I guess we go straight into it since we are all familiar faces. Let Chin Yee start.
Good morning, everyone. Thank you for taking time to join us today. For the first quarter of 2025, group net profit was SGD 1.88 billion, up 12% quarter-on-quarter, but down 5% compared to the record quarter a year ago. ROE was 13% on an annualized basis. Total income grew 7% quarter-on-quarter and 1% year-on-year to SGD 3.66 billion. Net interest income was 4% lower at SGD 2.35 billion, against a backdrop of declining interest rates. I will cover more on NII in my later slides. Non-interest income increased 36% QOQ and 10% year-on-year to SGD 1.31 billion, driven mainly by stronger wealth-related fees, trading, and insurance. Cost-to-income ratio improved to 38.7%. Against last year, loans and deposits grew by high single digits. Asset quality remained healthy, with NPL ratio at 0.9%.
Total credit costs were higher at 24 basis points on an annualized basis. We adopted a prudent approach to set aside additional preemptive allowances in view of the current macroeconomic uncertainties and heightened geopolitical tensions. Our capital position remains robust. Transitional common equity Tier 1 ratio was 17.6%. Fully phased in CET1 ratio was 15.5%. Moving on to slide five for performance highlights of our three key business pillars. The strength of our diversified franchise is reflected in the performance across our banking, wealth management, and insurance pillars. Banking operations profit was unchanged QOQ. Our 15% increase in non-interest income compensated for the lower net interest income. Wealth management income and assets under management were at record highs. Wealth management income was 29% above the last quarter at SGD 1.37 billion.
It now contributes more than a third, or 38%, of our group's total income. AUM rose 2% from last quarter to SGD 306 billion from continued net new money inflows. For insurance, its profit contribution from GEH increased significantly to SGD 322 million. This was driven by stronger investment performance as well as underlying insurance business. If you recall, in 4Q of 2024, we recognized a one-off negative impact from the changes in the medical insurance business in GE's key markets, Singapore and Malaysia. Turning our attention to net interest income on slide nine. Net interest income for first Q of 2025 was SGD 2.35 billion, 4% lower compared to a quarter ago, while average assets grew by 3%. This was more than offset by a narrower NIM and the effect of a shorter quarter.
NIM compressed 11 basis points quarter-on-quarter to 2.04%. This was partly due to the decline in loan yields in first quarter of 2025 after taking in the full impact of the Fed rate cuts in late 2024. Almost three-quarters of our loan book are denominated in Sing Dollar, U.S. Dollar, and Hong Kong Dollar, and these are predominantly on floating rates. Notably, the pass-through effect of the Fed rate cuts was more pronounced for Sing Dollar and Hong Kong Dollar rates, which experienced much sharper decline compared to the Fed rate cuts. Consequently, the decline in our loan yields outpaced the reduction in deposit costs, which typically reprice much slower than loans. In addition, NIM also declined as part of our planned effort to defend net interest income as we intentionally deployed deposits to grow our liquid assets.
This was part of our active balance sheet management strategy to defend our income over the long run, especially as we expect further Fed rate cuts in the second half of the year. Our exit NIM for March was 2.03%. At the end March 2025, NIM sensitivity based on one basis point drop in rates across our four major currencies- Of Sing Dollar, Malaysian ringgit, Hong Kong Dollar, and US dollars was around SGD 5 million on an annualized basis. Non-interest income grew double digits to reach SGD 1.31 billion. The growth was underpinned by higher wealth-related fees, trading, and insurance income. I will elaborate more on our fees and trading income in the next few slides. Fee income for Q1 of 2025 was up 6% QOQ and 14% YoY, led by higher wealth-related, loan-related, and investment banking fees.
Total fees also reached the highest level since the start of 2024. We continue to see good momentum in wealth management. Both wealth management fees and assets under management delivered double-digit growth YoY. Our AUM rose 12% to SGD 306 billion, led by continued net new money inflows. In Q1 of 2025, we saw net new money inflow of SGD 5 billion. About 60% of our AUM are placed into investments across all our wealth segments. For the first quarter, trading income grew 31% QOQ to SGD 396 million. This was underpinned by stronger customer flow and non-customer flow trading income. The rise in our customer flow trading income was contributed by both wealth and corporate segments. Turning on to operating expenses. Operating expenses for the quarter declined 9% from 4Q of 2024.
The reduction is largely attributed to the higher cost incurred in the fourth quarter of last year to fund our strategic initiatives and to pursue loan business growth. Cost-to-Income Ratio for Q1 of 2025 was below 40%. I mentioned 38.7%. Turning on to portfolio quality. Our overall loan portfolio quality remained resilient. NPL ratio was 0.9%, lower than a year ago. We have reviewed our portfolio and assessed that trade tariffs had first order impact on 3% of our loan book. We further stress-tested our portfolio for potential vulnerability and assessed that our portfolio remains resilient. Q1 2025, total allowances were SGD 212 million, up from the prior quarter and a year ago. This was mainly driven by allowances for non-impaired assets.
A llowances set aside for non-impaired assets was SGD 118 million, comprises mainly the preemptive allowances that I mentioned earlier. Total credit costs for the quarter were an annualized 24 basis points within our credit cost guidance of 20 to 25 basis points. Cumulative allowances rose for the first quarter as we continue to prudently set aside allowances. Our Group's NPA coverage ratio continued to trend higher to 160% as at March 2025. Allowances for non-impaired loans were at 0.9% of total performing loans. Loan portfolio continued to be well-diversified across geographies and industries. Our Group loans grew 7% YoY to SGD 332 billion.
We saw increases in residential mortgages and corporate loans led by the transport, storage, and communication sector, which is in line with our Group's strategic focus to capture opportunities in the new economy sectors and high-growth industries. By geography, the YoY increase in loans was led by growth in Singapore as well as in our overseas markets, such as the U.K. and the U.S. Our Group's strong and stable funding position was supported by customer deposits, which represented about 80% of our funding base. Customer deposits was 9% higher YoY at SGD 403 billion, from both CASA as well as fixed deposits growth. Over the same period, lower cost CASA balances grew by 12%, while CASA ratio improved to 48.9%.
On capital. Our Group's capital position remains sound, with transitionary CET1 ratio at 17.6%, up from 17.1% in the prior quarter. The increase was mainly from profit position. CET1 ratio would be 15.5% on a fully phased-in basis. Pro forma CET1 ratio will be at 14.5% after the payment of our final and special dividend for FY 2024, which will be paid today. That will bring us closer to our target of 14% CET1 ratio. With this, I end my presentation and pass the floor over to Helen. Helen, please.
Thank you, Chin Yee. Good morning everyone again. I think Chin Yee has delivered quite a lot of information. I just want to maybe add a few points. I think overall, our first quarter results reflect the strength of our diversified business franchise, which enable us to deliver a very resilient set of results. T otal income grew quarter-on-quarter, and if you look at this, supported by broad-based non-interest income across fees, insurance, trading, et cetera, and this more than offsets the lower NII. Wealth management income and AUM are doing fine. They are at record highs, and Chin Yee talked about SGD 306 billion and rose SGD 7 billion, and actually, SGD 5 billion is from net new money inflows, both in Bank of Singapore and also our CFS business on Premier and Premier Private.
Cost-Income Ratio came back down below 40%, but it is important, 40% important that we continue to exercise a very tight cost discipline in view of the uncertainty in the market. Sometimes people always ask me about investment. Are you stop investing and all that? I think we have to look at it in two ways. A lot investment is just crucial, and you cannot stop because it is building also for the future. Some are invested to continue to make your BAU or your business as usual better. There are costs that are variables that we can have more discipline on. It is those costs that we can In a worse market, for example, maybe you travel a bit less, maybe you do less marketing costs, right?
You hold a fewer events, it doesn't mean that you're not doing things, because your clients are expecting you also paying more time, more focus on helping them as well. We will continue to execute a very tight cost discipline. With this said, we continue to see deposit and loan inflows as well. Asset quality, I want to highlight NPL ratio at 0.9%. We always took a prudent approach to look at whether we are comfortable with our allowances. Given the uncertainties in the operating environment, we did think that we put aside more ECL 1 and 2. We continue to be very vigilant on how we underwrite transactions, how do we monitor our portfolio, doing the right stress test, looking at how to do it.
Indeed a tighter situation, we're quite prepared for it, and indeed have already think about how our portfolio is like. I think Chin Yee talked about first order of impact. Of course, you define, you look at the industry your customers are in, and talk about what are the second order, and ultimately, those customers, that is what we call a safer portfolio, which is predominantly more domestic driven. That means the demand and the business is more domestic. This includes utilities, local real estate, data centers . You talk about financial institutions, et cetera. This would be the sectors with a strong domestic focus that would be much, much less impacted by itself. We are very prepared, and we analyze and do stress tests like this.
We also focus on achieving our strategic goals despite the uncertainties. Retain that performance for the first quarter was resilient, but indeed, focus is on the future. On the future is, I think you always know we talk about announcing in 2023 a three-year plan of bringing incremental revenue. As that two years has passed, we say that we overshoot our targets a bit by the end of last year, by achieving close to SGD 2 billion out of the three, as opposed to reach SGD 1.5 billion last year. This year, with what we have done well, exceeding our target last year, I think we are quite comfortable still to deliver the SGD 3 billion this year. We don't stop there, right? We are actually well in advance.
Last year, we looked at what is our strategy to manage. What else are we doing in order to continue to be able to grow our bank and grow the group, and also have our customers going into the future? You recall, last year we set up a strategy and transformation division as early as in April last year. We know, as we look at the world, and we're quite well prepared for the current situation. I talk a lot about being vigilant on your portfolio. Also, how do we react and how do we plan? In our strategy, we have a special focus on handling a situation like what we see today. Of course, nobody exactly knows what iteration they mean and how much is the tariff that was talked about.
What we're saying is we have been having a strong focus on how we deal with situations like this one. We have focus team working on situations. Stress testing is one thing, but thinking about how that impacts our customers, how does that impact our own revenues, where we have to tighten, and where we have to actually expand, to capture more revenues. These are all in the planning. With a very special focus on what if the world becomes like this, or what if the world becomes not like this. I want to emphasize that. Of course, IMF, in reaction to the current situation, have also forecast global growth downward. Escalating trade tensions as well. It is indeed a very unpredictable environment, but the whole point is about being nimble to recognize the potential impacts.
Also nimble to identify the opportunities that arise, and then plan to invest in the right manner so that we will be able to continue to deliver resilient results. Also actively engaging our customer and preparing them. Just to once again, the first quarter, we did say wealth management fees are fine, and the stock market was doing not badly. We want to just give you a data point, and that particular week of very high volatility, we actually have very low amount of margin calls, meaning we talk to our customers well in advance to prepare for uncertainty. If you are not prepared, maybe there's a lot of customers who suffer. I think that we support all this with a very strong balance sheet as Chin Yee presented our capital position.
Indeed our well-diversified business franchise has helped us to deliver this balanced earnings throughout the cycles. Flipping the slide. In view of the uncertain macroeconomic backdrop, we are still keeping maintaining our financial targets. For the reason that, as we said, we have plans to hopefully to achieve these targets. It doesn't mean that this is set in stone. The market is still uncertain, but at this point, we do want to maintain the financial targets. The exit rate in March is 2.03%. We still plan for three rate cuts the rest of the year, but we don't know yet whether that would certainly come. It looks like that potentially not in the second quarter, but maybe at the end of the second quarter.
We have actually attract more deposits and then invest in liquid assets as Chin Yee has said. The target growth in liquid assets for the first quarter has been achieved. We will moderate the growth of liquid assets in the coming quarters. We have also announced the lowering of some of our deposit pricing, so this will be able to help us to proactively manage our funding costs. We'll see. We'll continue to be vigilant and look at the situation. Loan growth, we maintain at mid-single digit. Though, if you look at these five points, I would think which one probably seem more happen is probably maybe loan growth, especially if the market continues to be very uncertain. It doesn't mean that we don't engage customer if customers don't need money.
Refinancing is always there, and we do think that there will be some flex to quality, meaning we probably will be able to continue to keep customer relationships well and continue to take in more deposits and with customers talking to us about their investment needs. If economic situation is going down, meaning economic growth is slower, of course, loan growth will be lower as well. Cost-to-Income Ratio, we maintain low 40s, and credit cost will remain between 20 to 25 basis points. I really want to say that we remain committed to deliver the 60% dividend payout ratio, which we have announced, and coupled with our share buybacks over a two-year period, which we have started. Of course, very unforeseen circumstances. It's what we are working towards. With that, I pass to Chin Yee for Q&A.
Okay. Can take the first question.
Yeah, sure. Helen, congratulations on that nice beat and lowest DBR ratio among the three banks. My first question, could you give some colors about client demand for hedging, both for interest rates and FX? My second question, I want to ask Chin Yee. You said that new money for the wealth management, about SGD 3 billion in the first.
SGD 5 billion.
Oh, SGD 5 billion. Yes, actually, SGD 5 billion. Could you give a bit of alert on where that's going? Third one, why do you not publish Bank of Singapore AUM in the annual report?
I'll start with the first one, right, which is about customer demand for hedging. First, look, demand for hedging is always there, and I want to say that, I think the whole market has been a lot more disciplined after the last financial crisis. When you say discipline, meaning banks are very much there to help customers to manage the currency risk and interest rate risk. A lot of times, hedging doesn't come when we're perceiving a crisis coming or an uncertain situation coming. These days, most of the time, if you look at customer raising monies, a hedging proposition always go along with new borrowing. Hedging discussion is a day in, day out thing. It is really like talking to customers all the time.
This is a very strong part of our discipline in our customers planning, helping customers to plan. If customers have more a natural hedge, meaning if they buy and sell in the same market, in the same currency, hedging needs are lower, right? To an extent, our domestic customers hedging needs will be lower, but we are serving a lot of cross-border business of our customers, so that hedging is particularly important. Especially if customers are having a longer term financing, let's say a five year financing, they would always look at the currency hedge and also particularly some interest rate hedge as well. Is there a heightened demand for hedging? I wouldn't say so. It is always, as we said, we want to anticipate what can be coming and advise our customers accordingly.
I mean, also concern interest rates now were raised. Do you think you are seeing more demand?
There are certainly more conversation in managing the volatility conversation. Meaning you would tell the customer. I mean, I was just using the margin call as an example. That is not hedging, but if you are financing very actively into investment, meaning you are not hedged now you're exposed, right? Even financing is a form of exposure. When we say margin call, there are two ways to make sure your position is safe, right? First is not to take on too much leverage and high risk, right? Otherwise when price come down, you suffer. Similarly, if you are exposed to FX, if you are exposed to interest rates, you also can consider hedging, which is something we always provide to customer.
It's not that necessarily is a height of it. It is not that it's a height of it because it is not suddenly where you see perceived that and suddenly you start to hedge. For normal business, maybe you can say for individuals, whether they would then actually have a choice of a preference to say that they unwind certain investment. Yes, that can happen. It is a form of hedging as well.
Just to be clear, you are not seeing, I mean, your clients are generally adequately hedged because it's an action taken for these uncertainties. Did I understand it correctly?
You can say that, meaning there would be enough conversation on how they hedge or they protect their exposure. Ultimately, it's client's choice, right? If they don't want to hedge it's client's choice. If a certain client decide to take a certain position, it is their choice, right? When we say we are very diligent with our book, it's we do want to identify what clients are less prepared. That is exactly what we're saying, and that is why we have always have stress tested. If this come, assuming some of our clients are not protected, what's that impact on our book, right? When we say challenge come, it's a form of uncertainty, and we look at our first order impact, right?
First order impact, meaning industries that is more in manufacturing and international trade, that has more relationship in doing business with China and the U.S. That's what we call first order impact. You know that, I mean, nobody can completely hedge for any uncertainty. You have to say that they have considered the risk and that we are comfortable that our clients are comfortable themselves, that they have reached a position that even there is uncertainty and risk coming in, we can brave through it. Yeah, because there is nothing like 100% hedge. 100% hedge, that means you are not gaining the benefit of the upside here.
Okay. Continue, right?
Yeah, let me.
Yeah. Okay.
Continue. I think you are asking about why we don't disclose Bank of Singapore. Is that your question?
Yes. It is the first question. I want a second question.
The second question.
That's the first question. Sorry.
Yeah. Okay. The reason is that, I think we also receive feedback from the investment community because our other peers are also showing their AUM, including Consumer and Private Bank. We used to only show Private Bank. By putting in Bank of Singapore, the Consumer Bank, they are able to compare apples to apples in terms of the overall AUM for OCBC development. I think that's why. In terms of the sources of the increase, they are looking at just for the wealth.
Net new money.
The SGD 5 billion net new money is actually coming from both our Premier, our PPC, as well our Bank of Singapore business.
Net new money, Premier advisor client. Wealth management. In terms of this origination.
If you look at it may be easier to see if you look at Bank of Singapore. If you look at the year-on-year growth, it's actually coming from across. The AUM increase will come from Indonesia, Philippines, across ASEAN. Also, if you look at it, year-on-year, it was also Greater China, the market itself. I think it's quite relatively broad-based in terms of the year-on-year growth. Thank you.
Just two questions here. The first one is just, you mentioned in 1st order effects, the tariff, thank you for the loan book. Could you just provide some color on that, of which sectors and which geographies? I think we have an idea, just to be sure. I think following on that, what about supply chain or second effects on the 2nd and 3rd order risks? You mentioned your portfolio is resilient, but can you just provide some figures of sectors that may be affected, especially when the tariff war ends? I have a few more, but just these for now.
First order will be manufacture and production of goods. Excluding, at the moment, those that are not in the tariff. At the moment, pharmaceuticals, semiconductors, and certain integrators, those are not in the tariff yet. Another category is international transport and storage of goods, and then you have more materials and commodities. These are very subject to the tariff impact. We say that together, this is about 3% of our loan book. Then you have another category. What about the next, what can filter through? Whether there will be tariffs on pharmaceuticals, as we said, later on, and then wholesale traders. This is what you call the 2nd category. Then you look at the 1st category, that has a mostly domestic focus, will be less impacted.
Yes, maybe the supply chain may be impacted, but those who are very much focused domestically, also mainly sourced domestically as well. They are, for example, the service sector. The SME, the service sector. When you typically, you buy food, import, but that is not so much impacted because you are very domestic focused. Utilities is domestic focused, you talk about local construction, local real estate, residential real estate locally, data center, this will be less subject to tariffs in that sense. Financial intermediaries. I think, if you say thoughtfully, you then look back into your loan book, and if you look at our loan exposure, Singapore still the biggest. For the Greater China book, still very little onshore in China, very much comprised of offshore and Hong Kong. Offshore, actually, of course, again, quite a lot in Singapore.
We do look at it that way, and we stress test differently, how we stress the different categories.
There's just three more here. It's just, can I check your sensitivity value for the year ahead? Is it still going to be SGD 5 million-SGD 6.5 million at 2025?
Yes.
Okay, change that. Your exit NIM for March was 2.03%. Can you share your exit NIM for April, if you have that?
Sure.
All right, thanks. Finally, here, I know you're comfortable with surpassing your SGD 3 billion incremental revenue target by end of the year. Will you be sharing a next 3-year target or should we be looking at other metrics, like ROE, for example?
I think when we're ready, not necessarily a revenue target. I think as we step into the future, of course, tariff is one, trade tensions is one very important thing. We're also looking at something that is, again, also very big into the future, is the use of technology and AI. What the nature of your customers may be changing as well. I think sustainability is still a topic. Some people said, "Oh, U.S. is not focused on it." Doesn't mean that the world doesn't need it. The world still need it. I would think, we have already, to an extent, come into a lot into capital planning as well. In the past, we share maybe a lot less, but today we share a lot about how we plan our capital as well, to face the future.
I think 3 years back, it is the right time, as you know the market interest rate is going up, and you know by pulling ourselves together, working as one team, you will have a lot of initiatives that would capture incremental revenue. Into the future, it will be a lot more disrupted. To an extent, we have to be very vigilant about our capital. Treat our shareholders correctly, like the share buyback plan. We need to be able to have a strategy that will be able to keep us resilient, diversified. Increased customer flow, so that we'll be able to defend our income as interest rate comes down further.
Also to be able to build a lot more into our wealth, so that If we can step in more stable environment and at a lower interest rate scenario, customers will invest a lot more again. It is to make sure that we are resilient enough to have a strong capital, manage our funding cost, expand our customer base, and then devote more and hopefully achieve more contribution by NII going through the next few years. If we do have targets and plans to share, we will share.
Helen, you mentioned that the bank has commenced share buyback. Can you give a bit more color on the [audio distortion] capital distribution plan, how much shares have been bought back and also the special dividends ?
Actually, share buyback is proposed every day on the stock exchange, and we will go steadily. We have the target, but doesn't change our plans. Capital planning includes the dividend. That's why we committed for both years we would have a special dividend of 10%, right? That plan doesn't change. Share buyback, you don't time the market to an extent. There are also stock exchange rules on how much you can acquire in, say, any single day.
Hi, Helen. Can you please give us a bit of a color on your, in the reason, like a prudent approach to set aside the credit allowance is, what kind of scenario that you're basing or can we expect that there won't be any setting aside in the future, or this is already the worst-case scenario that you set aside enough for the buffer?
I wouldn't say this is a worst-case scenario because we think the market is uncertain, so I think we are prudent, because if you look at the book, you don't need to set aside that SGD 82 million, right? If I'm right with the number. You say you may not Actually, if you entirely base on economic factors based on your loan book, what we call an overlay is because of the uncertainty. If the uncertainty persists, let's say the second quarter, something very different happ ens. It still comes towards that end of the 90 days, right? The negotiation between countries, right? If there is more clarity, you may not need to put up more. If the uncertainty even worsens, but it's no one can predict, yes, we may actually provide more.
The important thing is we have to be comfortable at a level based on how we cap our book that we think this is the right amount that we are taking. Another impact is what we call the macroeconomic factors that may actually impact how we make our provision. Of course, that is according to market, and then the overlay is according to uncertainty. I hope it will be less uncertain. Indeed.
Hopefully it'll be better.
Hi, Helen. Thank you so much for sharing. I have two questions. One is about the trade shifts, and another one is about your outlook for the SME. The first question would be, are you seeing any changes or opportunities or challenges in terms of the trade shift scene, caused by the tariff wars, maybe like intra-ASEAN or from China with other ASEAN countries or the rest of the world? The second question is, can you give us more of your thoughts on your assessments in terms of the bank's SME customers? Because we know maybe the SMEs, they don't have as much resources like the big companies to cope with those scales and the challenges ahead.
Yeah. Thank you. The first one, trade shifts is a very interesting topic and very important topic. Just have to say that if you think about the first Trump administration, there was also a lot of discussion on tariffs, right? Even before that, I think trade tensions between China, predominantly China and U.S., actually started way back, I think around 2015, 2016. The China Plus One story has been true for many years, and you already see China's Plus N story happening, meaning they try to prepare, not just focus on a factory in China and a factory in Vietnam, right? If you see China business growing now, they have already diversified, not just in manufacturing. Right?
They have diversified in tapping the ASEAN market and a lot go for other resources in ASEAN or go for the population in ASEAN as they go out to try to sell their products as well. If you talk about manufacturing, it cannot happen in a day. You cannot say that because now the tariff is high on Vietnam and a bit lower in Singapore, I then try to build a plant in Singapore because that's not going to happen, because you still always have the cost concern, right? The other thing is, what if the tariff is changed after another quarter? You don't plan it like that because manufacturing cannot be shifted In a month time, or if you want to build something, it has to be built in a year or two years, or et cetera.
What most bigger customers, bigger corporates have done is they prepare for the future. Having a diversified manufacturing base is important, and where you source your materials is also important, right? Over the past few years, obviously, you see a lot more intra-Asia flow. That is why ASEAN becomes the largest trading partner for China and vice versa. In a way, a lot of times, when people talk about China facing the tariff, it always reflects the fact actually, China's exports to the U.S. is only 2% of its GDP. In that sense, you can imagine China over the years have also been shifting their trade partners as well. Would there be some shift? I think, yes, a supply chain that's always easier to shift when you say, "I tend to buy more from this country,".
If any good business, if they do plan correctly, they always have options which they can switch from time to time. Would trade shift happen? Yes, it will. It will continue to shift, but it would not happen in a day or in a quarter. Likewise, because we're a regional bank, we look very closely at all our customers and engage them in conversations even more intensely in periods like this. Your second question is about SMEs. SMEs is generally, unless you are a very trade-oriented SME, where you actually buy from a certain country and sell to very different countries. If you're talking about domestic SMEs, they are more subject to local economic growth situation.
This is what we daily help our SMEs to face, like how to strengthen them, help them to do business, make sure that they are easy in dealing with their money, make sure that the banking services to them and the advice to them is there all the time, right? Where SMEs are more impacted, like what we say, the first order impact would be on the international transport, storage, et cetera. This will impact those SMEs that are servicing this industry. We have to be careful and look at them and see how we continue to help them. Do they actually shrink some of their investment plan so that they preserve some of their resources when the market returns? They may have to do that. This is something we engage the customers all the time.
Actually, just on the cost cutting, earlier you mentioned looking at more expenses, more certain costs. You mentioned events, mentioned travel. Can you expand a little bit more on what you mean by this? Are we sort of no to this cycle of events again?
Actually, are we referring to our costs, our bank?
Our costs.
Our costs.
Yes, because you said more on certain costs. Can you expand more on what some examples on the sort of events you share, and then also on the cost around retained branch, earning about 5% YoY. Part of the reason was on salary adjustments to staff costs to be something that the bank looks at in the coming quarters, and a little more financial certainty and things like that. Thank you.
I think looking at improving staff productivity is an ongoing thing, right? The flip side of managing costs is to improve productivity. Earlier on, I talked about the use of AI, that's something very important. That's what I'm saying. Actually, that was what I was referring to as well. Staff productivity and what opportunity AI can bring as to new products and new ways to serving customers, yeah. On costs, yes, you can talk about salary costs as the highest, but salary costs always reflect the market. If there is economic weakening, then of course, the whole world will reduce the salary increment. That is a natural way of response to what is happening in the market now. I think that one of the things that if you can improve your productivity, then you don't need to hire as many.
You can slow down your hiring plan, for example. If there is natural attrition, you may not need to hire to replace. We think discipline is you have to watch this very closely. Yeah. I did mention traveling, yes, we travel a bit less. COVID taught us to be able to talk to everybody online. Of course, in a very rapid growing market, you tend to actually travel more to see your team, and then you organize things for your clients. In a market that is shrinking, in a way, no need to do that, or you would actually apply more discipline in doing that as well. It's how we spend our money, I think, so to say.
Thank you. Another question. At fully loaded CET1 ratio for tier, right? How much is your, 15.5%. What's the average capital that you have?
Excellent. Have a good answer on that.
Yeah. Of course, we are working out mathematically. Our target is 14%. We don't really disclose precise capital to say. Suffice to say that when we announce our five-year plan, that takes into account how we look at excess capital, what are the excess needs, to maintain uncertainties, so on and so forth, and support business franchise growth. Come up with a good price. More than SGD 2.5 billion in extra capital you got to raise. Mathematically, you can also work that out.
Just one question. This is a little bit off tangent. You know, the bank, the PBOC is encouraging all the Chinese banks to lend. You've got this 19% stake or say 20% stake in Bank of Ningbo. Is that included in those banks that the PBOC is encouraging to lend? Because some of them have raised capital, as you said, in the first quarter. What is the situation with Bank of Ningbo? What a big stake you made.
20%.
20%? Yeah. It is your equity associate.
Yeah.
Yeah, I think it is them.
Okay. China regulators, in periods of economic situation, always have certain guidance for banks, right? The biggest influence is on the centrally owned, the larger banks. Yeah. Bank of Ningbo is not owned centrally. Bank of Ningbo is also a listed bank in China, and it has a range of different shareholders. Of course, they have to do their part and support the economy. Yeah, they also have a very I would say there are things you generally follow. For example, regulation sometimes will give you targets that your lending to SME cannot be lower than your loan book growth. That way, sometimes there are guidelines like that. I am just giving you past examples, right? Past examples, meaning that you do not choose to support only one sector of the economy, right? Banks, in general, you have to follow.
Doesn't take away how you judge your customers and who to lend to. Yeah. Lending doesn't mean that you just have to lend regardless without putting in your risk management parameters. Bank of Ningbo, I want to say.
Yeah, I think just to be mindful, Bank of Ningbo is a state-owned company. They are listed on your board, so we can't comment for their business plans. I think that's quite important.
What I'm trying to say is they also apply good business principles. Yeah, and risk management principles. Are they likely to raise capital?
They have separate board members.
Under me, so we cannot really say. Can I rephrase? If they need to raise capital, will you support them? Right. That question, we don't know the answer. It is not a well-known issue. I think we cannot comment on that. Yeah. Nothing is sure, when they approach, then they have to know and how.
The amounts are significant.
Okay. Any other questions? Okay, if not, thank you very much.
Yes. Let's do it.