Morning, everyone. Thank you for joining us virtually this morning for our 2021 full year results briefing, as well as the fourth quarter 2021 results briefing. On our panel today, we have our Group CEO, Helen Wong, our CFO, Mr. Darren Tan, as well as our Group Head of Global Treasury, Mr. Kenneth Lai. We will start today's session with our CFO, Darren, taking us through the slides, and thereafter, we will have our CEO, Helen Wong, going through her presentation, and we'll take questions after that. Thank you.
All right. Thank you, Ching-Ching. Good morning. Thank you once again for joining us. I'll start with the third page of the full year 2021 result presentation. For the full year of 2021, OCBC Group achieved a net profit of SGD 4.86 billion. This is up 35% from the previous year and close to the pre-pandemic level of financial year 2019. Now, growth in non-interest income was strong, although the momentum has slowed in the second half. Net interest income had remained soft amid a low interest rate environment. With general expectation of higher interest rate, we should see stronger net interest income in 2022. Expenses has risen in tandem with continued investment in systems and headcount. With better economic outlook, significantly less allowances were set aside for the year.
With a strong common equity tier one of 15.5%, the board had proposed the final dividend to be raised to SGD 0.28 per share from SGD 0.25 per share in our interim dividend. This will bring the full year dividend for financial year 2021 to SGD 0.53 and back to the financial year 2019 level. Now, I'll cover our results in greater details in the following slides. Moving on to slide four. As I mentioned, our group net profit of SGD 4.86 billion for financial year 2021 had returned to pre-pandemic level. Consequently, our return on equity had also rebounded 2 percentage points to 9.6%. Our operations continue to be well diversified, with relatively stable contribution geographically from the year before. Now, moving on to slide five.
For the full year 2021, our three business pillars continued to deliver reasonably good results. In terms of banking operations, our net profit for financial year 2021 of SGD 3.93 billion was 41% higher year-on-year, with strong loan growth of 8%. Our wealth management income rose to a new high of SGD 3.92 billion, while our insurance business continued to deliver strong results. Now, on slide six, you will notice that our funding liquidity capital position remains strong, putting us in a very comfortable position to support our customers and pursue our long-term growth. Slide seven. The group's full year net profit of SGD 4.86 billion was 35% higher than a year ago. This was mainly driven by higher fee and insurance income, as well as lower allowances.
For the fourth quarter, net profit was SGD 973 million, 14% below the previous year and 20% lower than the last quarter, mainly as a result of higher allowances that we have conservatively set aside for impaired assets in the quarter. Now, moving on to slide eight. Our banking operation's net profit was 41% higher at SGD 3.93 billion, mainly from an increase in non-interest income and lower allowances, while Great Eastern net profit contribution also rose 17% to SGD 932 million. I'll move on to slide 10. Net interest income for the full year was lower year-on-year at SGD 5.86 billion as a result of the 7 basis points compression in net interest margin.
For the fourth quarter, we were able to maintain net interest margin at 1.52% from continued efforts to refine our funding compositions and costs. Moving on to slide 11. In terms of non-interest income, for the full year, it was SGD 4.74 billion, an increase of 14% as compared to the previous year. Wealth management-related fee income as well as stronger insurance income accounted for the bulk of the growth. Moving on to slide 12. Consequently, total wealth management income for the full year rose 11% to SGD 3.92 billion and now constituted more than a third of the group's income. The group's total wealth management AUM, assets under management, which comprise wealth management segment like premier and private banking, delivered consistent growth over the past five quarters to SGD 258 billion.
Moving on to slide 13. For the full year, fee income rose 12% year-on-year to record SGD 2.25 billion. Our strong wealth management franchise, as shown in the previous slide, continued to be the biggest driver of our fee income, with wealth management fee surpassing SGD 1 billion for the first time. Although the pace of growth has slowed in the fourth quarter on the back of a more subdued financial market. Slide 14, you will notice that our trading income of SGD 763 million for the full year was below that of SGD 863 million in the previous year, largely as a result of lower non-customer related flow and trading income. Now, moving on to slide 15 on our operating expenses. Operating expenses rose 7% to SGD 4.76 billion.
The increase in expenses for financial year 2021 were largely due to staff-related costs arising from higher headcount to support our growth in wealth management business. Continued investment in technology and also lower government job support grants that we received in the previous year. Adjusting for the grants, the year-on-year increase in expenses would have been lower at 4%. Moving on to slide 16. For the year, we have provided lower total allowances of SGD 873 million, given the improvement in economic outlook. However, additional allowances of SGD 317 million were set aside for the fourth quarter. These allowances for impaired assets was at SGD 387 million, and it arose from loans to a few project financing deals that were affected by supply chain disruption in Greater China and in international market.
The write-back in allowances for non-impaired assets of SGD 70 million were largely from movements to impaired categorization. Moving on to slide 17. Total cumulative allowances were lower at SGD 3.9 billion for the quarter, as we wrote off more impaired assets, mainly in the oil and gas offshore support vessels space. This reduction was more than the additional allowances for the impaired asset that we set aside for the quarter. While we prudently classified more secured loans as non-performing, the lower loss history of such loans necessitated a lower amount of allowances to be provided. Consequently, the coverage ratio for our non-performing assets was lower at 90%. Moving on to slide 19.
The quarter-on-quarter increase in the new non-performing assets was because of the difficulties faced, as I mentioned earlier, in a few project financing loans that had delay arising from the supply chain problems that they face. This were offset by increase in recoveries, upgrades, and write-off that were mainly from the oil and gas offshore support vessels space and transportation sectors. Moving on to slide 20. Our loan growth grew 8% to SGD 290 billion from SGD 267 billion a year ago, driven by growth in Singapore, Greater China, and our international network. By industry, the increase was led by growth to building and construction sector, as well as professionals and individuals. Moving on to slide 21.
Our loan portfolio remained well diversified, with building and construction housing sector as the largest segment at 28% and 21% of total loans respectively. The group continued to expand its green and sustainable finance portfolio, increasing 66% year-on-year to SGD 23.3 billion, and now accounted for 8% of our loan book. Total relief loans amounted to 1% of total loans, down from 2% in the previous quarter. Moving on to slide 22. Liquidity remained ample. We had grown our customer deposit by 9% for the year to SGD 342 billion. CASA deposits saw a stronger growth year-on-year at 14% to SGD 217 billion, resulting in a higher CASA ratio of 63.3%. On the final slide 23. The board has proposed a final dividend of SGD 0.20.
That's a 12% increase from the interim dividend of SGD 0.25. This will bring the total dividend for the year to SGD 0.53 per share, back to financial year 2019 level, and represented a payout ratio of 49% against our group net profit. The scrip dividend scheme will not be applicable. Now I pass the floor to Helen. Thank you.
Thank you, Darren, and good morning, everyone. I'm pleased to be here today to talk to you about our financial results for the last quarter and for the past year. Looking back, I think for the last two years, we've been managing through the uncertainties brought about by COVID-19. The pandemic has always asked us to look at how we actively serve our customers and support the community and also keeping our own people safe. I'm referring you now to the slides and with the year in review on slide three. During the year, we improved our financial returns, advanced our sustainability agenda, and also accelerated our digital transformation. Darren already mentioned that our profitability is back to 2019 levels.
We would have communicated during the midst of the COVID-19 in 2020 that we may expect to take two years to come back to the profitability level of 2019. I'm pleased to report a strong set of results for 2021 that already bring us back to 2021 net profit, just shy of that year's record earnings. We also restore our full year dividend to 2019 levels with a payout ratio of 49%. On the sustainability, it's a big topic. I think this is the subject that is most discussed between us and our clients and government authorities and regulators. We continue to make good progress in our sustainability agenda.
We secure more than SGD 34 billion in lending commitments for sustainable financing, and we set a more ambitious target to double the original target to reach SGD 50 billion by 2025. On accelerating digital adoption, we increased digital penetration and we continue to bring immediacy, accessibility, and simplicity for our customers. Looking at the future, I think we have to say we expect economic recovery momentum to carry on. Asia is expected to be among the fastest growth region. This would drive growth trajectory for OCBC. We see potential increase in interest rates to provide a gradual interest income uplift. Guidance for 2022 on three things.
We expect NIM to be between 1.5%-1.55%, but with a potential upside as interest rate if interest rate is uplift faster. We expect loan growth to be in mid- to high-single-digit, and we want to provide a credit cost guidance maintained within 20-25 basis points with a view that recovery is to continue in 2022. I would say that I am forecasting that it will be on the lower side of this range. Of course, we want to remain watchful for potential headwinds and do hope that Omicron is the final disruptive phase of this pandemic, and COVID-19 evolves into a livable endemic.
Other issues to navigate include inflation, geopolitical tensions, supply chain disruption, rising energy prices, et cetera. I'd like to share on the following slide the smishing, the SMS phishing scam. I think we've talked to the media in the past how it happened, but we just want to provide a bit more details. This is how we have been addressing the phishing scams, in particular, over the months of December leading to January. The scam was first detected on the 8th of December with three cases. During those period of time, this is much lower than the normal average of 18 daily cases of other scams, particularly job scams. The number was thus not significant.
The cases increased from the 15th of December in similar trend as other scam. The surged to double digit on the 25th December and grew aggressively until the 30th of December. Which is during that period, we have seen a surge, a 40% surge in customer calls to our contact center. The attack was unprecedented and is well orchestrated and highly coordinated. We cancel training, we cancel leave of staff, and we call for nine staff to cope with the calls. Of course, we took immediate steps to raise public awareness during the period in December, and we intensify the efforts of communications from mid-December. We also actively blocked and took down phishing sites.
At one point of time, it is more than 200 sites that we identified. We expedited additional security measures such as the cooling-off period for 2FA activation. We lower daily payment limits, and we step up monitoring for transactions and reject those multiple transactions for same beneficiary for monitoring and tracing. This helped to stem the cases from 31 December , and there are no new cases in early January onwards. We decided on the having goodwill payout actually very early in when we look at this scam because the circumstances are very different from other scams. The amount provided for the payout is under the expenses in the fourth quarter 2021.
Of course, we implemented MAS and ABS security measures announced on the 19th of January, and that is applicable to the whole industry. Just this month, we rolled out the emergency kill switch, which offers customers a choice and option to stop the risk of being scammed and stop the account being used for further payments. We continue to work with the industry, MAS and other government agencies to put in place more safeguards on a coordinated basis. I'd like to now switch to slide nine, where I would like to talk about our three-year refresh corporate strategy to drive growth and to reinforce our strengths. I'm pleased on the progress so far. This doesn't start today. We have been actively looking at our strategy.
I think in previous discussions, I talked about the global trends and in particular the trends in Asia, that Asia now trades more within Asia, that together with our focus on our core markets and our strength in Greater China and ASEAN, we've been identifying a lot of opportunities. The strategy comes from that direction, and we are looking at four growth pillars and another four pillars to reinforce our strengths. On Asian wealth, which is the first pillar we talk about, we will strengthen our hub capabilities across Singapore, Hong Kong, Dubai, and London to continue the growth. We want to extend our global wealth platform.
This is across all customer segments from Bank of Singapore to OCBC Premier customers that was built and started to run across all segments in 2021. We are accelerating the building up of relationship bankers to capture growth, and we want to deepen cooperation with financial institutions, particularly in China and in the regional banks, such as Ping An Bank. The second pillar talks about trade and investment flow. We will grow Chinese cross-border business, deepening coverage of technology, trade, and logistics, and supply value chains in China-ASEAN corridor. We continue to build Greater China division and enhance capacity. We just increased our personnel in the China business that's in Malaysia, as an example. The China business office is not just in Singapore and Malaysia.
We also have built it up with coverage on the whole ASEAN countries that we have a presence. We continue our partnership with Bank of Ningbo. I mentioned FIs. That includes Bank of Ningbo, obviously, the industry we are in, Bank of Shanghai, China Guangfa Bank, China CITIC Bank, and Ping An Bank, where we have already signed up a relationship and cooperating agreements. On the third pillar, we talk about the new economy. We will deepen penetration in the high-growth industries. We develop new target segment for renewable and also explore opportunities in rapidly evolving world of digital assets and currency. Things that we look actively would be a tokenization and also how we offer trading for our customers in digital assets.
The fourth pillar is a very important one, on sustainability. We unveiled a five-year climate strategy last year, and with this newly developed climate strategy, with this five pillars there that is led by the members of the management committee of the bank. We doubled our target of a sustainable financing to SGD 50 billion by 2025. It was previously 25 by 2025. We now double it to SGD 50 billion. We also target to achieve carbon neutrality for OCBC's banking operational emissions this year in 2022. When we say we have four pillars to grow our business, we also want to reinforce our strengths to excel. We want to talk about the one group approach, where we deepen the management talent pool through.
Last year, we continued to deepen our management pool. We appointed a Group Chief Operating Officer. We appoint the Head of Global Wholesale Banking, who will join us in the coming months, and the Head of Greater China. We formed the Greater China division by integrating the operations of OCBC Hong Kong Branch and Wing Hang Bank. The Greater China division will cover our operations in Hong Kong, Macau, China, and also Taiwan. We rolled up our matrix accountability, and we refined our operating model across the group. We also scale up collaborative product capabilities and distribution across group to capture synergies. We have also talked about speeding up transformation and digitalization, and that started, also accelerated actually since the end of 2020.
Last year we saw quite a bit of investments to jack up expenses, but in preparation for increased digital penetration of our customer segments and deliver a superior customer experience. If you go back to my first page of presentation, we did show some numbers regarding the digital efforts so far and how we bank online with our customers to have a straight-through processing on the loan application and also on account opening. We continue to execute our transformation agenda. We have appointed a Chief Transformation Officer, and we want to also strengthen our risk and controls and modernize our bank for a digital world.
On people, I talk about organizational structure changes or renewed appointments, but we also will look at and continue to groom our talent, hire, retain, and train. We intend to transform also our HR processes to attract and retain the best talent so that we are ready for the future growth. Last but not least, the last pillar, it is about capital and risk management. This is to allow us to deliver sustainable growth through franchise expansion with robust capital base and also prudent risk management. I do want to mention we have set some targets for ourselves on this three-year plan. We are targeting both banking income and banking profits to grow more than 10% CAGR.
We're targeting loan growth more than 10% CAGR. We'll manage our liquidity accordingly. Our CASA has been growing satisfactorily, but we'll manage our funding with a wide range of liquidity to support this growth. We also will tightly manage expenses in line with the revenue growth. Last but not least, I think it's a little bit early to talk about an ROE, but we do expect that the group CET1 will fall slowly over the three years in supporting this organic growth and the RWA growth in that sense. There are also moving parts, of course, because our interest rate is everybody's guess. It has been changed rapidly.
As I also mentioned, the headwinds that is still around that we need to manage. But we will also look at inorganic growth where the opportunity arise, that will be on business that supplement our strategy as I lay out just now. Also, to, in particular, on the four pillars, the growth pillars, that I mentioned. I would like to stop my presentation on this slide. Thank you very much. We will now move on to take questions as you may have.
Are there any questions from our media friends? Goola, you are up for your first question.
Yes. Thanks, Darren and Helen for the presentation. Also, I guess thanks for the increase in this dividend. For rising interest rates, could I ask on a more granular note, what is the impact on your net interest income? Say, if the Fed raises rates by 1% this year as some of the investment bankers are expecting and at 25 basis points for each cycle. Do you want me to continue or do you want to take them one by one?
We can take one by one. Helen, do you wanna take that question or Darren?
Yeah. I think I'll take the question on the interest rate rise and what's the impact on our bottom line. In general, a 1% raise across the year will increase our NIM by about 18 basis points, and that would translate to close to SGD 700 million of income.
Thanks. Okay. Then, on the funding cost side, are you comfortable with? I mean, is the plan to continually increase CASA? Because if interest rates are rising, you want to keep the funding costs as low as possible. That's one question on the funding side. Are the subsidiaries in Hong Kong, Indonesia, and Malaysia locally funded or do you have to like estimate how it works?
Yes, our subsidiary are all locally funded and we have been growing CASA a very satisfactory over the years. As you are right, as interest rate go up, I just mentioned, we also want to balance our liquidity sources. It's not entirely rely on deposits, but we've been happy to grow CASA. I think one important thing about growing the bank to serve our customer regionally is to be able to continue to invest in how customers open account with us and maintain their operating accounts with us. One emphasis is on our transaction banking capabilities, where we have been over the last years winning a lot of mandates.
When we talk about handling investments and trade flows between Greater China and ASEAN, that is actually one important investment we do. Because it is for the clients as they do business across this corridor, they would have to handle their operating accounts, and this is important. We'll be able to serve them as one group so that they can bank with us and manage their transactions across one banking platform.
Okay, thanks. The next question is, I just wondered if you could remind us what your management overlay is? And also what are the thoughts on the outlook for credit costs and write-backs? Were there some SPs from Indonesia and Malaysia in this recent quarter? And were the NPLs, like, from Greater China, were they, as what Darren said, are they those project delays? And what exactly what projects were they? Just wondered on that.
I think I'll take the last part of your question before passing on to Darren to talk about the overlays. In the fourth quarter, we have conservatively looked at some of the project financing that we have taken over the years. Those project delays are regarding to construction. We do know that over COVID, there has been a difficulty in certain projects around the world, and that is like there are short of manpower or the some of the logistic arrangement that has been causing delays. We're taking a conservative view on this delay in the projects and thus leading to putting some provisions on the some of the project financing deal that we have entered into earlier on.
In the last quarter, we're talking about three more chunky deals that this is not as systemic, and we are quite happy the way going into 2022. I talked about earlier on that we project the credit cost of SGD 0.20-SGD 0.25 , but with some of the provisions that we have already taken that we are expecting at the lower end of this guidance I just provided on the credit cost. Darren, you want to pick up on the other part of the question?
Yeah. Goola. Now, if I can refer you to slide 17 because it's easier to have a pictorial-
Uh-huh.
Representation in front of us. You can see that, essentially, in terms of allowances, there's a combination of what we call regulatory loss allowance reserve, which had been reduced from SGD 874 million- SGD 444 million. In a way, it's not overlay in the sense of allowances that you might have defined. One way to look at it, this is somewhat of a macro overlay as well. If you were to define the allowances in the form of ECL one and two, which in a way you will notice that is the light blue portion of the bar itself. You will note this, that at this point in time in terms of macro overlay, is less than SGD 100 million that we have set aside.
The reason is because we have progressively built some of the scenarios into our ECL model as well.
About the ECL model, I mean, it's because it relies on the macroeconomic variable model.
That's correct.
Of what happens. Have you looked at how you can affect that model? Because that seems to be what everybody seems to be concerned about, is the inflation and higher energy costs. Does that impact you?
Yeah. I'm guessing your question, Goola, because your question didn't come through very clearly. But essentially, if you look at the ECL model, it's a mean-variance model. Meaning it's a historical model. You know, sort of a model that captures what happened to credit losses historically and how those credit losses could vary. To calculate how those credit losses could vary, you need macroeconomic variables. Now, macroeconomic variables would be a function of essentially GDP growth, inflation, property prices, factors that essentially affect the credit quality of our loans. To answer your question, yes. The ECL model would have taken into consideration the outlook in terms of both growth as well as inflation.
Would you have an idea of how chronic inflation could be this year in the developed markets?
Well, I mean, it's the inflation and oil prices specifically that you're referring to is one component of what goes in. In that sense, the higher inflation would have increased the amount of the allowances that we have to set aside. It really depends on the geography. Also, if you think about it, there are other factors that come in as well. For example, the tightening in terms of activities in the property space. That would be other factors that would somewhat also affect the entire model. It is quite a bit of a technical discussion.
Okay. Thanks.
Yeah. Thanks, Goola.
Okay. Thanks, Goola.
Yeah.
Prisca from Straits Times.
Hi.
Go ahead, Prisca.
Yeah.
We can't hear you.
I have a question about. Can you hear me now?
Yes.
Okay. Yeah. Thanks for the presentation. I have a question about the bank's outlook on interest rates, in the light of what's happening in Ukraine. Does OCBC expect hikes to perhaps delay it, given the crisis, and also how will it affect trading income given the market volatility? My second question is about its dividend policy. If interest rates rise and leads, a one basis point increase leads to a SGD 700 million increase in income, as Helen mentioned, how does this affect the bank's dividend policy going forward? My third question is about OCBC's expenditure. I think Helen mentioned just now that there are plans to tighten expenses. Yeah, could you give some color on how the bank expects to do so?
Does it expect higher expenses on tech in view of the measures it is taking to combat phishing scams and other type of scams?
I want to clarify the third question before I pass to Ken on the first one, and then Darren on the second one. The third one is expenses, and you want to talk about specifics related to controlling scams?
No.
Uh-
Yeah. The first part is on how it plans to tighten expenses in general. Will it be reducing hiring a bit this year to keep expenses under control? Secondly, specifically to tech expenses, because it's taking holistic measures to improve its scam control capabilities. How will this affect its expenses on tech?
Okay. Shall we start with the first one then? Maybe I ask Ken to talk about interest rates and outlook, and how does that actually affect trading income.
Yeah. Hi, good morning. Our outlook is that the rates will continue to go up. I think yesterday after the comments from the Fed as well, that given you know the Ukraine Russian-Ukrainian crisis, that they wouldn't deter from their interest rate hikes. The question really is whether you know you'll see a 25 basis point hike or a 50 basis point hike in March. The market's already pricing in about six hikes for the year. I think the speed and how fast they how much they front load the hikes really now depends also in terms of the equity markets, right?
I mean, if you look essentially the equity markets and bond markets, the previous corrections in the markets were really due to you know the inflationary pressures and the hikes that were coming on stream. Of late, recently, in the last week or so, the Ukraine crisis is now starting to take a toll on the markets, and we're starting to see some deleveraging of risk there as well. We believe the hikes will continue because I think the Fed is behind the curve on this. The question whether you'll see six hikes this year or not, that's the question that remains to be seen.
Obviously, taking into account how badly the equity markets sell off and whether, you know, there'll be some sort of consideration or support to equity markets, yeah.
Now, on the question pertaining to dividend, just want to highlight that the approach that we adopt towards a dividend policy has not changed. If I may kind of, you know, remind our media friends here is that, we adopt one of, being progressive and also sustainable in terms of how we essentially hold the quantum of our dividend on a upward trajectory, unless obviously otherwise, mandated, as we saw in, financial year 2020. Essentially targeting a payout ratio of 40%-50%. In response, when we see earnings grow, along with the strategy that Helen has just, you know, presented, we'll progressively obviously, you know, revise our quantum of dividend as well.
Thank you for the first two questions. Then the third one is about tightening expenses. When we say tightening expenses, obviously, is to watch how we invest in people and in digitalization, mainly. We have, as we said, the plan to grow, and of course we'll continue to invest. We should be happy to say we made quite a few appointments last year. We have strengthened the teams in the front line to prepare ourselves for the growth. This year, attention will be put on looking at the headcount to see whether we have indeed been hiring enough and that we are retaining the talents.
We would also look at some of the expenses. Perhaps there will not be new expenses like, for example, we did integrate our Hong Kong branch and Wing Hang. We have some integration expenses there incurred last year. Expenses will be watched on many fronts. Indeed, we'll be looking at what are the investments that bring about with the growth and the results that we hope to see coming in the next three years. We also invest quite a lot into our training. We want to build what we call a future-ready staff base as well.
As to the scam, I mentioned that we have a view on the amount and we have a very good view by the end of the year because we have effectively stopped the scam. We have provided enough in December. The numbers we have been advising the market on what we expect the numbers to be. We have already expanded that. As to the measures, a lot of the capabilities we already have. It is to switch it on. It does not require a lot of investment in that sense.
For example, when we say we do our kill switch, we have the capability to develop in a very short-term time, without having to need to wait for huge investments or expenses to be put in to make it effective. These are the things that I think that, yes, going forward, working with the industry and the regulators, obviously we want to be able to prevent scam and to stop it as early as it happened. We are also very watchful, because the scammers they can change their MO, and it is really more into preventive. There will be strengthening of the surveillance systems, et cetera.
I'm not expecting a big expenses, a big amount of expenses to be spent on the scam prevention.
Okay. Thank you, Helen. Next up will be Farish. Farish from Bloomberg.
Hi. You can hear me, right?
Yes, we can.
Okay. Just a few questions. It would be great if Ms. Wong can elaborate. Building up on the earlier question about the project financing delays, how much of a delay are we talking about, and whether it means going forward in the subsequent quarters of FY 2022, the bank will set aside higher allowances because of this reason? The second question I have is, Ms. Wong, you mentioned late last year that the bank is interested in setting up a crypto exchange. I'm just wondering, you know, what is your position on that now, given, you know, MAS is tightening in the space? The last question is, I'm just wondering, the U.S. has imposed sanctions on Russian companies, including banks.
I'm just curious and wondering whether OCBC has any dealings with Russian banks?
Thank you for the questions. I'll take that one by one. On the project financing that we take some provisions on, you're asking how the impact of the delays is going to evolve. I think the delay of the constructions of some of the projects, I did mention the three in particular, it is very much due to COVID slowing the logistics and also causing staff and the equipment delivery, et cetera, are not being able to be effected in the timeframe that was originally planned.
With the world moving on with living with COVID, living with a pandemic and the economy continues to open up, I think that these issues that was caused during the last two years should gradually be recovered. We expect the sponsors to continue to provide support to the project. As we said, we have taken a conservative approach to look at how these financing has been impacted. In a way, we should not comment on individual projects and what customers are actually involved.
I'll stop there, but I'll remain optimistic for the economy to continue to open further in 2022 and for economic activities to pick up much better in speed. The second one is about crypto exchange. I think last year I did say I will look into it. I think I need to correct in saying that I did not talk about setting up one. But we are actively looking at all the opportunities arising from what I call this new economy. This is exactly it, into how we help our customers in the trading and in investing in crypto assets.
I talked a bit earlier on about we are actively looking into tokenization whether we can use the technology to actually effect some of the products that are related to actually real world assets. We actually can develop products through tokenization. These are things that we're actively looking at and it fits into our strategy. I hope we should have more to discuss in future discussions with the media. Thank you. On Russia imposing sanctions, we are looking at that. You do know that our business is predominantly in Asia in our four core markets and our international branches serve mostly our network customers.
We are watching and assessing what the sanctions is going to be like, what is the impact. Preliminary, I do not see the impact as big, but obviously, continuous instability in that region would have impact on the financial markets, which we again need to watch closely and to advise our customers accordingly. Maybe I'll ask Ken to provide a bit more insight as to how financial markets could be impacted.
Yeah, hi. As I alluded to early on, particularly to your question, the earlier question on the Russia-Ukraine, the impact on interest rates. We believe the interest rates will continue, that the Fed will continue its plan to hike interest rates. Obviously, you know, the market's pricing six, and how fast and furious after that is the big question. It all depends on the impact of this Russia-Ukraine in terms of the equity markets and the bond markets. So if the markets were to sell off too fast and too drastically, you know, they might tone down a bit on the rate hikes or there might be some sort of intervention in that space.
Initial reactions, the markets are already starting to react. I think we are seeing a bit of de-risking and expect further de-risking to continue. For the time being, you know, we think yield curves have flattened and will continue to stay flat. Again, how the crisis pans out also will kind of lead the way in terms of how quickly the QT will happen. Again, we believe that, you know, what you're seeing in the rates markets today aren't really fully pricing in the continued tightening.
I think, if that were to happen quickly, or by the end of the year, you might then see yield curves steepen a lot quicker. Yeah.
All right. Thank you, Ken. Can we move to?
Sorry.
Kelly. Kelly, you're next. Thank you, Farish. Sorry.
Sorry. Yeah, I just have one follow-up question for Ms. Wong. I just want to clarify on the crypto exchange bit. Does that mean that, you know, that is not an option that the bank is studying right now?
Let's say you can expand a bit on this, because in an interview with Bloomberg in last November, you did say that you were studying, you know, setting up a crypto exchange. So I just want to clarify the bit on that, whether that is an option that the bank is still looking at or whether the bank is not going to look at that anymore?
Okay. Yeah. Thank you for the question. I thought I missed one part of it. We are looking at crypto assets as a whole. I wouldn't say we will not look at an exchange. I'm saying that we do not have a lot to disclose at this point. We are looking at propositions more on the products we can offer and how we actually help our customers to trade. It's one option. I just want to say I do not have more to report on that front.
Got it. Thank you, Ms. Wong.
Okay, thanks, Farish. Can we have Kelly from Business Line, please?
Hi. Good morning. Thanks for the update. I have some questions on the phishing scams. Although MAS has said, and I think Helen reiterated that earlier, that, you know, the recent goodwill payouts are one-off. I think many are still saying that it will set a precedent. Just wondering what the bank's preferences would be in resolving future scams in this regard. You know, as scams become more rampant, would banks have to start provisioning for such payouts? Thank you.
Thank you for the question. We make a decision to make a one-off goodwill payout for this scam because of the speed that it has happened and the circumstances leading to what has happened. Indeed, it is through spoofing of the SMS. We feel for our clients because they trust us. They click into the link that is supposedly coming from our bank. They hit on the websites that was very well designed. We make that decision based on this. In a way, I think education across the whole industry and the community is very important. We continue to see scams happening every day, job scams, impersonation of a friend.
It is very important that we continue to make sure that our customers and consumers understand the risk. I think to prevent scams from happening, it is all efforts. I think indeed it is the focus of government. It's the focus of regulators for our industry and focus of our whole industry. We have a lot of discussion among the banks to tackle scam in this area. We do think some of the measures that continue will help to prevent. I think the key thing is about prevention. The key thing is about whether our customers they also have a responsibility to safeguard their own money and to safeguard their own banking credentials.
I think the discussion is also along that line, that we want to have a discussion on how we handle scams in the future. I hope that with a lot of discussion and focus so far, and that there are effective ways of stopping scams, that I'm not seeing the need to make big provisions for scam payments. It does take time and understanding. I want to recap again. I want to call upon consumers, customers as well, please look at all the communications from your banks. Look at what is the risk, what are the scam that is happening, and then also continue to safeguard your own credentials and your monies.
Okay. Thank you, Helen. Can we have Anshuman? Anshuman from Reuters.
Yes. Hi there. Hi, Helen. Hope you're able to hear me.
Yes, we can.
Hello?
Anshuman, yeah, we can hear you.
Yeah, so then I want to check with you in terms of overall in the statement, you said you're cautiously optimistic about the operating environment will improve. What are one or two things that is behind this cautious optimism? And secondly, the markets are a bit concerned the last few quarters about OCBC's dividend policy or the exposure to the legacy clients, which have led the shares to underperform. And also there's a one-off. There's higher operating expenses last quarter. Do you see this as a one-off in terms of operating expenses? And what would you tell analysts and investors about OCBC's underperformance over the past year compared with the peers? Thanks.
Thank you for the question. The first one about why am I cautiously optimistic, what are the basis behind that? The first one have to be about COVID. I did say I hope Omicron would be the last strain that have an impact. But indeed, even with this, with a lot of governments deciding to open up the borders, deciding to bring lives and livelihoods more to normal. I do hope that this big thing that has been looming over all of us for the last two years is beginning to recede.
I believe that in that sense, that is one of the big factor that support me being cautiously optimistic. Other things are we do see Asia continue to be most likely the outperformer in the economic recovery. With our strategy focusing on the Greater China and ASEAN, and with wealth continue to grow, we see the affluent population continue to grow in Asia. That leads us to refresh our strategy in this direction. With that is another factor that cause me to be cautiously optimistic. Still need to be cautious, right? Because we do talk about inflation. We still talk about commodity prices rising.
We are still seeing geopolitical tensions across the world. These are factors that we always look at very cautiously. No strategy is the right strategy unless you remain agile and continue to shift and be able to allocate resources to where opportunities are. As to the exposure to legacy clients, I'd say that I think we have done enough on the legacy portfolio in the past. As I said earlier on, we look at the fresh year. I'm quite optimistic about controlling credit risk, and I do not see a massive credit loss that we have to build in.
If you look at last year, our credit cost is 29 basis points, and in the new year we're looking at lower amount as well. As to operating expenses, yes, we have been investing in the people. We have investments in systems. We have been doing a bit of organizational change. Meaning we have put in a few more senior positions, building teams to effect our growth. Those expenses, of course, once we have the people in, of course, those expenses will continue. I'm not expecting a high speed of growth on expenses going forward.
We need to build our strategy so that we begin to see the growth that comes in, and that will support the expenses going forward.
Just one last point. When you talk about the cautious optimism and all, on the financial results side, financial performance, is it fair to say that you think the worst is over in terms of what you've gone through? Full-year profits are at a two-year high, pre-pandemic levels. Overall, on the other side, would that be a fair assumption? Thanks.
I never use those three words, "The worst is over." I don't look at our business with that manner. I look at the business on the are we doing the right things, capturing the right opportunities, and managing our risk and capital in the right manner. I am actually happy to say to see 2021 generating the profitability levels back to pre-COVID. I think COVID has always been a big factor affecting the economy, affecting our customers, and affecting some of the credit worsening, right? Because, as we say, disruption in supply chain because of COVID. We are actually seeing customers having reservation in expanding the business and all that. When...
As we look at if we can say that we can live with COVID-19 as an endemic, we continue to look at economic recovery. Yes, I'm optimistic in that sense, and I think we have a strategy to bring us to higher growth. As I said, for some of the legacy position, we have done with that. That's why I am optimistic. I would never say the worst is over, because I just don't use those words.
Okay.
I'm not looking at our business like that.
Thanks.
Okay.
Thanks for the answers.
Oh.
Thanks, Anshuman. Can we because we're gonna end at just 10:30, but we will take another last question. For the other journalists with your questions, not to worry, we'll follow up with you, and we will be able to come back to you with responses. Can we have Takashi please?
Thank you for taking my questions. We acknowledge OCBC continues to strengthen Greater China operations, but the Chinese economy is expected to slow down in 2022. What is your short-term and medium-term outlook for the Chinese economy? Some Western financial institutions are moving their staffs from Hong Kong to other parts of the world, including in Singapore. Does OCBC have any plans to reduce the number of staff in the Hong Kong office, or to move some of the functions of the Hong Kong office to other countries?
Thank you for the question. For China, if we look at our China operation of our Greater China operations, we have a bigger presence in Hong Kong through our acquisition of Wing Hang Bank in the past. It is a full-fledged bank operating in Hong Kong. Our China operations are comparatively smaller. Should we say, the opportunities for us for China is linking China or Greater China with ASEAN. We continue to see Chinese companies wanting to establish in ASEAN. We see quite a continuous inflow into Vietnam, and more into Malaysia on the advanced manufacturing front. As you can see, I think the China Plus One strategy is still there.
We also see some of the multinational companies are also establishing more in ASEAN as a second base to China. I do see as a particular niche where we can win business, but we can serve our customers better. If you look at the China, we talk about economy slowing down, yeah, there are sectors that is under more pressure, but there is also sectors that is continued to grow well. No matter how we look at economy slowing down, it is a very big economy. Economic growth of 4%-5% is still very, very meaningful to the world. As China continue to trade with the world and more indeed more within Asia, that is the opportunities I talk about.
The essence is to look at the sectors that we can do more business with, and as we integrate our Greater China business tighter, and as we improve our processes as we grow our regional coverage team, looking at this corridor flow of business, I'm optimistic we will be able to continue to grow business. Just have to say that we are not a very big player yet, but I think there is still market share that we will continue to gain and business to build.
Thank you, Helen, and thank you for the panel for the Q&A this morning. I'm afraid we will have to end our session right now. For journalists with questions, not to worry, the team will be following up with you and we'll be providing you with the responses. Right. Thank you everyone for spending time with us this morning. Thank you.