Welcome to our first quarter results briefing. I guess we go straight into it since we're all familiar faces. Let's 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 S$ 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% Q on Q and 10% year- on- year, to SGD 1.31 billion, driven mainly by stronger wealth-related fees, trading, and insurance income. Cost-to-income ratio improved to 38.7%. Against last year, loans and deposits grew by high single digits. Asset quality remained healthy, with NPR 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 remained robust. Transitional Common Equity Tier 1 ratio was 17.6%. Fully based-in CET1 ratio was 15.5%. Moving on to slide 5 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 Q on Q. 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, which 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 incomes. 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 Q4 of 2024, we recognized a one-off negative impact from the changes in the medical insurance business in GEH's key markets, Singapore and Malaysia. Turning our attention to net interest income on slide nine. Net interest income for Q1 of 2025 was SGD 2.35 billion, 4% lower compared to a quarter ago. While average assets grew by 3%, this was more than expected 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 use in Q1 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 SGD, USD, and HKD, and these are predominantly on floating rates. Notably, the pass-through effect of the Fed rate cuts was more pronounced for SGD and HKD rates, which experienced much sharper decline compared to the Fed rate cuts. Consequently, the decline in our loan use outpaced the reduction in deposit costs, which typically reprice much lower 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 this year. Our exit NIM for March was 2.03%. At the end of March 2025, NIM sensitivity based on one basis point drop in rates across our four major currencies of SGD, MY R, HKD, and USD 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% Q on Q and 14% year on year, 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 year on year. 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 world wealth segments. For the first quarter, trading income grew 31% quarter on quarter 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 Q1 of 2024.
The reduction is largely attributed to the higher costs 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. NPR ratio was 0.9%, lower than a year ago. We have reviewed our portfolios and assessed that trade tariffs have first-ordered impact on 3% of our loan book. We further stress-tested our portfolio for potential vulnerability and assessed that our portfolio remained resilient. Q1 of 2025, total allowances were SGD 212 million, up from the prior quarter and a year ago. This was mainly driven by allowances for non-impact assets. Allowances set aside for non-impact 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 20-25 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 SGD 162% as of March 2025. Allowances for non-impact 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% year on year to SGD 322 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 year-on-year 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 year-on-year 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 remained sound, with transitional CET1 ratio at 17.6%, up from 17.1% in the prior quarter. The increase was mainly from profit contribution. 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 FY24, which we should be late today. Okay, 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.
Thank you, Ching Yee. And good morning, everyone again. I think Ching Yee has delivered quite a lot of information. I just want to maybe add a few points. I think overall, our first quarter results do reflect the strength of our diversified business franchise, which enables us to deliver a very resilient setup in South Asia. Total income grew quarter on quarter, and if you look at this, supported by broad-based NII, across fees, insurance, trading, etc., and this more than offsets the lower NII. Wealth management income and AUM are doing fine. They are at record highs. Ching Yee talked about SGD 306 billion and SGD 7 billion, and SGD 35 billion is from net new money inflows, both in Bank of Singapore and also our CFS business on Premier and Premier Private.
Cost-to-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 stopped investing and all that? I think we have to look at it in two ways. A lot of 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. But there are costs that are variables that we can be, have more discipline on. It is those costs that we can, I mean, in a worse market, for example, maybe you travel a bit less, maybe you do less marketing costs, right?
You hold a few fewer events, but it doesn't mean that you're not doing things, right? 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. We did say we continue to see deposits and loan inflows as well. Yeah, asset quality, want to highlight, NPR ratio at 0.9%. We always took a prudent approach to look at whether we have accommodated goal with our allowances. Given the uncertainties in the operating environment, we did think that we could assign more ECI one and two. We continue to be very vigilant on how we underwrite transactions, how we monitor our portfolio, doing the right stress tests, looking at how we do it. Indeed, a tariff situation, we're quite prepared for it.
Indeed, have already, think about how our portfolio is like. I think Ching 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. Ultimately, those is, those customers that is what we call a saver portfolio, which is predominantly more domestic driven. I mean, the demand and the business is more domestic. This includes utilities, local real estate, digital centers, you talk about financial intermediaries, etc. This would be the sectors with a strong domestic focus that would be much, much less impacted by tariff. We are very prepared and we analyze and do stress tests like this. We also focus on achieving our strategic goals, despite the uncertainties.
We're saying that performance for the first quarter was resilient, but indeed focus is on the future. On the future is, I think you all will know we talk about announcing in 2023 a three-year plan of bringing incremental revenue, right? At that two years that's passed, we say that we overshoot our target a bit, to by the end of last year, by achieving close to SGD 2 billion out of the three, we're supposed 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? Actually well in advance, in last year, we really look at, what, what is it, what is our strategy still valid?
Are we, what else are we doing in order to continue to be able to grow our bank and grow the group and also help 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, I mean, as we look at the world, right, and we are quite well prepared for the current situation. I talk a lot about being vigilant on your portfolio, but also, how do we react and how do we plan, right? In our strategy, we have a special focus on handling, and handling a situation like what we see today, right? Of course, nobody exactly knows what liberation they mean and how much is the tariff that was, sort of a talk about, right?
What we're seeing is we have been having a strong focus on how we deal with situations like this. We have a focused 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 is the world become like this or what is the world become not like this. I want to emphasize that. Of course, IMF in reaction to the tariff situation have also forecast global growth downward, right? And 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, but also nimble to identify the opportunity that arrives and then invest in, then 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, want to think the first quarter we did say wealth management fees are fine and the stock market was doing not badly, right? Indeed 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. Yeah, if you're not prepared, maybe there's a lot of customers that suffer, right?
I think we support all this with a very strong balance sheet as Ching presented our capital position and indeed our well-diversified business franchise has helped us to deliver this balance earnings throughout the cycles. Flipping the slide, in view of the uncertain macroeconomic backdrop, we're still keeping maintaining our financial targets for the reason that, as we said, we have plans to, hopefully to, achieve these targets. Doesn't mean that this is set in stone, right? 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 plan, still plan for three rate cuts the rest of the year, but we don't know yet, right, whether that would certainly come.
It looks like that potentially not in the second quarter, but maybe at the end of the second quarter, right? We have to, we have actually attract more deposits and then invest in liquid assets as Ching 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. This will be able to help us to proactively manage our funding costs. We will see. We will continue to be vigilant and look at the situation. Low growth we maintain at mid single digit. Though if you look at these five points, I would think which ones probably see more happens is probably really low growth, especially if the market continues to be very uncertain.
doesn't mean that we don't engage customer and customer don't need money. refinancing is always there. And we do think that there would be some flag 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. but if economic situation is going down, meaning economic growth is slower, of course low growth will be lower as well. cost-to-income ratio we maintain in low forties, and credit costs to remain between 20-25 basis points. I really want to say that we remain committed to deliver the 60% dividend payout ratio, which we have announced, and couple with our share buybacks over a two-year period, which we have started. of course, very unforeseen circumstances, right?
but, it's what we are working towards. With that, I pass to Ching Yee for Q&A. Okay, good. I'll take the first question. Yeah, sure. Helen, congratulations on a nice beat and lowest PPL 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, just want to ask, Ching Yee, you said that new money for the wealth management about SGD 3 billion in the portfolio of SGD 5 billion, if I say, but I got it. Could you give a bit, alert on where they are from? Third one, why do you not publish Bank of Singapore AUM anymore? I'll start with the first one, right? Which is about customer demand for hedging. Customer demand for hedging is always there.
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 does not come when we are foreseeing a price is coming or an uncertain situation coming. These days, most of the time, if you look at customer raising monies, a hedging proposition always goes 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 lateral 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. That hedging is particularly important, especially if customers are having a longer-term financing, let's say a five-year financing, they will 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, but it is always, as we said, we want to anticipate what can be coming and advise our customers accordingly.
Yeah, I mean,
also concerning. Yes. Great.
I'll always listen,
and that's why I wonder because you are seeing a bit more demand.
There's certainly more conversation in managing the volatility. Conversation meaning you would, 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 to be very active in, you're financing very actively into investments, meaning, meaning you, you are not hedged or you're exposed, right? Even financing is a form of an ex, financing is definitely a form of exposure. When we say margin call is, do you, there are two ways to make sure your position is safe, right? First is not to take over, too much leverage and high risk, right? Because otherwise, when price comes down, you suffer.
Similarly, if you're exposed to FX, if you're exposed to interest rate, you also can consider hedging, which is something we always provide to customers. Oh, no, no, it's not a, let's say it's a high profit. It is not that it's a high profit because it is not suddenly where you see perceive that uncertainty, you start to hedge. For normal business, for 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 if it's 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 all these uncertainties.
If I understand it right,
you can say that meaning there would be enough conversation on how they hedge or they protect the exposure. Ultimately, it's client's choice, right? If they do not want to hedge it, it's client's choice. If a certain client decides to take a certain position, it is their choice, right? When we say we are very diligent with our book, you do want to identify what clients are less prepared. That is exactly what we are saying. That is why we have always stress tested. If this comes, assuming some of our clients are not protected, what is that impact on our book? When we say tariffs come, it is 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 is, have 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 cannot say if you, you have to say that they have considered the risks and that everybody is, we are comfortable that our clients are comfortable themselves, that they have reached a position that even if there is uncertainty risk coming in, you can break through it. Yeah, because there is nothing like the 100% hedge. 100% hedge, that means you are not gaining the, you're not gaining the benefit for them, the upside. Yeah. Go ahead, right?
Okay. Okay.
Can you, I think you're asking about the, why we don't disclose that Singapore AUM? Oh, okay. Is there a question? Yes, it is the first question, but I don't have a second question.
The third question, the third question.
Yeah. Okay. The reason is that, I think we also received the guide for the investment community because we, our other peers are also showing that AUM, including consumer private bank, we only show private bank. By putting in Singapore or consumer bank, they're able to compare apples to apples in terms of the overall AUM or OCBC, the wealth business. I think that's why. In terms of the sources of the increase, they're talking about just for the wealth business.
The new money, the new money, the new money.
The SGD 5 billion, the SGD 5 billion new money is actually coming from both, Premier, PTC as well as Bank of Singapore business. So for the new banking Premier Private client, that's not expense. Oh, okay. That's the highest price. Yeah. I mean, in terms of their origination. Okay. If you look at it, I mean, it may be easier to see if you look at, for Bank of Singapore, right? If you look at the year-on-year growth, it's actually coming from across. So in the AUM increase will come from Indonesia, Philippines, cross ASEAN, ASEAN. Also if you look at it, year-on-year will be also like Greater China, you know, the market itself. I think it's quite relatively broad-based in terms of the year-on-year growth. Thank you. Joey? Just a few questions. Yeah, like a personal interest.
You mentioned the first order exact tariffs will affect few particular books. Could you just provide some colors there of which sectors and which geographies? I think we have an idea because it's sure. I think following on that, what about supply chain or non-funding stack? It's your second and third order risks. You mentioned your portfolio in billions. Could you just provide some figures of sectors that may be affected, especially when the tariff cost ends? I have a few more, but just leave for now.
First order will be manufacturer, manufacturer and production of goods, right? But excluding at the moment, those that are not in the tariffs, right? At the moment, pharmaceutical, semiconductors, and certain integrated circuits, those are not in the tariffs yet. Another category is international transport and storage of goods.
You have more materials and commodities. These are very subject to the tariff impact. We say that together this is about 3% of our notebook. You have another category, right? What about the next, what can filter through, whether there will be tariffs on pharmaceuticals as we said, right? Later on. Wholesale traders, right? This is what you call the second category. You look at the third 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 on domestically also mainly source domestically as well. For example, they are the service sector, the FNB, the service sector.
When you typically, it's, yes, I mean, you buy, you buy food, not, but, import, but that is not so much impact because you are very domestic focused. And then the utilities is domestic focused. Then you talk about local construction, local real estate, residential real estate, locally basic center. This will be less subject to tariffs in that sense. Financial intermediaries. Yeah. I think, if you say geography, you then look back into your loan book. If you look at our loan exposure, Singapore is still the biggest. For the Greater China book, still very little onshore in China, very much a comprise 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 just differently how we stress the different categories.
Just a few more here. That was just, can I check your SIM? Because it is a bit out of your ahead. Is it still going to be SGD 5 billion for the shift point by 2025?
Yes.
Okay. I will change that. And then your exit SIM for March was 2.03%. Can you share your exit SIM for April if you have that? Okay. Okay. That was. All right. Thanks. Finally here, I know that you are comfortable with surpassing your SGD 3 billion incremental revenue target by the end of the year. Will you be sharing a next two-year target or should we be looking at other metrics like ROE, for example?
I think when we are ready, but 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, right? We are also looking at something that is, again, also very big into the future, which is the use of technology and AI, right? The nature of your customers may be changing as well, right? I think sustainability is still a topic. Some people said that, oh, U.S. is not focused on it, but it does not mean that the world does not need it. The world still needs it. I would think we have already, to an extent, come into a lot into capital planning as well, right? In the past, we shared maybe a lot less, but today we share a lot about how we plan our capital as well to face the future.
I think three 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 will capture incremental revenue, right? Into the future, it will be a lot more uncertain. To an extent, you will have to be very vigilant about our capital and, I mean, treat our shareholders correctly, like the share buyback plan. Then we need, you'll be able to have a strategy that will be able to keep us resilient, diversified, and so that an increased customer flow, so that we'll be able to defend our income as interest rate comes down further.
but, also to be able to build a lot more into our wealth so that, if we can step in more stable environment and at the lower interest rate scenario, customers will invest a lot more again. It is to make sure that we're 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 three years. If we do have targets and plans to share, we will share. You mentioned that the bank has commenced share buybacks. Can you get a bit more color on your, on the 2.5% capital distribution? There's not much shares that they bought back and also the specialty equities. Actually, share buyback is the second day on the stock exchange.
We will go steadily, yeah. We have a target and that does not change our plan. I mean, the capital planning includes the dividend. That is why we committed for both years. We would have a special dividend of 10%, right? That plan does not change. Share buyback, you do not time the market to an extent. There are also stock exchange rules on how much you can acquire on any single day.
Hi, Helen, can you please give us a bit of color on the reason for a prudent approach to setting aside a credit allowance?
What kind of scenario that you are facing or can we expect that there will not be any setting aside in the future, or is this already the worst case scenario that you set aside enough for the buffer?
I would not say this is a worst case scenario, because we think the market is uncertain. I think we are prudent, because if you look at the book, you do not need to set aside that SGD 82 million, right? I am right with the number. You may not be, you say you may not, actually, if you entirely base it on economic factors, based on your loan book, what we call an overlay is because we want, because of the uncertainty. If the uncertainty persists, let's say the second quarter, something very different happens.
I mean, you still count towards that 10 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, if no one can predict, then yes, we may actually provide more. The important thing is we have to be comfortable at a level based on how we test 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 position. That is according to market. The overlay is according to uncertainty. I hope, I hope we will be less uncertain indeed. Okay. Thank you.
Hi, Helen. Thank you so much for the sharing. I have two questions.
One is about the trade shifts and another one is about that you are out for the SME. The first question would be, are you seeing any, like, changes or opportunities or challenges in terms of the trade shift scene, caused by the tariff chaos, 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, like, more of your thoughts or your assessments in terms of the SME, your, the bank's SME customers? Yeah, because we know, like, maybe the SMEs, they don't have that as much as of resources like the big companies to cope with those chaos and the challenges ahead.
Yeah. Thank you. The first one, trade shift is a very interesting topic and very important topic.
Just have to say that, customers, if you think, if you think about the first Trump administration, there was also a lot of discussion on tariffs, right? Even before that, I think trade tension between China, predominantly China and the U.S., actually started way back, I think, around 2015, 2016. The China plus one story has been true for many years. You already see China's plus end 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's business going out, 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 we, as they go out to try to sell their product as well.
If you talk about manufacturing, it cannot happen in a day. You cannot say that because now the tariffs is high on Vietnam and a bit lower in Singapore, I then try to build a plant in Singapore because that is 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 do not plan, you do not plan it like that because manufacturing cannot be shipped in a month's time or in a, you want to build something, it has to be built in a year or two years or et cetera. What most bigger customers have, bigger corporates have done is they prepare for the future. Being, 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. Yeah. In a way, a lot of times, when people talk about China facing the tariff, it's always reflected that actually China's exports to the U.S. is only 2% of the GDP in that sense. You can imagine China over the years has also been shifting their trade partners as well. Would there be some shift? I think yes, a supply chain, there's always easier to shift. When you say I tend to buy more from this country, but in any good business, if they do plan correctly, they always have options which they would make a switch from time to time.
Would the trade shift happen?
Yes, it will.
It will continue to shift, but it will not happen in a day or in a quarter. As likewise, because we're a regional bank, we work very closely with all our customers and engage them in conversation, even more intensely in periods like this. Your second question is about SMEs. SMEs, yeah. SMEs generally are not in, unless you are very trade-oriented SMEs, where you actually buy from selling countries 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 day in, day out have our SMEs to face, right? How to strengthen them, have them 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 has, this will impact those SMEs that are servicing this industry. We have to be careful and look at them, see how we continue to have them through. 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.
Thank you for the last one. Maybe, okay, so that improves 20 pages, but maybe do you have a question? Go ahead.
Just on cost, right? I think earlier you mentioned looking at more and spending some more to depend on cost. You mentioned events, you mentioned travel.
Can you expand a little bit more on what you mean by this? I mean, in terms of, you know, no to cycle events, you mean
how do you refer to our cost, our events, our cost, our cost?
You said more, more than on cost. You mean you explain more on what some examples on, on, so events you have shared or events, also on the, on cost, right? On everything for in general, it's up 5% year on year. And part of the reason was on salary adjustments. Such costs to be something that the bank looks at in the coming quarters, [audio distortion] . Thank you.
I think looking at improving staff productivity is an ongoing thing, right? If you can, the flip side of managing cost is you improve productivity.
Earlier on, I talked about use of AI, that's something very important. That's what I'm saying. Actually, that was what I referred to as well, productivity and what the opportunity AI can bring as to new products and new way to serving customers. Yeah. Of course, yes, yes, you can talk about salary cost is the highest, but salary cost always reflects the market. If that is economic weakening, then of course, I mean, the whole world will reduce the salary increment. That is a natural way, respond to what is happening in the market. I think that one of the things that if you can improve your productivity and you don't need to hire as many, you can slow down, slow down your hiring plan, for example.
Or if that is natural attrition, you may not need to hire to replace. When we say discipline, 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 the market that is shrinking, it is very in the wind only 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.
Last question. At fully loaded CET1 ratio 14, right? How much is your emphasis? [crosstalk] Sorry. 40.55.
What's the excess capital that you have?
It's a weakness. Thank you, sir. Have a good answer on that. We have forty. What did I mess up? My accounting? Oh, the factor is 40%. No, let's see. We don't really disclose, like, excess capital per se, but suffice to say that we announced our insight we need and, you know, at the return plan, that it will come out how we look at excess capital, what are the excess needed, you know, to mitigate uncertainties, so on and so forth and support business franchise growth and come up with the SGD 2.5 billion. So more than SGD 2.5 billion in excess capital we got to see what, you know, mathematically, you can also work that out. Yeah.
Just one question which is a little bit of tension.
You know, the bank, the OCBC is encouraging all the Chinese banks to lend. And you know, you've got this, is it 19% stake or is it 20% stake in bank? Yeah. So what is, I mean, is that included in those banks that the CBOC is encouraging to lend? Because some of them have raised capital I think in the last, in the first quarter.
Yeah.
So what is the situation with Bank of Ningbo? You could, I mean, what a big stake in it.
20%. 20%. 20%. [crosstalk] Yeah. It's what you put. It's associated. Yeah. You, you, yeah. Yeah. Okay. China, China regulators, in periods of, in periods of economic situation, always have certain guidance, for banks, right? And the biggest influence is on the centrally owned, the larger banks. Yeah. So Bank of Ningbo is not only central.
Now, Bank of Ningbo is also a listed bank in China. It has a range of different shareholders. Yes, of course, they have to do their part in supporting the economy. Yeah. They also have a very, I would say that they have, there are things you generally follow. For example, regulators sometimes will give you tasks that your lending to SME cannot be slower than your local growth. That, right? Sometimes there are guidance like that. I'm just giving you past examples, right? Past examples. Meaning then you don't choose to support only one sector of the economy, right? Banks in general, you have to, you have to follow. That doesn't take away how you judge your customers and who to lend to. Yeah.
Lending does not mean that you just have to lend without the result, without putting in your risk management parameters. So Bank of Ningbo, I want to say.
Yeah. If I think, I think just to be mindful, Bank of Ningbo is an associate company.
Yeah.
They are listed on their own. We cannot comment for their business plans. Yeah. I think that is quite important.
What I am trying to say is they also apply good business principles. Yeah. And risk management principles. I think that need to raise capital. [Foreign language] Yeah. [crosstalk] They have own separate bonds and those things. Yeah. Separate bonds and companies. We cannot. Billion. [Foreign language] If they need to raise capital, will you support them? Right? That is my question.
I don't know. That's the question. It is not the right thing. Yeah. I think they're not. Yeah. It's not, nothing is sure when it happens. It happens and they have to know and how.
We're not [audio distortion]
Okay. Any other questions? Okay. If not, thank you very much.
Thank you very much.
Thank you. Thank you.