Thank you very much for joining us this morning. We've started our media briefing for our third-quarter results, and we'll pass the mic to Chin Yee.
Good morning to all. Thank you for joining us at OCBC's third-quarter 2024 results briefing. We reported a strong set of results for the quarter, and I will now share the highlights.
For the third quarter of 2024, we recorded net profit of SGD 1.97 billion, up 9% year-on-year and up 2% quarter-on-quarter. Total income for the quarter climbed to a record SGD 3.8 billion. Net interest income was generally flat at SGD 2.43 billion. Non-interest income surged 41% from the previous year to SGD 1.37 billion. Buoyant wealth management activities boosted fee and trading income. Insurance income was also up. Cost-to-income ratio improved year-on-year to 38.5% on positive operating jaws. Loan growth momentum was sustained. Our loan portfolio expanded 4% year-on-year on a constant currency basis.
Deposits were broadly stable. Portfolio quality remained benign, with NPL ratio at 0.9%. We continued to set aside allowances, mainly for non-retail assets. Non-performing assets coverage ratio increased to 164%. MAS's final Basel III reforms came into effect on 1 July 2024. On a transitional basis, common equity Tier 1 ratio was 17.2% as at end September 2024. On a fully phased-in basis, CET1 ratio would be 15.6%. Our strong third-quarter 2024 performance contributed to a record nine-month group net profit of SGD 5.9 billion, up 9% year-on-year. I will elaborate more on the performance of our key businesses in the following slides. The three main engines of our diversified franchise continue to deliver resilient performance. Banking operations net profit for Q3 2024 was SGD 1.72 billion, up 3% year-on-year. Our wealth management business performed well, reflecting our continued efforts in growing the franchise.
Group wealth management income grew 15% year-on-year to SGD 1.29 billion, accounting for about one-third of group total income. Assets under management grew to a record SGD 284 billion from net new money inflows and improved market valuations. Profit contribution from Great Eastern rose 72% year-on-year to SGD 254 million, driven by better underlying insurance performance and stronger investment results from its shareholders' fund. Our operating profit is well-diversified across businesses and geographies, providing long-term earnings stability. Our capital, funding, and liquidity positions remain robust. Our financial strength places us in a good position to pursue growth opportunities, navigate uncertainties, and increase shareholders' returns. Moving on to details of our growth performance trend from slide 19. Net interest income was largely stable throughout all three quarters of 2024. For the nine-month period, NII increased 2% to SGD 7.3 billion.
This was underpinned by a 4% rise in average assets from customer loan growth and a 10% increase in other high-quality assets. As part of our ongoing balance sheet positioning to manage NII amid declining interest rates, liquidity was deployed to high-quality bank placements and debt securities. These assets were income-accretive but lower-yielding than customer loans. Overall, ninth month 2024, NIM narrowed to 2.22% as the increase in funding costs outpaced the rise in asset yields. For the quarter, NIM was 2.18%, and exit NIM for September was 2.16%. Taking into consideration the recent Fed rate cuts in September and November, as well as our house view on rates for the remainder of 2024, we expect full-year NIM to be around 2.2%. This is in line with our previous guidance of coming in at the lower end of our NIM range.
Non-interest income for nine months of 2024 grew 23% to a new high of SGD 3.76 billion, driven by higher fee, trading, and insurance income. For the quarter, non-interest income was up 41% year-on-year from broad-based growth. I will go into more details of our fees and trading income in the next two slides. 3Q 2024 fee income rose 10% year-on-year to SGD 508 million, the highest level over the last two years. The improvement was largely driven by a 25% increase in wealth management fees. We saw robust customer activities during third quarter, driven by higher demand across wealth products, including bank insurance, unit trusts, structured deposits, and private banking. Investment banking and loan-related fees were also higher. We recorded strong trading income growth for the quarter and nine months from record customer flow and higher non-customer flow income.
2024 trading income more than doubled year-on-year to SGD 508 million, while nine-month trading income surpassed the SGD 1 billion mark for the first time. The rise in customer flow trading income was underpinned by both corporate and wealth segments. The increase in non-customer flow treasury income was led by higher mark-to-market valuations and gains in our global markets portfolio and Great Eastern shareholders' funds. We continued to put in targeted investment to support the growth of our businesses. Operating expenses for the quarter were up 9% year-on-year. This was mainly driven by higher costs associated with increased business volumes, as well as technology expenses linked to our ongoing digitalization initiatives. Cost-to-income ratios for each quarter of this year were below 40%. Nine-month 2024 cost-to-income ratio was 37.8%, marginally below the previous year. Our loan portfolio quality remained sound, with NPL ratio improving from a year ago to 0.9%.
Total NPAs dropped 10% year-on-year to SGD 2.8 billion. Compared to a quarter ago, NPAs were 4% lower as higher recoveries, upgrades, and write-offs more than compensated for new corporate NPAs. New corporate NPA formation in third quarter was mainly attributable to the downgrade of one corporate name in Hong Kong, which relates to real estate and is largely secured. For the nine months, total credit costs were 17 basis points on an annualized basis, lower than 20 basis points a year ago. Total allowances for the third quarter were SGD 169 million. These were mainly SGD 132 million in general allowances taken, largely for credit portfolio changes. For example, in Hong Kong, we have taken prompt action to watch list accounts when necessary, given the headwinds and weak real estate market sentiments. This is in line with our prudent and forward-looking risk management approach.
The group's NPA coverage ratio continued to trend higher to 164% as at 30 September 2024. Our loan portfolio continued to be well-diversified across geographies and industries. Group loans expanded 4% year-on-year to SGD 305 billion. By geography, this was driven by Singapore, Malaysia, the United Kingdom, and Australia. By industry, the growth was largely from mortgages and non-trade corporate loans. We supported customers in the student accommodation and built-to-rent asset space. We also supported new economy industries, including technology, digital infrastructure like data centers, and the new energy sector. One of our fastest-growing segments is our sustainable financing loans portfolio, which expanded 31% from a year ago to SGD 47 billion. This portfolio now made up 15% of our group loans. Loans to the commercial real estate office sector comprise 11% of total group loans. These are largely secured with an average LTV of 50%-60%.
About two-thirds of these loans are in our key markets of Singapore, Malaysia, Indonesia, and Greater China. Customer deposits were SGD 369 billion at end September, steady from a year ago, and SGD 1 billion below previous quarter. Group loans to deposits ratio increased to 81.6% on the back of loan growth. Importantly, the change in deposit mix reflected our proactive balance sheet management. Compared to the previous year, higher cost fixed deposits were reduced by SGD 1 billion. On the other hand, we grew lower-cost CASA balances by SGD 8 billion year-on-year, and CASA ratio increased to 48.4%. Closing off on my final slide, we maintain our strong capital position. CET1 ratio increased quarter-on-quarter to 17.2%, mainly driven by a significant drop in risk-weighted assets after the adoption of final Basel III reforms.
The Basel III reforms are being progressively phased in until 1 January 2029, and the transitional decrease in risk-weighted assets will reduce over time. Assuming our portfolio as of September 2024 was subject to the full application of the final three reforms, which will take effect on 1 January 2029, CET1 ratio would be 15.6% on a fully phased-in basis. With this, I end my presentation and will now pass the floor over to Helen. Thank you. Helen, please.
Thank you, Chin Yee, and welcome to our office again. Chin has given quite a detailed presentation on the third quarter's results and the nine-month number, so I'm not going to repeat most of what she said.
I have prepared only two very simple slides, but perhaps will give a bit more of new about how I think the business is progressing and also some of the new things that we are doing. Right? So first thing, happy to say that, of course, this is another record result for the bank, for the group, and this is nine months. And again, powered by our three franchises, banking, insurance, and wealth management. Also, total income crossed SGD 11 billion for the first time. Happy about that as well. And supported by high NII and record non-II as well. So of course, income ratio improved, and we're operating, we have a positive operating growth for nine months.
So I think a lot of what we do this year in preparation for interest rate peaking and coming down is how we look at our net interest margin and also our net interest income. So we aim to defend NII, and there are a few things that we have done right. The first thing is indeed to drive volume growth. You need bigger volume so to counter the drop in NIM, and so that we continue to bring more NII in. And we also put our liquidity to work to invest in high-quality assets. So that may have some impact on NIM, but we protect our NII, which is protecting the income. The second thing is we grow our fixed-rate mortgages, in particular, quite successfully in Singapore.
And then we put in some cash flow hedges, and that was when interest rates were catching up to the higher point. And lastly, we manage our funding base. I think in the past, I talked quite a lot about how we grow digitally in SME account opening, in the consumer account opening, and indeed, I think we have seen some fruit. And with more of these accounts open, then we're able to actually build our CASA and then face off some of the higher-cost fixed deposits. And if you look at how our CASA work has been trending up, it's now close to 49% of the total deposits. And we hope we'll continue to be able to do it in that same momentum going into next year. So our non-II also has a rather broad-based growth, which adds on to show how our franchise has worked.
Chin Yee mentioned about AUM, and we reported AUM, which is a record high of SGD 284 billion. This is contributed by Bank of Singapore, contributed by our premier private client segment, and also our premier banking segment. And just also want to mention one more number that for nine months, these segments together reported about SGD 12 billion net new money in the inflow.
For third quarter, it is close to SGD 5 billion. So we do see a bit of increase over along this year. So seeing some of the results that we have invested in people, invested in products, and also invested in the capabilities to serve our customers using our capabilities. So some of the trading income that we've seen also reaching quite an actually good record is really about serving our customers. So this year, in particular, I feel the growth is very much customer-driven, which is good.
Yeah, because this will be a longer-term growth for the group in particular and does reflect when we announced we have growth plans and various initiatives to bring the one group together to serve our customers in more geography, more products. This is seeing some results and that is why if you reflect on what we announced last year, we said we want to, based on all these initiatives, we want to have incremental income of SGD 3 billion in three years so last year, we reported SGD 500 million, which we made and this year, our target is SGD 1 billion. I'm quite pleased to say that by end of nine months, we are close to SGD 1 billion so probably this year will overachieve.
But it's good to overachieve this year because next year, the market will be perhaps a bit more uncertain as to how loans will grow, whether interest rate will still stay higher for longer. Right? So these are things that we will actively manage. I just mentioned trading income is robust, crossing SGD 1 billion. And again, solid momentum in customer flow. I want to say that our sales and trading work hand in hand together and working with our corporate side and also with our retail side to bring a lot of customer-driven income for what is a good trading number. Loans expanded SGD 9 billion from the end of last year. I think this is on track for us to achieve our full-year loan growth guidance. And we have successful capture flow. I think Ching talked about what area we're focusing on.
Indeed, she also talks about we continue to help our client to transition into net zero and indeed sustainable loan financing. Outstanding is SGD 47 billion, as Chin mentioned, and our commitment, including, I mean, those that is not drawn yet, is about SGD 63 billion, sorry, is about SGD 65 billion as at the end of September. Asset quality is at an NPL ratio of 9%, but we remain prudent, prudent meaning that we know the market is uncertain and we are closely monitoring because geopolitical tension will remain, especially after the U.S. election results have come out. Of course, there's ongoing wars and conflicts in various parts of the world. We will continue to actively do stress testing and manage our portfolio.
So that's what got us to, in a way, we will refine our full-year credit cost guidance to a range of 20 basis points, which is we did say last quarter that we expect to be low end of 20-25. So now I want to say this year. Yeah, this year. Yeah. So on page two of my slide, we said we're firmly placed to deliver this 2024 target, which includes the NIM around 2.2% and then the single digit loan growth, no single digit loan growth, a full-year credit cost in the range of 20, and then the ROE about 14%. Yeah. So I just want to touch on, I talk about the initiatives allowing us to build faster growth and improve income. Right?
I also want to say some of the things that we have invested over the last two, three years and how we are seeing bearing fruit, and we continue to want to do more of the first-to-market initiatives. For example, I think some of you do see and cover that. In October, we launched our OCBC My Account for teenagers, young teenagers, and older children between the age of seven to 15. We see very good interest from the parents. This is more about financial literacy, teaching young people how the money is coming in and going out, but giving parents the controls over the ceiling of each payment, for example, and teaching and working with the young children to manage the money. We got some interest since we launched in October. I think we're only like about two weeks into it.
We have opened quite a few thousand accounts already for children and teenagers. And I think this goes hand in hand with some of our ESG initiatives as well that we really want the community to be a lot more financially literate. And also this will be able to help children or young people to understand some of the anti-scams efforts that the industry is putting in. We also set up the first comprehensive financial and personal wellness program for property agents. So property agents, we are working on to treat them, give them more in a way, give them more attention so that they would work with us also closer. So we have a program that we launched for property agents.
And also we have just this week announced we are working with a real estate, a government-owned company, a government body to pilot blockchain-based conditional payments for construction projects. And you know payments for construction projects is a very tedious process, checking construction process, getting certificate, getting a lot of documents in place, and then drawing down the loans and making payments, etc. So if we use blockchain, that means everything will be tracked in a very safe environment, and everything can be tracked along the blockchain, which makes things a lot more transparent and easier for those who are involved. And also, in October, we are the first bank with enabling intraday institutional lending capability. This is to use a platform to lend cash intraday to an external counterparty and by accepting tokenized assets. And again, using blockchain technology and all that.
We're quite excited. We are doing a lot of these. Some certainly help to make sure that we onboard more clients. Some make sure that we protect the process as we deal with clients. Some are more effective to generate more funding channels, for example. All this is based on the very active period of digitalization investment, and we will continue to do that. We also want to report some of the corporate development this year. We completed the merger of PT Bank Commonwealth into OCBC Indonesia on 1st of September. Our stake in Great Eastern. After the offer that ends in July, that was 93.32%. But you remember we report that is Section 215(3) of the Companies Act that allow our shareholders to continue to sell the shares to us based on the same price.
As at the end of these three months, which is 23rd of October, our stake in Great Eastern is now 93.72%. So we gathered another 0.4% of the shares. Looking ahead, we would have to say that we're still confident about the asset market to remain resilient. We are also thinking that of the growth opportunities as well. Outside of Singapore, countries like Malaysia and Indonesia should continue to benefit from the global repositioning of supply chain. One of the things that we do, again, as we say, we want to onboard more clients, is we are also becoming more active to cover some of the bigger MNCs as they continue to use ASEAN more for the supply chain. We could be taking more risk on the MNC as we finance the receivables of the supply chain companies.
So this goes also hand in hand with our increase of supporting, in particular, Chinese companies coming to this part of the world, or even Korean companies, Taiwanese companies coming to this part of the world. But we can help them and also provide them the receivable financing as well as part of it, but also gaining the capital account with us, meaning the working capital account, which is a part of the growth of our CASA. So I think if economic activities and sentiments for China improve with the implemented stimulus measure, then this could also provide more wind in the sails. So to wrap up, I think we are on a firm footing to deliver on 2024 targets. And our well-diversified franchise again shows that it works.
You look at our insurance income and our wealth income as NII become quite flat in terms of growth the last quarter. And I think our strong financial position also will allow us to continue to capture growth and give us confidence in generating shareholder returns as well. I think we'll stop here and pass it on to Q&A and Ching Ching.
Yeah. Okay. We also have a few of our media friends online. I'll start with M here first with us. Chanyeong. You always have a question. I'm honored.
Yes, just to continue the theme of these earnings, since you have very high excess capital, could you say on fully loaded CET1, how much excess capital do you have and what's your plan on capital management? Since your two rivals already mentioned capital buyback, is it something on the cards at OCBC?
Second question, I would like to get your 2025 outlook that includes profit, NII, NIM, and wealth growth.
I wanted to take the capital management question. Yeah, you mentioned the fully phased in capital common equity tier one, and I reported just now fully phased in is 14.6%. We don't release, we don't unveil excess capital, but just suffice to say that we have always been saying that over the medium term, we want to have our common equity tier one at about 14%, minimally 14%. And why 14% is really because that was the expectations that our rating agencies has conveyed to us for AA-rated banks. We want to definitely maintain our AA rating. So tier one excess in. Yeah, so 14% is minimally what we want to do.
Over the medium term, and talking about capital planning, capital planning to us fundamentally the most important is to be able to have enough capital to support our franchise growth. Right? As outlined in our corporate strategy, we do have a lot of growth ambitions and a number of exciting plans in the pipeline on how we can use capital going forward. Secondly, navigating uncertainties. As we can see today, there are really quite a lot of uncertainties in the world, like what Helen has actually highlighted as well. Finally, providing capacity for us to be able to capitalize on any inorganic opportunity that crop up on and off again. Right? We do have small bits of that in the form of PT Bank Commonwealth, which we announced in 2023, and they just completed a merger in September 2024. Yeah.
And then there's also AmMetLife that our Great Eastern subsidiary has outlined. And of course, not forgetting our exercise for Great Eastern. Right? So these are areas of usage of capital, and we do have quite a fair bit of this because we are really excited about the future and providing enough capacity for Helen to go shopping. Yeah, we particularly like portfolios built on part of acquisition. Yeah. So these are areas that we have in our plan, what we wanted to do, right, in the future. Now, you also have a question like, okay, how about share buybacks? Right? So share buybacks is indeed share buybacks and canceling the shares is indeed one of the capital management tools that can be used alongside delivering dividends. Okay. Now, it's not that maybe I should rephrase. For us, looking at share buybacks really depends on the situation as well.
Currently, we do have share buybacks, but we don't cancel the share. It's to meet our employee share plan. And why do we buy back share to meet our employee share plan? It's because we don't want to issue new shares to fulfill such employee share plan, although we do have the mandate, right, that it's fresh every year at our AGM to do so. Now, why do we not do that? It's because we don't want to dilute our existing capital gains, right, by issuing new shares. Now, on the share buyback to cancel shares, it depends pretty much on the situation. As of now, whenever we have a, as I said, share trading or share price above price to book of one, my preference would be not to do share buyback and canceling the share, but to deliver more in terms of dividend.
And also, of course, we fundamentally in capital planning, we really take into consideration the usage of capital, the usage of funds we have. And I've already outlined their exciting prospects in relation to that we can stand for. Yeah. So I'll stop there. In terms of share buyback, yeah, it's something, a tool that can be considered, but not at this moment for us. I see. But just to understand your comment on valuation a bit better, you say share buyback with cancellation depends on situation. At current PB ratio, which is just above one, you'd rather do dividend. Am I understanding?
Yes. Thank you. Yeah.
Do you have a second question, which is asking me to tell you a lot of things for the future? Oh, look, we will have more better guidance by the time we go into the final results announcement in February.
But just to have to some discussion on what you asked. Of course, we are all projecting interest rates to further come down. And indeed, last day is another cut of 25 basis points. Although the results of the Trump administration may throw different lights on the interest rate environment. But before that, we're still thinking that with interest rates coming down and with the way we grow our business, we do feel that the growth of non-II should be in double digit again next year, which should be able to counter the fall of NII. Right? Fall of NII is also would be mitigated by higher volume as well. So if you ask me, given the original scenario where the market generally talked about further interest rate cut, we're still thinking that or we expect profits to be quite stable for next year. Yeah. Compared to this year.
I mean, this is because of a lot of the growth initiatives we were talking about, right? But I'll give you better guidance when we come to February. So I did say that that means that our wealthies, we're expecting wealthies to do better. And with the AUM that is increased and with the hiring that Bank of Singapore has been doing, remember Jason mentioned he wanted to build to a 500 number strong in RM. This year, he added quite a number of RMs already. So hopefully, we can capture, of course, some of the net inflow of funds. And if the interest environment is coming down, our customer will be a lot more active. As you can see, actually, the last quarter, wealthies have been growing really well. So that is on the non-II. For NIM, it also depends on whether we can grow loans faster as well.
But with interest rate coming down, of course, NIM would always have pressure. Pressure doesn't mean that it is exceptional pressure. It's just that you will indeed see that we will be able to protect NIM to an extent of building more CASA, right? Lower cost CASA. As we said, SME account opening, consumer account opening, and more account open with us, then you would have more CASA coming in. So this is to protect NIM. But again, volume is still important. So I do see that next year, loan growth has a bigger potential compared to this year. But I will tell you the whole year guidance in February again. So I think these are the few things I can discuss and disclose. Before you ask, I probably would just want to mention when Chin talks about we have various plans, right?
I do want to mention that there was a question about the Center, the property, right? I know whether you're going to get to that. Yeah. So before you ask, then we did talk about exploring and just want to say we have made certain progress. So certain progress that may need us to have more to say by next year. But I can't disclose any details. But when we say more to say that if we do embark on redevelopment, of course, that needs capital as well. Is the plot ratio fully used or do you have excess? This is the details I can't tell you. Because we are still planning, but I just want to say that we make progress. We need to develop something like this of course. It's not the Center, right? You know what we have? Center East, Center South.
That was the whole thing. How big is the? Okay, I'll come back to you. Yeah. We do have that number. Yeah. So give you the details. And the car park? Yeah. But we want to preserve this building. We want to preserve this building. If I didn't come here this today, it's about results. So it's a question about results. Sorry, I jumped to say, but I thought you may ask, and I want to relate that to some of the things that we are doing. Yeah. No, but I just need some capital. I just want to bring back to the dividend part because when we had a chat, you and I, one to one, sorry, everybody, you said, I mean, I did ask, and you said that you prefer dividends to share buybacks at that time. And that's still.
It's just like Chin Yee said just now, we still prefer that. Yeah. Still prefer that. In a way, it's the same results, right? Meaning doing shareholders' return. But I keep the capital base. Yeah. Ching from Java.
I have a question regarding the impact of the global minimum corporate tax on the profits. Which markets or which industry would you firstly, would it affect you think that this will create some big impact on the profits? And then which industry, if yes, which industry and sector would be most affected? Thank you. Yeah. Okay. This minimum global tax compliance, it takes effect from 1st Jan of 2025. And typically for countries which have tax rates below 15%, because the minimum global tax rate now is 15%, right? So the three countries that are relevant for OCBC, Singapore, Macau, as well as UAE. Right? UAE. UAE.
I think you mentioned that I think also it would be Singapore, Malaysia, and Hong Kong. I think Chin is also talking also within our network, but our key markets would be Singapore, Malaysia, and Hong Kong.
Oh, I thought the ones with the lowest rate is Macau, Hong Kong, and Singapore. Because you get a lot of, what is it called? Tax rebates or something.
Yeah, yeah, yeah. Okay. There are also some incentives in Singapore depending on the sort of activities, right, where we have the financial services sort of incentive, right? But if you look at what's the impact on OCBC, if you look at our overall group, even for this year, our effective tax rate are already quite close to like 15% because of the blend of our revenue mix and countries that we operate.
When this takes effect, the impact will not be overly significant for us. What causes some tax rates to go up? I mean, what causes some tax rates for some banks to run?
Yeah, because we need to comply with this minimum 15% global tax.
When you do trading and all that, is it like tax-free or is it?
No, it's not tax-free. Yeah. But in Singapore, some of these could have the financial services incentive scheme where the tax is actually lower. It can be 5% or 10%. So it also depends on the mix of our products that we get revenue from. So yours is not. Overall, on a blended basis, effective tax rate overall for OCBC group is actually 14% or so percent, close percent. So it's not bad.
Can you mention the effective tax rate is already quite close?
Are you able to disclose the 14%?
Then you want to. Yes. I think the foreign bank in Singapore already slashed their mortgage rates. So I guess what's the OCBC going to do? So we went in this market. I mean, we've been quite competitive in terms of our mortgages, right? So we have also increased our market share within the mortgage space. So I think right now we're around, I think, quite close to being 3% already. So up from last year. I guess Kippen is asking whether we are going to cut mortgage rates. I think I'm going to respond to the. Yeah.
I think we'll always adjust. Yeah. We'll look at the market and we will adjust accordingly. It's not like somebody cut, we will definitely just cut immediately.
It depends on how our pipeline is like, depend on how our relationship with the customer is like. And I think the last two years as we improve in the fixed rate mortgages, I mean, you know the life of a mortgage hold, how with any bank is quite short. So we actively look at repricing and how we manage the book.
But I think what we're saying is that we have grown our mortgage book very well.
Yeah. Despite quite a lot of local banks pricing, which are already on par.
Coming back to the NPA that you mentioned that there's a new one from Hong Kong property. Do you see more coming? What's the outlook? NPA going?
Okay. This would be quite idiosyncratic. We're not seeing it as like the whole industry or our book. Having big pressure is not like that.
For this particular one account, it is largely secure with LTV around, actually with average LTV below 15%. But of course, we look very keenly at the, in particular, Hong Kong, our real estate sector. Yeah. Because residential is a lot more stable. And when we say real estate sector, we started managing actually much earlier. And I just want to share with you one data point. For Hong Kong, our real estate sector, we have reduced exposure by 50% over one year from last September to this September. This is due to our actively engaging clients to advise them to deleverage much earlier on. And also that's the reason why we actually reduce our outstanding. And we will continue to help clients on how to read the market and to deleverage earlier than later. So hopefully it will stabilize. Yeah. Did I need to repeat the question? Yeah.
This is a very basic question. Yeah. I think back in August, Kevin said the banks would do it for two rate cuts. But it hasn't this year, which has so far not materialized, and possibly four to five next year. So does this still hold with Trump presidency in mind? And how much of an update on 2024 forecast was set prior to the outcome of the presidential election this week? And has that changed anything? Finally, how are you preparing the bank for both maybe a falling rate environment, which has really been expected, and maybe a longer rate pause?
Yeah. And inflation, because we think that Trump will create a lot of inflation. And inflation lead to interest rates staying higher.
Yeah. Okay. Thank you. I think our plan has been on two to three rate cuts this year, plus five next year.
I think that is what the industry normally would think as well. So if a lot of people are now saying that potentially there's still rate cuts, but maybe stop in March, right? Some people are saying that industry is changing their view. I would not be telling you now what views we adopt. It just happened last night, right, in a way. But indeed, if interest rate is a reduction stop in March, then it does provide potentially higher NIM for the rest of the year, right? But again, ASEAN currency is not directly linked with U.S. dollars. We have to always remember that. Different countries' currency interest rate respond a little bit differently. Of course, in general, interest rate will go down together alongside the U.S. Fed cuts, right? But they also actually acted differently. For example, Singapore interest rate reacted faster, quite faster in that sense.
So I think we won't be able to say whether we will change the outlook from five cuts next year to three. I think it's too early to say. We don't want to. We haven't even heard from the president hasn't sworn in yet. So to an extent, I think it's a bit early to tell. But I think by early next year, we'll be seeing what our plans are. We'll be able to give some more guidance on NIM for the year, on loan growth for the year, and also for expected wealth AUM growth for the year, etc. I don't think so. Yeah.
Just writing on the question, so with more than expected, do you think the environment is now less or is more?
I think we always talk about the uncertainty, which we have seen happening, right?
I think long before, I mean, don't talk about Trump 2.0, but even before that, when Trump first in his first term, right, or whatever, you know, when we refresh our corporate strategy, we have always talking about the flow in Asia that we're focusing on. I don't think that trend has changed or that trend has deteriorated because the more trade conflict there is, I think Asia do trade more with Asia in that sense. So it actually fits very neatly in our corporate strategy when we refresh it in 2022, right? And the initiatives we talk about in growing wealth, the initiatives we're talking about capturing more corporate clients or SME in the supply chain under China Plus One, that is materializing as well. And we continue to see the flow.
And nowadays, we talk more about China plus eight rather than China plus one because Chinese companies not just going to one country like Vietnam for low-cost manufacturing, right? Chinese companies are doing a lot more in the region. Some go to Indonesia, but everybody comes to Singapore first to start the company. Before they always use Singapore as the center to manage their investments into Indonesia, Malaysia, Vietnam, etc. So that is how we have seen flows coming in and we benefiting under our corporate strategy. So geopolitical tension will be more fierce, I think. It would be. You cannot draw an equal sign. You just have to look at what's the impact of that and then how we capture opportunity. And I was just saying exactly that would have an impact to cause Asia to trade more with Asia, right?
And then with more shift of China manufacturing or investments coming out, then it does benefit a bank like us. And that is why we have been preparing ourselves by adding more China offices in that sense, sitting in various presences in ASEAN in order to be able to engage this. And we are seeing flow from the China Plus One not just for Chinese customers. It is for the Koreans, it is for the Chinese, it is also for some of the MNCs that have to actually reshape their supply chain by moving some of the supply chain in ASEAN. So I think that benefits us in that sense.
And on the flip side, do you see more need to de-risk in China and Greater Bay Area because you have been quite bullish there?
Yeah. When we say bullish about China, we were always saying that we are focusing on outbound. Better way, we're focusing on outbound, China outbound. China outbound, right? So if you capture well, the risk is not so much about that, and as you say, the flows stop. Otherwise, on wealth, I mean, we're not talking about the risk in. But if you're talking about exposure to Chinese companies lending money to them, we are always saying that we have been serving Chinese companies outside more than within China.
Within China, our exposure is more really to the SOEs and to leading companies, but our proposition is always helping them to come to ASEAN. And I think we used that sort of number before, and every $1 we lend in China, there will be at least $4 or $5 lent outside of China, which is very clear if you look at page 17.
Page 17 of Chin Yee's deck, right? We have a breakdown of the Greater China loan book, and Hong Kong is SGD 32 billion. Offshore is SGD 23 billion. China is only SGD 7 billion, so you can imagine SGD 7 billion versus, and if you consider Hong Kong part of China, but however you consider, meaning 7 versus offshore of 23, that is already 1 versus 3 point something or 4 to 4, and of course, part of that is book in Hong Kong as well. Is it Johor or,
so further on, China's question about risk, right?
Again, with Trump in the background of our minds here, not just how much data you have, but among the companies that have come from Greater China to set up shop here, are they only involved in business around ASEAN, or are you seeing maybe them setting up JVs to enter U.S., like a bit of Singapore washing?
Interesting question. I don't think you can really do it. You can really do it to say that because companies, you always look at the ultimate beneficial owner, right? A China-owned company is a China-owned company. Not sure how we wash it in that sense. But when we say are they only focusing in ASEAN, probably not. We do see some Chinese companies, especially in new economy. They would take Singapore as the international business headquarters. Some of them do.
I have one client that has set up their international headquarters in Singapore, but also focusing on the Middle East. Not just ASEAN. But a lot of the companies that come now, I mean, the SOEs, they've been in ASEAN long ago. And you do know that because Singapore, we are a very big commodity trade center. So the big POEs do trade using Singapore as a trade center, right? But we're seeing a lot more of the what we call the new economy company come in. A lot of them is logistic and, I mean, fintech is already long here, right? And then you have other things like research, medtech, agritech. Some looks at Indonesia on the e-commerce because Indonesia is going to be the fast-growing consumer market, right?
And some look at linking up with, as I said, with the Middle East as well because we do see Middle East sovereign money more active in Asia as well. So, and Saudi, for example. So I think these are all new developments that we think we can capture. I think it's quite interesting. What about, I mean, can you ask specifically about Johor as well? What are you doing in Johor with the special economic zone? And there have been some incentives to set up more branches. I mean, you plan to do that? You plan to invest more? I mean, are your customers moving to Johor? I think it is quite an early stage of the initiative. We're excited about it. We're excited because we've been in Malaysia as long as we are in Singapore in that sense.
So we actually do have quite a good presence in Johor already. Doesn't mean that, but that is under Malaysia, right? But we want to capture a lot of the initiatives both governments are looking at. And we will be. We will be. I wouldn't even say tracking it. We will be actively involved in it. Being, as we said, we are very open in Malaysia and also very open here. And we're going to support our customers as they develop their business plan for using the Johor economic zone. I'm talking about Johor companies. So you support more Johor companies. And there's also this initiative to set up something for a city. Would you look at that as well? Well, you consider for all options at the moment. But it is, I mean, you need some concrete planning exactly how to execute it.
We are at that stage now. Yeah. We are big in Malaysia. I mean, we have been supporting Johor companies. I think just in Johor, we have seven branches, if I'm not wrong, but I need to confirm that. My memory is quite good. Seven branches. We're already supporting Johor. Actually, Johor is a very affluent area. We're keen about our Johor development.
We do see areas that we're looking at. I mean, people are looking like sustainable energy, right? Trading, electronics, healthcare, right? Data centers. I think so. I think we're also seeing interest from customers as well. They're going to move the plant from China? Yeah. Just a question. I guess a lot of focus on new net inflows, right? I guess a lot of it just seems skewed to Singapore.
But you don't sort of see the mix sort of being more different as all these countries are seeing traction. You think more new net account inflow coming out of Singapore or the center in Singapore?
You see new accounts coming outside of Singapore, but domestically as well. When you say domestically, Singapore's SME scene is quite vibrant as Singapore continues to capture the growth in the region. So the domestic companies are also growing quite well. And we're beginning to see quite a lot of what we call serial entrepreneurs, meaning they continue to bank with us and not just in one particular sector. As they grow faster, they are involved in different parts. Or they may be in their own industry. They are in the whole chain in the industry. So they will open different accounts with us as well.
So we grow quite a lot of accounts with domestic owners in that sense. But it's important. That is why it is so important we have to be very digitally prepared because most of the new SME companies, they're very digital starting. And they need it. They are smaller companies in a way, and they cannot afford to do a lot of their own analytics. I mean, they know the market, but we help them to shape their business plans. And the way we do have a service, that actually we send them back how we analyze their dealings with us. We tell them, "Your customer, for example, F&B," so simple as that, "F&B shop," right? We have a lot of their payments data.
So if those clients are using OCBC card in particular, we can share your age group of your clients is actually between this age to that age. So we actually can have data analytics that we can help our customer. And we have launched two years ago because we have enough data analytics that we know which SME customers are doing better and on a trajectory of better growth because we can use the data to analyze. And we approve loans for some of these SMEs. So we already offered to them before they asked for it. And we have launched that in Malaysia last year, which ones have been good. This is important because you speed up the way you serve your SME customers, and you help them to grow. So a lot of many other things recently we also launched, in particular for women.
So for women owners, we have launched something that we actually cultivate. I think we issue press release to talk about some of the characteristics of female entrepreneurs. In general, they're more cautious. Yeah. They're more cautious. And we know how to deal with them also better in order to support female entrepreneurs. So there are many ways that we're doing to make sure that our SMEs continue to fare well. It's very important because if you look at our commercial banking, they contribute to deposits is about 20%. And these are mainly working capital accounts. Once they bank with you, they trust you. They don't move the money away. And this is the money that they use day in, day out to do business. The float is always there. Okay. In the interest of time, if anyone's urgent, maybe just one last question.
Not more than one last question. Your securities book, your interest rates are so high now. I mean, are you going to reprice them now, or do you want to? If you have anything to reprice, if you reprice them now, you could firm up your NIM.
We are talking about our debts. I mean, we have been balancing that over the course of the interest rate cycle. And then if you notice what we call the FVOCI, Fair Value through Other Comprehensive Income, it used to be quite negative when interest rates were declining so quickly. Rising so quickly during the low of the 20s. Now the negative has sort of gone off. So the fair value through other comprehensive income, the sort of mark-to-market sort of losses have actually tapered off.
And even within their net securities portfolio, we have been lengthening the duration, locking in some of the things over the course of the interest rate cycle. All the big banks, LCR came off a lot. Was there a particular reason for that? It was actually above 150%. Now it's actually a much better sort of use of, yeah, in the 140-something%. Now it's actually much more better. It's better handling. It's more efficient. It means very high. We're not going to go on. We take it offline. All right. Anyway, thank you. Thank you very much for joining us this morning. Thank you. Thank you. Thank you.