reach net zero by 2050 is a big commitment. So, the sustainable financing go hand in hand with decarbonizing the book. The more you can refinance your current customer by a green deal, it is better, meaning they are transitioning themselves. That's why the demand shift to sustainable financing.
So I think that will be a strong measurement going forward. Yeah. And then, of course, what are the policies we adopt? What are the disclosure we are able to to define and share with our customers? What more we put into social, for example, yeah? What do we care for? It all builds into the overall sustainability agenda. So we could continue to measure and report all this.
Last question.
Yeah.
Yeah.
I think OCBC's allowance coverage rose to 139% from 131% at the previous quarter. This is really higher than your years. What is driving this, year in a sense? Is this overly conservative in your view? Are you erring on the side of caution here?
Well, I guess if you look at it right, it's a function of your allowance coverage over your NPAs, right? So the numerator, the allowances has remained fairly stable, but it's in fact the denominator that's actually come down, I think, for the reasons that I think she explained during the briefing. So that's why I think the allowance coverage has been going up, due, actually, due to the decline in-