Good morning, and welcome to UOB's third quarter 2023 results briefing. I'm Wendy Wan from the Group Strategic Communications team, and I will be your MC for today. This morning, we have Mr. Wee Ee Cheong, UOB's Deputy Chairman and CEO, and Mr. Lee Wai Fai, our CFO, to present the results. A few house rules before we start. Please keep your questions till after the presentations are done. For those in the room with us, please put your mobile phones to silent. For those on Microsoft Teams, please put yourself on mute for now. Without further ado, I will now pass our time to Mr. Wee, please.
Thank you. Good morning. Thank you for joining us today. As all of you know, the global economy has become more uncertain. The impact of higher for longer interest rate has filtered through the economy. Recent geopolitical tensions have added to the volatility. This will slow ASEAN growth, but the region's fundamentals are still strong, with low unemployment rates and robust consumption. We expect the ASEAN region to remain relatively more resilient, with 4% growth for this year and 4.9% for next year. ASEAN is also attracting more investment flows, especially in new economy sectors such as sustainability. With global supply chains continue to shift into ASEAN, we are optimistic about the region's growth potential. Closer to home, Singapore continue to draw inflows in a flight to quality.
As a key player in Singapore financial system, we will continue to stay vigilant to uphold Singapore's reputation as a safe haven, and participate in industry efforts to strengthen the country position as a wealth management hub. For UOB, we have built a resilient portfolio that allow us to ride through market cycles. Prudent management is our hallmark, and we prefer to take a long-term view in all that we do. Against this backdrop, we deliver a set of robust financial result this quarter. Our core net profit for the third quarter grew 5% year-on-year to SGD 1.5 billion, driven by strong income growth across our diversified businesses. For the first nine months, our core net profit was up 33%. Despite muted loan growth, net interest income increased, boosted by higher margins as we focus on quality credit opportunities.
Higher interest rates continue to support our balance sheet profile. Fee income recovered strongly across all key drivers: loan and trade-related fees, wealth management, and credit card fees. In particular, card fee income crossed the SGD 100 million mark for the first time to a record quarterly high, growing 89% year-on-year. This shows the consumers are still willing to spend. Customer-related treasury income continued to do well, accounting for more than half of trading and investment income. More customers are engaging in hedging activities, given market volatility. The one-off costs for our Citi acquisition will largely taper off by end of this year. Asset quality is resilient, with a stable NPL ratio. Even as specific provisions stay high due to portfolio revaluations, our strong provisioning buffers kept total credit costs within our guidance. Our balance sheet remains strong, with robust CET1 and liquidity ratio.
With deposit outpacing loan growth, our liquidity ratio remains at record levels. Now, let me share some highlights on our core business segments. Group retail business. We have a strong retail franchise, well supported by diversified revenue drivers. Net interest income remains our main income driver. We are seeing healthy net interest margin. CASA deposits continue to grow. Our capabilities in UOB TMRW have also helped us build strong deposit balances. Quarterly credit card fees reach an all-time high of SGD 104 million. Well, management fees improved this quarter, although investor sentiments remain subdued. Net new money continued to grow, bringing our total AUM to SGD 170 billion. This show the strength of our customer franchise. The Citi integration is also progressing well. We have successfully migrated about 700,000 ex-Citi customers in Malaysia onto our platforms.
Integration for the other three banks—three markets, sorry, Indonesia, Thailand, and Vietnam, is on track. Our retail customer base continues to expand, and we are ready to serve our regional customers. We expanded our service capabilities in Indonesia as we recently upgraded our TMRW app. This will ensure a seamless transition of ex-Citi customers in Indonesia onto the UOB platform. We're engaging strategic partners, such as regional airlines, to extend lifestyle offerings that meet the needs and aspiration of our customers. Last week, we announced another mega lifestyle offering across our key ASEAN markets of Singapore, Malaysia, Thailand, and Indonesia, Ed Sheeran's Mathematics Tour concert. Our wholesale business delivered a commendable set of results, despite a challenging operating environment. Loans were flat quarter-on-quarter, reflecting soft market conditions.
Customer cash balances were up 3% year to date, despite rising interest rate, as a result of our improved capabilities over the years. Our fee income did well. Loan and trade-related fees grew strongly this quarter, the highest in five quarters. Our focus on trade financing has created synergies for other business unit, boosting customer flow income in the global market business. We have invested SGD 800 million over the past eight years to build our regional payments, trade, and cash platforms. Regardless of market cycles, I believe we will continue to invest in our franchise, as we believe in the long-term structural growth prospects of the region. And we've started to see results, and we are continuing to deepen relationship with our clients, who are accessing more of our solutions. Our investment will put us in a good position to capture the next upturn in the economic cycle.
Now, on sustainability, we recently set up a sustainability advisory panel, where we have appointed three industry experts to advise on our sustainability strategy, targets, and initiative. Since our net zero commitment a year ago, we have made positive headway on our target sectors. We will be releasing our first net zero progress report next week. Look out for it. When talking about ESG, it is not just about the environment. We are equally focused on what we do on the social and governance fronts. We continue to keep the good going through our CSR efforts, such as encouraging our people to volunteer and investing in our people through various upskilling and reskilling programs. Our board was recently awarded the Best Managed Board at the Singapore Corporate Awards. The macroeconomic environment ahead should remain bumpy, but our strong balance sheets and diversified revenue driver will help smoothen the ride.
Across our businesses, we see encouraging trends, strong credit card spendings, signaling consumer confidence, positive net new money inflows, and a growing deposit base. By next year, the one-off costs related to our Citigroup acquisition are expected to roll off. Importantly, our customer franchise is growing, and the momentum is strong. Much of this is due to the continued investment in our products, platforms, and people. We are here for the long term, and we have the trust of our customers that we will support them in these uncertain times. We continue to be optimistic on the ASEAN region, and we believe the situation in China will stabilize and continue to improve on the back of support measures recently announced. Overall, UOB is in a good position to capitalize on the pockets of opportunities as they come along.
Our next year guidance, 2024, mid-single-digit loan growth with a focus on high-quality customers. Margins to remain supported at current levels. Double-digit fee growth, stable cost-to-income ratio, with one-time Citi integration costs to substantially roll off. Credit costs at around 25 to 30 basis points. I thank my colleagues for their hard work and dedications and teamwork. Now, let me switch over to Wai Fai to elaborate on our financials. Thank you.
Thank you, Cheong. Once again, good morning, everybody. Thanks for joining us today. Okay, now back to the detail of the results. Our core profit is 2% quarter-on-quarter to SGD 1.5 billion, with core ROE at 13.9%. For the nine months period, core profit increased 33% to SGD 4.6 billion. Net interest income was relatively unchanged this quarter, as the longer day count and wider loans margin were offset by lower margins earned on the excess funds deployed. Fees income for the quarter was at the second-highest history in the bank, powered by strong loans, fee deals, and credit card fees, which hit a record high. Customer-related treasury income continued its momentum, growing 9% for the quarter to almost SGD 200 million. Cost-to-income ratio, excluding the one-off, improved to 41%, as spending kept pace with income growth.
Credit cost was at lower, at 19 basis points this quarter, as the write-back of general allowance more than offset the higher specific allowances. Asset quality remained resilient, with NPL ratio at 1.6%. Our capital and liquidity position remains strong, with CET1 at 13% and NSFR at over 121%, respectively. For the business itself, year-on-year, retail operating profit increased on an enlarged franchise with Citi, alongside higher interest rates, as well as picked up in credit card and wealth activities. Wholesale, we saw a double-digit growth from last year, driven mainly by margin expansion and sustained treasury customer flows. Global market managed to capture the trading opportunities amidst the market volatility, but they were impacted by the higher funding costs. Like Cheong said, our retail customer base continued to grow organically post-Citi.
Now, we serve over 7.5 million retail customers in the region, of which 77% are digitally enabled, and this will increase by year-end when we integrate Indonesia. We acquired new-to-bank customer at a faster pace. In the nine months of this year, our new-to-bank customers were 28% higher compared to the same period last year. The growth can be attributed to our enhanced digital capabilities and lifestyle offerings that aligned with customers' need. The larger scale of our retail business, following the Citi acquisition, enable us to collaborate with more regional strategic partners and broaden lifestyle products. Currently, we have 45 strategic and co-brand partnerships across multiple markets to cater to our aspiring ASEAN customers. Customer confidence in this region remains upbeat, evident from our record credit card fees.
We'll continue to see positive net flow, net new money inflow, bringing our total assets under management up 21% year-on-year to SGD 170 million. For the wholesale business, it showed resilient results despite the uncertain environment. Cross-border income was up 14%. Our investment in trade and cash systems over the years positioned us well to be the number one cross-border trade bank in ASEAN. The number of suppliers and distributors within our financial supply chain management continued to grow, increasing 35% year-on-year. Across the region, our cash management platform is seeing higher digital adoption, with robust growth in transaction volume and cashless payment. For the nine months of this year, like in the summary, we rose 13%, driven by strong net interest income and trading and investment income.
The third quarter core profit was at SGD 1.5 billion, which is 5% higher than a year ago. Okay, let me now go through the details. Net interest income was unchanged from last quarter. Core franchise loans margin expanded two basis points to 2.64% for the quarter. Interbank and securities margin declined to 0.93%, as excess liquidity was deployed into high-quality yielding assets, while cost of funds continued to stay high. As a result, NIM moderated to 2.09% this quarter. With funding costs likely to stay elevated, we continue to actively manage our balance sheet to keep NIM stable. Fees income hit a bright spot this quarter, recording a near historical high of SGD 591 million. Loans and trade-related fees surged from some strong corporate deals.
Credit card fees crossed the $100 million mark to a new record this quarter, reflecting the upbeat consumer confidence that boosted spending. Well, fees also recovered, though at a more moderate pace. Customer-related treasury income sustained momentum, growing 9% quarter-over-quarter to SGD 198 million, with continued demand for hedging activities from our customers. Trading and liquidity management activities did well, while the other D&I income line was impacted by some valuation volatility on our investments. Core expenses decreased 2% quarter-over-quarter, in tandem with the lower income, with cost-to-income ratio held steady at 41%. And like I said, including the one-off Citi integration, this will be 44.4%. We expect the one-off costs to taper off as we progressively complete the operational merger in the four ASEAN countries.
By this year, we have completed Malaysia, and later part of the year, Indonesia. First quarter of early part of the second quarter, Thailand, and then what we are left with is our small operation in Vietnam. So, most of the thing will taper off by the first half of next year, so that we can actually then look at productivity improvements. The overall asset quality of our loans portfolio remain resilient, with NPA ratio unchanged at 1.6%. New NPA formation reduced to SGD 267 million. Specific allowances increased this quarter as we revised the collateral value of our NPLs to reflect the near-term uncertainty. This was cushioned by the unwinding of the general allowances, which we have earmarked for these accounts. However, additional general allowances was provided for the overall credit portfolio.
Hence, if you look at the next page, the total general allowances remain relatively stable. Let me go to the next page. So this, this actually shows the breakdown between your GP and your SP. So as of September 2023, my total allowances stay at SGD 5.1 billion, of which SGD 3 billion was for non-impaired assets, which we generally call GP. So, so the, the level is actually quite stable, and I can take questions on that. Total NPA coverage strengthened to 102%, or 205% after taking collateral into account. We believe our provisional reserves are adequate to absorb anticipated losses from our credit portfolio. Core operating profit for the nine months increased 34%, with growth across various market. Year-on-year, the ASEAN franchise was boosted by the inclusion of Citi portfolio in Malaysia, Thailand, Vietnam.
Against last quarter, the ASEAN four was largely impacted by margin compression from higher cost of funds. North Asia, on the other hand, registered higher trading and investment income, mainly from commodity trading, which they are very strong in, especially gold. Loans momentum continued to be soft due to the uncertain macro environment. On a constant currency basis, loans were relatively unchanged against last quarter and a year ago. In view of the uncertainties ahead, we maintain our focus on short-term and good quality credits. Customer deposits rose steadily by 1% quarter-on-quarter and 2% year-on-year. CASA to total deposit mix ratio improved to 48.2%. Our One Account value proposition refresh is bearing results, as absolute CASA actually continued to grow over the last 3 quarters this year.
Our liquidity position remains strong, with the quarterly LCR at 153% and NSFR at 121%, both well above the minimum regulatory requirements. So you notice in this number that we, our balance sheet is very defensive. We have a lot of excess liquidity, mainly because we continue to focus on our long-term loans. And if you realize the worry about the rising interest rate on NSFR, et cetera, we have actually increased that over the years, and we have a lot of short-term surpluses that we were not sure of how the market will act. But our balance sheet is very strong. However, we sacrifice 2-3 basis points to the margin, okay? To strengthen balance sheet. Our total capital remains healthy, with CET1 at 13%.
I think, you noticed that this quarter, we had the interim dividend payment, so that brought down the CET1 a little bit, and we expect it to recover, for the remaining part of the year. So I think with that, I will pass my presentation back to Wendy.
Thank you, Mr. Lee. We will now move on to the Q&A. For those present here, if you would like to ask a question, please raise your hand and wait for my cue. For those on Microsoft Teams, please use the Raise Hand function to indicate that you would like to ask a question. Please wait for my cue and turn on your camera before asking your question. Kindly introduce yourself before asking your question. We will now start off with those in the room with us. First question, please. And we have the first question from Chanya from Bloomberg.
... Sawadika, I'm Chanyaporn Chanjaroen from Bloomberg. I have two questions. The first one, could you give me a bit more colors on how lifestyle of the offerings like Taylor Swift and upcoming Ed Sheeran is boosting your credit card fees to beyond SGD 100 million mark? And my second question, your outlook presentation for 2024, the credit cost expectation 25-30 basis points, I think is quite higher than this year's range, which I believe is 20-25. Could you explain why that is, and maybe a bit more on the outlook for next year? Thank you.
Well, I think credit card is a lifestyle card, right? And that's partly the reason why we bought over Citibank portfolio, because we believe UOB Singapore is a small population base. We continue to expand into the region, and as a result that you can see there are many international marketing agents approaching us, and to see how they want to capture our customer base. And we are talking about 8 million customer base that we have today, and it continue to grow. And lifestyle is many things, right? But musical shows, restaurants, traveling, these are all lifestyle. This is why we are working with the various organizations, regional airlines, regional restaurants, concert organizers, and that hopefully can get our consumer a better value proposition.
Very exciting, but if you could quantify a bit about Taylor Swift impact on your credit card?
Offhand, I cannot give you exactly, but definitely, you know, if you have the UOB credit card, you have some advantage, right? Right. Because the volume is overwhelmed. Okay, but yes, small advantage. And there will be more to come, okay? You look at Ed Sheeran, it's the same thing, right? The first one day or two days, we are only allow UOB credit cards to apply. So this is something that I believe we have the competitive advantage and we should take advantage of that. Now, for the outlook, of course, is something that is a little bit difficult to predict, is continue to be uncertain as you can hear from my speech, is bumpy. But I think management taking the view that ASEAN continue to grow, and I can see the momentum and our system, our technology, our platform is ready.
We are able to capture, not so much growing the market share, is we can capture other people, other bank business to come to us, because we have the relationship and we have the platform. So this is something management, we put it to the challenge. This is why it's outlook is budget. And I hope the result will. We will let you know.
Maybe, maybe let me elaborate, Chanyaporn. Your specific question was on credit costs.
Yeah.
If you look at the ten-year operating credit costs, around 25-30 years between us and the competitors, I can't comment on the competitors, but I can comment on UOB. Two things that we did, especially this quarter, if you notice. Number 1 is, we actually increased the provision. Well, you always ask me, how much do I have an MO and all?
Mm.
I know that's the last next question.
Because when everyone's gone.
Okay, how much is MO? Which is the management overlay we generate. So what we have done is that, if you really look at the forward-looking, where we think that we are not going to a crisis, but we expect weakness into the environment, most of our credit portfolio, technically we call it MEV, okay? To look at a more difficult environment. As a result, your normal business general provision actually increased, okay? And that is a defensive nature, so that the business people understand and start pricing some of this in, rather than hiding it at GP, because we say that the credit cost is going to be in a tougher environment. So by doing that, you find that technically we just relocate MEV from MOs, technically, into the base system. So that, that's the first defensive nature.
Yeah.
The second defensive nature that we did was, again, on the same outlook, we were worried about valuation on our security of our collaterals. Okay, because there are a lot of comments that it will take time to unwind this. So what we did was that we actually lowered those values. As a result, SP actually went up. Okay? So the specific provision actually went up, not because of new NPL formation, but mainly because of this defensive nature, that I actually reduced the valuation of the collateral.
Mm.
And the third that we did was from a capital standpoint purpose, we relook at all our credits and look at how much of those are actually vulnerable. Okay, not NPLs yet, but vulnerable. So we actually started to, in a way, downgrade them by one, two notch. The results of those doesn't cross NPL. The result of those consumes capital. My RWA actually went up, okay? And that's the reason why my RWA went up, my loans didn't go up. So this a very defensive nature that I took to protect the balance sheet. The second part that we did was to protect liquidity. Hence, there is this excess funds that we have, still profitable, but making less, especially if you look at the trends of where the US dollars is going.
But we believe with the uncertainty in the market, we have to defend the US dollar funding. So, so as a result, my, my liquidity, my funding, we are comfortable. Okay, so if I can protect credit quality and liquidity and credit costs, we are actually strengthening the balance sheet into the near term uncertainties. So one of the question is, for next year, why are we guiding? Okay, now we guide higher and we hope to come in lower. But, but because of the uncertain environment, we still stick to the long term of 25 basis points. We hope to bring it there, but should I be caught by SPs that I am not prepared for, it might go up. But in our environment, my normal balance sheet, like I said, we are comfortable operating at 25.
Mm-hmm.
Yeah, I think, I think let me just echo what Wai Fai said. We want to take this opportunity to strengthen our balance sheets, okay? I think that's important. You look at the liquidity, all this is cost to the bank, because the loan growth is still coming, right? But you look at NPL, right? These are all costs to the bank, and given our risk appetite, we don't want to use the liquidity to go into something which is higher yield and to show to the world that our profit is up. We rather take a more prudent, improve our immunity, because next year, as I said, is bumpy, okay? But given the set of the result, I think you can see the fee income is coming in. I'm still very hopeful, but let's see the result next year.
Thank you.
Yeah.
Thank you. Next question from John, from Forbes.
Just curious whether the bank is implementing more stringent measures in terms of bringing in or onboarding new customers, given the ongoing money laundering investigation in Singapore. And with this more stringent measures, I wonder whether you can sustain the continuing growth in your AUM. Congratulations on that. It's 21% higher year-on-year.
Wow!
SGD 170 million.
I think all along our philosophy, obviously, we want to have good quality, customers, right? It's unfortunate. I think this is isolated cases. I think Singapore, as a financial center, we have to take the good, the bad, and, right, together. I don't think we should overreact, right? Given the total flow of money coming in versus this, in proportion, I think we, I think Singapore has done well, okay. Yes, we will continue to strengthen, given the scam recently, we will continue to do that. It's to protect the consumer. You look at, today, you just came out with a shared responsibilities, right? And this is something I think among the banks, we, we talk about it. I think it is a shared responsibility, and we need to strike the balance among fairness, accountability, and compassions, okay?
But the first line of defense is consumer. Every one of us, including myself, right? You cannot have a cake and eat it. You cannot have a convenient, and yet, at the same time, you are, right, you expect a free ride. So the first line of defense is consumer, and the bank is working very hard to see how we can help the consumer to segregate some of this account. And also, public education is very important. And I would like to take this opportunity to urge my customers, if they don't understand, please approach our RM, go to our branches. We want them to feel safe banking with us, right? You know, our tagline is: Right by you. We want you to feel safe, right? While you are still doing the transaction.
Thank you, John. Next question, please.
Oh.
Next question from Goola [Viet].
Anecdotal evidence that mortgages are being priced at 3%. I think there were some analyst reports that said that. I wonder whether that's happened at UOB, and how does the book... I mean, is your book... Is it substantial, and is your book going to be repriced lower? And because there's excess liquidity in the system, so just wondering how it affects NIM, then when you say your NII is the most important, it's the biggest part of your income contribution.
Right.
First question-
Any, any, you want to-
Yeah.
You want to finish your question, or you want to take it one at a time?
You take that, that one-
Okay.
Because I think, isn't that the whole thing, though?
Okay.
The interest rates have risen, but there's liquidity in Singapore. Is it, is it different?
So, I think it's a fair question, where the industry or competitors are struggling to deploy the excess liquidity. Singapore mortgage is a comfortable asset class-
Mm-hmm.
because over the long term, the asset quality is actually very, very strong, unlike all the rest. Like everybody else, now, a lot of them are trying to move longer. They're trying to fix it longer because they think that the interest rate is up.
Mm-hmm.
That is where the debate that is going in. A lot of them are lowering their 2-year fixed and the 3-year fixed, okay? So the question really is, okay, we will compete to stay relevant. If you really look at our statistics last year. Of course, the new developments are slowing down, but the refinancing is where there's a lot of war starting, and we have to be relevant. What we have done is that to fight that, that's why the CASA that we are building up is important.
Mm-hmm.
Because I need long-term stability CASA to actually manage the long-term book. So together with what we are saying, the One Account, CASA and all, which is-
Mm
Actually doing well in Singapore is the objective we set to our consumer people, that if you want to compete in this, make sure that you bring in CASA. Because by funding it on the long-term basis-
Mm
You continue to get lower margin, okay? A lot of them has already come below 1%.
Mm.
So that's, that's where we are. There is a trend, that some of the competitors are coming in, because, I mean, everybody knows that loans growth is muted.
Mm.
So we grew 1% over. We continue to grow 1% over this year. Slow, but at least there's growth that we are doing in there. But we remain disciplined to make sure that I have the long-term stability of the funding, to match CASA. Because I might, I might be okay for the next one, two months, when interest rate goes up, and my funding is not ready, I will get caught up. So, so this is even more real than it was two years ago, because now we know that, the interest rate cycle is coming to an end.
Mm-hmm.
You could debate whether six months, nine months, but it's coming to an end. And cost of funding, if it's starting to creep up, how do we manage that? So that's where we are. We will compete to stay relevant, but we remain disciplined, because the asset class is important to us.
So is there, are there any signs of the yield on your assets starting to fall? I mean, on the loan book. Is anything being repriced lower than it was a year ago or six months ago?
Okay. Technically, the repricing effect has gone in for the first half.
Mm.
Because that's where there's a very clear, direct correlation between the Fed rate hikes-
Mm-hmm
and our yields.
Mm.
Okay, because the base rate all went up. We could talk about country specific, but generally that's where we are. So as the yields start to taper off, because now if you don't expect any more increase by the Fed-
Mm
... technically, that increase yield will slow down.
Mm.
Okay? As a result, that's why we are so worried about funding costs, and that's why we wanted to be defensive in funding costs.
Mm.
Because if not, the repricing of funding costs will-
Mm
will catch up.
Mm-hmm.
Okay, and, and there's a lot of diversification to make sure the stability of your funding costs, et cetera.
Mm.
So that's, that's probably where we are. So yield part, you are right, that is already a bit toppish. And what we are worried about is the discipline of some of our competitors, okay? Whether to get that volume growth. It's the same argument we had for mortgage, that we actually underprice and cut and grow, and grow volume. We, we tend to be a bit more disciplined, mainly because, like Wee Ee Cheong said, the outlook is very uncertain. Okay, we are not sure... Okay, I mean, the base case is that we are going to a mild recession and quick recovery and all.
Mm-hmm.
The base case is that U.S. will get out of it, China will get out of it, but should something drastic happen, we might be dragged because we are ASEAN. And that's where we are positioning balance sheet stability, provisions, and deposits that we're talking about. So there is some pressure, okay, of the repricing. But like I said, we will continue to try and remain disciplined.
Okay.
I think given the high interest rate environment, you expect good customer to pay you off.
Mm.
Right? Who wants to, Right? You expect good customer to pay you off. This is why I'm not overly concerned about the loan growth.
Mm.
Right? If the loan growth continue to be robust, means you have good customer, they continue to stay with you, right? A good customer, they say, "Well, expensive, I have my liquidity, I'll pay you off.
Mm-hmm.
I think it's a healthy sign, looking at the market in an uncertain market outlook. Every bank is also chasing after good quality customers.
Mm.
So margin is market driven, right? It may drop a little bit, but I think in an uncertain market, liquidity is very important. Our core business, we continue to focus on supply chain, continue to focus on foreign direct investment. They will take advantage of the ASEAN. So this is the fundamental shift, right? Medium to long term. But loan growth is a function of market outlook. And housing loan, we are competitive. In today's environment, I think it will be flat, because as a consumer, why should you buy property? It's a big-ticket item, right? So we are all market driven to a certain extent, right? And our pricing is also market driven.
So, so I think you all brought that up earlier, but Wee Ee Cheong is right, that margin is not the only factor. It's a total-
Mm
... it's a total, operating model that we look at.
Mm-hmm.
I think the good thing is some of the consumer confidence is there. My retail is doing well, the fees are doing well, and that's what we look at. And we have invested enough into our cross-border, into our wholesale systems and all. So hopefully, cross-border connectivity will improve. And that's what we were built for.... If you believe that ASEAN is one of the few bright spot, okay? I think if it stabilizes, and I think we'll benefit significantly because we built it through the connectivity, and we saw that. Okay, you look at the relocation of the supply chain and all, it's slowly, not in an aggressive way, but slowly happening.
Mm.
Okay, and I think that is where we are a bit hopeful.
Yep.
It means banking is a long-term business, like Wee Ee Cheong said, we are prepared to make sure we ride through the next cycle. It's not the current cycle. Current cycle, you already know. But you want to ride through the next cycle, should it happen? Okay. And we have been long enough to know that, when it comes, it can be quite ugly, yeah. Okay, that's where we are, a very defensive balance sheet. But the medium-term and the longer-term, structural growth in ASEAN and all, and we continue to invest in systems capability in the retail side to make sure that we can-- As I invest in system, it's not for loans, it's for fees. Okay, because loans is all pricing, okay? It's the fees that we are...
So as we invest, as you saw our trade fees, wholesale fees, you saw our retail fees, even credit card, wealth, all these are what we are investing in.
This is where I think if all of you, I think, has been spending a lot of time understanding UOB. Five years ago, right, UOB depend a lot on loan growth.
Mm.
But today, given the investment, I articulated in my speech, we spent SGD 800 million over the last five years, okay? It's to build our capability. Today, fee become very important, wealth management fee, credit card fees, and all these related fee that we are focusing on. You don't just focus on one single loan, right? The capability is there.
Mm.
Right.
Yeah, so when you talked about the connectivity, that's the next question. You know, there's this ASEAN connectivity that the experiments that the MAS and some of the central banks are doing with this Project Nexus. I don't know whether you have-
We're talking about data.
Paying up.
Data.
No, there's a pay up-
Payment system.
The payment system.
Payment system.
Okay, the data is separate. Yeah, there's a payment system. So are you—I mean, how? Because you said that you, you're also building linkages, so are you sort of linked, are you linked into that? Or because it's, or, or you're, or-
Yeah, we are involved with the MAS, all these projects that's going on.
Mm-hmm.
Especially with Thailand.
Mm-hmm.
Some of the bilateral, China, Indonesia, et cetera.
Mm-hmm. Mm-hmm.
So we are definitely involved, and our stand is that you need a macro payment system rather than a bilateral-
Mm-hmm
... standalone system. That's why we believe in linking and working together with MAS to make sure that whatever we are building-
Mm-hmm
... link in to the macro outlook. There's no point we're doing something on our own and says that, and you'll never be successful because-
Mm
... nobody else will trust your standards.
Mm.
It's only when the regulators lead that. And that, that's the other problem that we're having. Because of this payment system, you find some of the countries changing some of the system.
Mm-hmm.
It actually affects us quite a lot in cost, because I actually have to invest in that-
Mm
... to actually protect ourselves.
Mm.
So that's where a fair bit of investment is, because you look at the payment system that has changed in Malaysia and Indonesia over the last two years is tremendous because they are all now trying to improve the connectivity within the country and within ASEAN itself. So we are in there. Our wholesale, who is doing our deposits and trades-
Mm
... indeed, is actually in leading some of those projects that is actually driven by MAS.
In fact, Goola, I think we are tracking some of this. You look at the wholesale, the cross-border activities-
Mm
... I think year- to- date, we are up 14%. Okay? And now make up about maybe a quarter of wholesale banking income.
Mm-hmm.
We continue to also focus on foreign direct investment, and that is actually the traction is quite good.
Mm.
Even the consumer, right? Among our 8 million customer, consumer, you know, we have ATM in different part of ASEAN.
Mm-hmm.
You can actually access Singapore cards, and then you can access-
Mm
... through our Malaysian credit, I mean, ATM, getting money, all this. These are all, to be an ASEAN bank, we have to make it seamless, and we are doing all this to connect the dot.
Thank you, CEO. Thank you, Goola.
Okay.
We have one question online, from Reuters. Can you on your camera?
Yep. Hi, this is Yantoultra from Reuters. I have two questions. One, the first question is, what is UOB view on the impact from the recent Middle East conflict in general?
Yes.
The second question is, from the outlook section. You see that, you guys expect like a mid-single digit loan growth and double-digit fee growth for next year outlook, which is much higher, than this year. Can you tell us a bit, why, especially on loan growth? Thank you.
I take the look. When you are flat this year, we expect some economic recoveries. Okay, really look at all the macroeconomic activities, and I think I rest at six. IMF just did the outlook in Singapore just last week, okay? And you look at the statement that they put in there, is that yes, there is global uncertainty, but the only bright spot will be in ASEAN. And ASEAN will still contribute two-thirds of the growth expected next year, of the world growth. So that is where we have to hopefully some of it will come true. Okay, and that's why we are actually a little bit more hopeful. But of course, we will look at the environment, and that's the basis that we talk about.
If the ASEAN actually grow, then our connectivity story and all will ride with it, and then trade activities will start going, growing up. So based on that, we are a little bit hopeful, okay? I can forecast zero or negative, but I don't think we run a bank like that. Okay, the board will never accept me to go into... So we're actually looking for growth opportunities, and in order to meet that, we're actually forcing business to look at new business line, look at opportunities, et cetera, besides the traditional part that you do, basically using pricing. So our sector solutioning is another good example that we put in where we apply solution. The other one that's actually leading us is ESG.
We believe that we are a market leader in ESG, and a lot of the trades, especially in some countries like Malaysia and all, are ESG-focused, and we have the solutioning. Okay, we have the solutioning for some of these customers, and those are. And you know, the ESG momentum is now being accelerated. Okay, gone are the days where you talk about just green bonds.
Mm-hmm.
Okay, then people worry about greenwashing.
Mm-hmm.
Okay, what we go into is the transitional financing-
Mm.
To make sure that we have solution to help customer transition, okay? Especially from the brown to the green.
Mm.
Okay, because you can't cut it off. So that's, that's probably where we are, and we are hopeful in some of these new segments that we are looking at. Okay, the mid-single, you think it's aggressive, but I thought it's, it's something that we build our vision on to look for those pocket opportunities, because we believe that ASEAN is still showing 4% or over growth. Okay, it's not 0 growth that we are talking about.
Mm-hmm.
As for Middle East?
Well, I, I don't think I'm the best person to answer, but end of the day, I think I stick to my own philosophy and principle. I think we should find peace. Very important, okay? Whatever differences, I think there must be area that we can find peace, because ultimately, it's the people that suffer. So if you have that big objective in mind, everyone will sit on the table and compromise, and I hope that will happen.
Mm-hmm. Thank you, Mr. Wee. We may have time for one last question. Any last questions? Mm.
I just would like to ask about... I mean, because you also mentioned digital offerings that you'll be, how many disruptions have you gone through recently? Do you have much disruptions in your digital offerings?
So far, none that I know of.
Touch wood.
How do you improve your, make sure that you are resilient with trending?
Well, I think, I think, to be fair, we have many unsung hero in the bank, okay? These are people, not like today you interview me, these are people doing work 24 hours. They want to make sure they constantly monitor and, and continue to invest to enhance the system. You know, system stability is very important, and, and technology, you know, it can break down, and we have to be prepared for it. The question is, hopefully not so severe, and when you break down, we can recover as fast as possible. This is why our model is different. We centralize a lot of our technology platform, okay? We don't outsource.
Mm.
We are in a better control situation. You look at our center of excellence is in Singapore, okay?
So-
So, this is something I'm not saying right or wrong, but so far, this is... If it's internal control, we would make sure that our people is on top of things.
Mm-hmm.
When you outsource, sometimes it's difficult to control the temperament.
Thank you.
So Wee Ee Cheong is right, because, I think two areas we focus on for technology next year is really, resiliency and security. I mean, we, we saw a little bit of security with all the scams-
Mm.
But resiliency, because we actually do it in-house, we stress test and look at recovery scenarios, because system will come down, right?
Mm.
The challenge is that when it comes down, how fast you bring it up, et cetera. And touch wood, we are less affected because it comes down less often, but we are able to bring it... And that's what resiliency is about, okay? So I think we continue to look at that, to make sure that we continue to invest. And sometimes when you look at external APIs that you deal with, it's not easy, because people are all changing their system. So sometimes you hear complaints that, you know, we are slower to react.
Mm-hmm.
We are not in the open architecture. Like Wee Ee Cheong say, it's our model.
Mm.
Okay? But we think that it's a better model. Again, we are over long term. We are commercial bank, looking at long-term stability and all. So that's probably... We're not gonna comment whether our model is better or not, but that's how we look at it.
Thank you for joining us this morning, and we wish you a very good day ahead. Thank you.