Good morning, and welcome to UOB's first half 2022 results briefing. I'm Wendy Wan from UOB's Group Strategic Communications and Brand, and I will be your MC for today. This morning, we have Mr. Wee Ee Cheong, UOB 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. During the Q&A session, if you would like to ask a question, please raise your hand and wait for my cue. For those dialing in via Microsoft Teams, please use the raise hand function to indicate that you would like to ask a question. You can find the icon at the top of the frame, third button from the left. Please wait for my cue and turn on your camera before asking the question.
We would like to remind those in the room with us to keep your mask on at all times. Please also put your mobile phones on silent. For those of you on Microsoft Teams, please put yourself on mute for now. Without further ado, I will now pass the mic to our CEO. Mr. Wee, please.
Good morning. Thank you for joining us, and great to see every one of you here in person again. I believe our results announcement, and I saw some of the headline numbers. I believe you are quite familiar, but let me just take this opportunity to highlight to some of you, all right? Since we last spoke, there is much talk about rising inflation, aggressive rate hikes, and recession risks. This backdrop has two divergent implications on banks. On one hand, increasing rates will boost our interest income. On the other hand, higher rates may weigh on overall business and credit costs, as the economy slows. We are confident that with our strong balance sheets, diversified revenue drivers, and disciplined approach, we can navigate this environment and support our customers. Our first-half profit came in at SGD 2 billion, stable year-on-year.
Our second quarter profit of SGD 1.1 billion was 11% higher year-on-year. Core business is strong, driven by higher margins, healthy loan growth, and active balance sheet management. We achieved record fees related to loans, trades, and credit cards. Asset quality is resilient, with total credit costs well within expectations. Our balance sheet remains strong. Given our strong earnings and capital position, the board has recommended an interim dividend of 60 cents per share, a payout ratio of 50%. Now, let me give you some highlight on business segments. Wholesale banking did well. Income up 16% year-on-year, backed by quality loan growth, higher margins, record trade and investment banking loan fee. Our diversified footprint, client base, and deep expertise allow us to capture business flows as borders reopen and trade and investment activities pick up.
Our AA rating, coupled with strong transaction banking capabilities, have resulted in higher CASA balances, and digital transaction volume. We continue to help clients go digital and prepare for the future, working closely with government agencies on various initiatives. Being the leading financier to the bunker industry, for example, we are actively helping clients improve operational efficiency, and cost control through the same TradeTech platform. Our retail performance, the income came down 3% year-on-year, was supported by diversified revenue drivers. On one hand, we saw lower wealth management fees as investors stay cautious in an uncertain market. We continue to take a risk-first approach with our customers. Despite market correction, our overall AUM was stable, still maintained at SGD 138 billion as at June this year, reflecting clients' continued confidence and trust in us.
On the other hand, credit card fees rebounded to a new high, benefiting from higher consumer spending as COVID restrictions are relaxed. Mortgage business also grew steadily, with strong pipeline from new mortgage sales. We are making meaningful progress in scaling up across the region. For our digital platform, UOB Tomorrow, we see strong growth momentum. We have acquired 1 million customers since launch in 2019, and expect to acquire 500,000 customers this year, and about 70% are new to bank. UOB Tomorrow is ranked number one on App Store, number two in NPS, with a wide merchant base offering choices for customers. We have 7,000 merchants and 13,000 touchpoints. Now, on our Citi acquisitions, we are happy with the progress. Business remains resilient.
We are targeting legal closing for Thailand and Malaysia, by end of this year, Vietnam by first quarter, and Indonesia by fourth quarter next year. Citibank staff given us a strong vote of confidence. 90% of the staff in Thailand, Malaysia, and Vietnam have agreed to join us. In Indonesia, 75% of the leadership team will remain on board. Next, on sustainability, we are making good progress and building our sectoral pathways toward net zero. Earlier this month, we issued our first sustainability bond impact report, listing out tangible outcomes from financing green and social projects. Our sustainable financing portfolio reached SGD 21 billion to date, of which SGD 2 billion was to SME customers. As a leader in SME segment, we continue to support SMEs in their ESG efforts. We are working closely with the government and industry on various initiatives.
For example, we launched a new program called GreenTech Accelerator to help startups commercialize green solutions for SMEs in areas such as carbon management and reporting, energy efficiency, and zero-waste supply chain. Looking ahead, there are differing views on how much the economy will slow as the world fight inflation. Now, at UOB, our base case is we do not expect a recession in our key markets, though growth may slow. In the next 12-18 months, we will benefit from rising rates through higher net interest income. Overall, we expect mid-single digit loan growth, low single digit fee growth, stable cost-to-income ratio of around 45%, and 25 basis points of credit costs. I want to thank my colleagues for their dedication and teamwork for this good set of results.
As a team, we are here for our customers, fellow colleagues, and stakeholders in these uncertain times. We are committed to fulfill our purpose of helping to build the future of ASEAN by supporting the businesses and people and communities there. Thank you. Now I will turn over to Lee Wai Fai to elaborate on our financials.
Thank you, Wee Ee Cheong, and once again, good morning again. Actually, it's quite nice to meet physically again after so many years. Okay. I think since we last spoke, markets continue to be uncertain, with consumer confidence receding, business sentiment waning, and inflationary pressure rising. In response, like Wee Ee Cheong said, various countries have been raising interest rates. Amid this macroeconomic challenges, the group sustained stable first half profit of above SGD 2 billion, supported by NIM expansion and lower credit costs. The second quarter profit of SGD 1.1 billion, showed strong recovery of 23% from the previous quarter, as spurred by strong net interest income with trading and investment income normalizing. Against the same quarter last year, profit was 11% up. Strong NIM momentum drove a robust net interest income growth. On the fees front, we are witnessing record loans related and card-related fees.
However, wealth fees were softer as customer sentiment was more subdued. Businesses are also taking a more cautious stand by hedging their forward positions, leading to higher customer-related treasury income. With interest rates expected to continue to increase, we focus our effort to grow selectively. Hence, our loans book grew 1% Q-on-Q, but 8% year-on-year. Asset quality remained resilient, with NPL ratio stable at 1.7%. Total credit cost on loans was stable at 22 basis points. Our capital and liquidity position remain healthy with CET1 at 13.1%, and NSFR at 111% respectively. From the business front, retail operating profit was lower as wealth management activities slowed down on the back of the cautious market sentiment. This was partially cushioned by sustained deposit growth and higher margin.
We are confident that with the Citi Consumer portfolio coming in, it will further fortify our regional franchise to capture more opportunities when customer confidence resumes. Wholesale saw double-digit growth led by broad-based growth drivers. Margins has improved with loans and investment banking fees at record levels. Global Markets, on the other hand, benefited from market volatility and achieved better trading results. Our wholesale business continued to register strong growth momentum on the back of diverse engines of growth. Our comprehensive ASEAN footprint, sector specialization, and deepened product capabilities has enabled us to capture the growing cross-border opportunities as economies reopen. Cross-border income grew 13%, and now accounts for 29% of our wholesale banking income. Loans-related fees increased 8% to a record high in the first half as customers increasingly tap on our sector-specific insights and solutions.
Our global financial institution income rose 25%, as we bank property funds and financial sponsors, and meet their needs with our strong structuring capabilities. Across the region, we see an acceleration of digital adoption by our corporate customers with robust growth in transaction volumes and cashless payments. For the consumer, we continue to build scale and deepen capabilities in our retail business. Like Wee Ee Cheong mentioned, we are on track to digitally acquire another 500,000 new customers across the region by the end of the year. We have also accumulated SGD 3 billion deposits from our digitally acquired customers. Ecosystem partnerships has been key to our franchise growth. Today, we have established more than 80 ecosystem partnerships across the region, to drive customer acquisition and loyalty. 27% of our digitally acquired customers were successful partnership referrers.
Despite market volatility, our assets under management increased 1% year-on-year to SGD 138 billion. Our digital home solution was well-positioned to serve customer needs in the buoyant property market. We achieved more than SGD 9 billion of new mortgage sales in Singapore and across the region. Growth is seen across our key markets in Singapore and North Asia. As our customers venture across the region to seek trade and investment opportunities, we offer one of the best platform in the region. As a result, our overseas contribution stayed strong at 45%, where we continue to support real capital and trade flows of our customers. I think as I mentioned earlier, our customer franchise remains strong with higher net interest income, stable fees and expenses. Net profit for the quarter grew 22% and 11% year-on-year. I think asset quality and credit costs are stable.
Okay, let me go through the details. Net interest income increased 11% quarter-on-quarter. This is powered by the nine basis point lift in NIM for the quarter to 1.67% on the back of rising interest rate. Loans growth was seen across consumer mortgages, corporate, and the financial institution group. With further rate hikes expected in the second half of this year, we expect that the net interest income to continue expanding. Total fees was largely flat at SGD 567 million. Loans-related fees hit a new record high, recording 4% quarter-on-quarter growth as we supported customers' need for trade and investment opportunities as economic activity levels increased. Credit card fees also reached a record level, with card spending picking up as borders reopen and travel resumes.
On the other hand, wealth management and fund management fees took a dip as market sentiment continued cautious along geopolitical tensions and recession concerns. However, these dips were more than compensated by our margin expansion, leading to a growth in total income. Year-on-year, customer-related treasury income rose 9%, with more customers looking to hedge business risk. Other trading and investment income rebounded to a more normalized level this quarter. Our costs were well under control. Cost-to-income ratio for the quarter improved to 43.8% as income picked up. We are managing our staff costs as we respond to the tight labor market condition, especially in Singapore. The good news is that our prior investments into people and systems, are starting to bear fruit, as evidenced by the improving fees and customer flow income. Overall, our asset quality of our loans portfolio remain resilient.
NPL formation was higher this quarter, due mainly to a single corporate account. This led to NPL ratios being slightly higher at 1.7%. As country relief programs tapers off, the residual risk of this portfolio will reduce over the next few quarters. While the credit outlook remain uncertain, we believe that the credit cost will be at manageable level. Total credit cost for the quarter was at 22 basis points, mainly from the specific allowance from the account mentioned earlier. We do not see any systemic weakness in our portfolio. Considering heightened inflationary pressures and recovery slowdown, we are taking a conservative stance on allowance and adding a modest amount to the general allowance this quarter. We expect credit costs for 2022 to maintain at around 25 basis points.
The group total allowances were at SGD 4.9 billion for the quarter, of which SGD 3.3 billion was general allowances. NPA coverage at 91% or 185% after taking collateral into account, and performing loans coverage at 0.9%. I think they all remain adequate. We are confident that our general allowances will be sufficient, to absorb anticipated credit losses from our portfolio should it weaken. Loans growth momentum sustained well, increasing 8% year-on-year across all our major footprint as economic activities resume. While we have been more cautious this quarter in view of the uncertainties in the market, we remain committed to support our customers in their pursuit of business needs and trading opportunities. Our liquidity position remains healthy.
With the quarterly LCR at 141 and NSFR at 111, they are well above regulatory requirements. On the capital front, we ended the quarter with a healthy CET1 at 13.1%. With a comfortable capital and liquidity position, with adequate allowances, the board declared an interim dividend of SGD 0.60 per share in appreciation of the support from our shareholders. I think this translate to a payout ratio of 50%. I think with that, I conclude my presentation. I'll pass it back to Wendy.
Thank you, Mr. Lee. We will now move on to the Q&A. We will start off the Q&A session with those in the room with us. Please raise your hand if you would like to ask a question. Kindly identify yourself before you pose the question. First question, please. Hi. We have the first question from The Business Times.
Good morning. Can you hear me? Yeah.
Yes.
Okay. If market conditions continue to deteriorate, would rising NIMs in second half be sufficient to offset lower non-interest income? That's one. The second question is: What is your strategy for riding out this period?
You want to take it? Okay. Like Wee Ee Cheong said, our in-house view is we don't think we're going to a deep recession, okay. There might be some slowdown. I think you look at the macro environment, obviously the recent rate hike by the Fed, okay, they have already done four add up to two hundred basis points. Will they continue? Two things that we have seen, and they have signaled that they are now watching. They are not as bullish as they were. The other thing they look at is the ten-year rate. The ten-year rate has actually come down. That seems to indicate that the market is starting to get a grasp that the long-term inflation is probably going to be stabilized lower. Now it's a short-term problem.
With the short-term going up, how much will it affect the real economy? I think that's the challenge that we have. Our view is that when you look at this part of the world, the real economy indicators are not that bad. Okay, GDP are still positive, although they are slowing down a bit. They're not negative like in Europe and probably some debate in the U.S. Unemployment is still healthy. I think these are a bit more real indicators to find the real effect of economy. I think as you walk around, you will still see that consumer sentiment is still positive. Activities are still happening. Basically, our view is that there will be slowdown in the region, but we don't think there will be a deep recession.
Mainly because of this market sentiment, like we explained, the consumer part, people might be a bit more cautious. Yes, wealth fees will come down, but we are quite confident that the margin expansion to your first question will more than offset this. I was confident to say that my total income will continue to grow because our base, if you think about it, on a SGD 1.5 billion net interest income compared to fees of SGD 400 million, the delta itself, I can more than absorb it. That's probably where we are. We are watching. Like Wee Ee Cheong said, we are taking a cautious stand on observing the development in the region. So far, the in-house view is.
Let me just also further add what Lee Wai Fai just said.
I think we don't see recessions. We see a slowdown and why, okay. Few things we are observing. One is the rise of interest rate, I think, is manageable. Second thing is strong employment. That is important. Third thing, if you look at the whole long-term prospect of ASEAN, right? You look at with the COVID recovery, and most of the Southeast Asia countries are net exporters of commodities. Right? You can see the commodity prices has been moving up. I think with that scenario, and I believe there will be a slight slowdown, but I don't think it's significant to affect us.
Thank you. Second question from Aakash Goolab.
Can I just ask, on the short-term stuff first. Is this troubled account that you mentioned, is it a one-off, or are there any further customers in this sector?
Yeah.
Yeah. Can I ask about the China exposure as well in terms of the property sector? What are your exposures in China on that? Because you used to announce it, but this year you haven't.
I wouldn't comment on this specific account since it's suffice to say, that we are trying to work out with the borrower. Okay? We look at China itself, and we really look at the real China China exposure. Okay? Those that we are worried about, where the development risks and the projects are all in China. We disclose that's around SGD 3 billion. Okay, so that is 1% of our loans book, of which a big part is taken up by this account in there. The rest of them are well-diversified, strong LTVs, and we think that they are performing. Because when we do credit assessments, they are all in the one to four range, our internal credit rating, or the five to eight.
They are performing with strong LTVs, and we think that they are not in danger of turning NPLs. That's the real exposure that we are actually managing, SGD 3 billion, 1%, of which a big part we are really taking into NPLs by this account.
Okay. In terms of the loan growth that you're looking at, the mid-single digit, you know, what is the pipeline like in terms of sectors and geographies, and where are people likely to invest? I mean, in terms of their projects, et cetera.
Yeah.
If you could on that one.
I think two things, right? One is we think in the short term, like in the second half, mortgage will still continue to be strong. Okay? Despite all the worries about rising interest rates, especially Singapore. Okay, we think mortgage, the pipelines are still strong in there, because mortgage pipelines, we can see the drawdown. All these new projects probably will draw down one half, two years later. The next half year we see strong pipeline drawdown in mortgage. The other part of the growth will be some of the trades. Okay? While there are slowdowns, we still see opportunities in there because ASEAN is a trading region. We are seeing core activities going around. Where we see a little bit some cautiousness is in the big funds. Okay?
These big funds might be a bit more cautious, where the FIG people begin. In the region itself, we think that this year the growth will be modest. Okay? Although we don't see pressure, we don't see big interest rate hikes in there, because except for Malaysia, the rest have not actually done any hike. We think it'll be modest, but there are some uncertainties and some other political developments that we're actually watching. The growth probably will still be strong from Singapore and the developed market for this. Next year we are probably a little bit more confident with the Citi portfolio coming in, into the region itself. For this year it's mainly Singapore.
Let me also further add. If you look at some of our SME customer, you can start to see, especially working capital. Right?
They start to make use of it. As Lee Wai Fai said, the trade is important, right, because ASEAN is basically net exporter of commodities. Thirdly also, this recovery of global FDI, because you can see, companies are coming to this part of the world. Also sustainable financing, ESG-focused investment. These are all activities I think generally we are still quite optimistic and hopeful that there will be some growth.
Okay. I have a question. In terms of your ECLs, et cetera, in the one and two, will you continue to set aside in the next two quarters? Also, if you could update on your management overlay, if you could do those couple of things.
Okay.
This is a short-term question.
This is a bit of a technical question. The long and short is do I have enough GP? Okay, do I have enough general provisions into my book? We think that we have enough, but I think technically you know that the amount that we set aside from a bottom-up standpoint, we are actually very comfortable. Okay? We are very comfortable with the portfolios. You know, we have the RTF portfolios that we monitor closely, et cetera. We are actually very comfortable. The challenge is the top-down scenario. Are we going into recessions? You know, are we going to growth or are we going to stagnation? I think that is probably the challenge. If you are very pessimistic, then obviously you need a lot more.
Okay, you are very positive you will start writing back. I think we can take out the first scenario. Okay, I don't think people will be very positive when we look at that. The question is that how negative are you? See how much you need to add. Because of our conservative and stress scenario, we think that we don't really need to add a lot, but I don't think we will reverse. Okay? Hence, you see the indications that we are adding slightly, to buffer for the scenarios itself. The management overlay we do have enough, but management overlay is just the technical part. Look at my total general provision, whether you call it management overlay or whatever, performing loans. I think at 91 basis point is something that we are all comfortable with.
The last time before crisis, we were at 70 over, so we are really building up a buffer, in view of some of this uncertainty. That's probably just tell you that we do have enough, but we'll build up slightly and not reverse.
General provision is enough. Maybe a bit top up, but won't reverse, won't write back.
We don't see that maybe next year when we are surer of the outlook.
Thank you. Do you still have a follow-up question?
Yeah, I just wonder, so will you continue to invest? You know, I think you just mentioned that you're gonna open a new building and all that in Bangkok.
Yeah.
Are you planning to put more capital in your various subsidiaries, or do they self-fund, you know, in the region, Vietnam?
These are all self-funded, right? We have adequate capital in our respective subsidiaries, right? In Thailand, for instance, I mean, we are using our capital for the Citi acquisitions. Okay? The existing building is already there, right? Whatever we do is just to build a new building. So the land is already there. When we were acquired, we already have the two pieces of land in the building, right? Malaysia is okay. Our capital is adequate to take. Right? Vietnam is something that we are focusing, and hopefully one day we are able to buy a small building in Vietnam, and to be part of the overall strategy, right? We believe that every subsidiary, you should have your own building, right?
That provides a lot of confidence as well as certainty.
Okay. Maybe Aakash Goolab, like Wee Ee Cheong said, the first thing our position is we're actually quite bullish on the long-term outlook of ASEAN, so we'll continue to invest. But the two big subsidiaries of Malaysia and Thailand, we expect them to be self-funding. Maybe Vietnam might need a bit more, but Vietnam is a small base, and we know that Vietnam is a country that we are very positive about. Maybe, but it won't be big numbers because it's a small base. Okay, Indonesia, I think, has reached a level where they are sustainable. We will then have to relook at our future business direction, but they have enough today to sustain the growth strategy that we have, especially after Citi.
Thank you, Aakash Goolab. Can we move on to Faris from Bloomberg?
Faris from Bloomberg. Just a couple of questions. The first is, just to expand on, UOB's China exposure. The SGD 3 billion loans to developers, just want to clarify, do you think that there is a potential for default, you know, given the turmoil in the market and given, you know, the mortgage boycotts that we're seeing in China right now? Second question is like, the bank is very, very optimistic, you know, contrary to global sentiment, very, very optimistic. But in terms of the markets under your portfolio, is there like, you know, one market in particular that, you know, you're very concerned about in terms of the outlook for the rest of the year?
I think generally we are fairly well diversified, right? If you look at, I would say 50% of portfolio are in Singapore. Okay? These are well diversified. I would say our SME, if you worry about market uncertainty, SME will be the first one that get hit. Our overall exposure to SME is about maybe 30%, of the loan portfolio cut across the whole region. Now, you look at Malaysia, I would say 50%, Lee Wai Fai correct me if I'm wrong, consumer related. The rest are big corporate as well as SMEs. In Thailand, I would say the main bulk of it is in consumer. Okay? The rest of the OECD country, these are very wholesale. These are all big corporates. I think the rating are good, right? I'm not overly concerned, right?
As what my CFO articulate in China, I think our exposure to a Chinese developer is only SGD 3 billion.
Mm.
Right. In the overall scheme of things, I think we should be able to manage. I'm confident the Chinese authorities are actually looking at it.
Mm.
Okay? This is not something overly concerned. In fact, the main activity in China today is export manufacturing, right? To cater for the domestic as well as external. If the economy continue to grow, okay, and property market, yes, is a subset of all these things, and then if people continue to have the income and employment, I think they should be able to overcome some of this.
I think maybe just to supplement, I think Wee Ee Cheong said it well. We are actually very well diversified.
Mm.
The markets you ask that we are worried about, right? The usual suspects, Europe, North Asia, okay? We are not big in Europe. Okay? In fact, anything in Europe are actually our customers investing there. North Asia, Hong Kong, China, yes, we are concerned. Number one, but two things, we don't do retail portfolio in this. All this worry about mortgage and all, we are not exposed.
Mm.
Because we don't have retail exposure in China.
Mm.
For the wholesale part is how strong are these developers besides the account. Like I said, when we do the credit review, they are technically still rated between one to four or five to eight internally.
Mm.
which is still credit performing.
Mm.
Based on that, we are confident, okay? That those portfolio will hold. Besides that, the third thing that we look at, the sponsors behind it for the other exposures. I mean, just being very open, we do have some of the Singapore companies doing development in China, okay? The usual suspect of Keppel Land and all. You know, they openly say it's the big part. We are quite confident that some of them, the business model might be some slowdown, but the sponsors are strong enough, okay, should something happen. That's where we are. We're actually watching that portfolio very closely. As a group, my GP portfolio diversification, I think is more than sufficient to take any of these shocks should they arise.
Another question from The Business Times.
May I ask where do you see your NIM at the end of this quarter and by the end of the year? The second question is, just like to talk about healthy drawdown of mortgage loans in Singapore. Do you expect further cooling measures from the government?
If you look at the property market, right? You look at the recent launch of Ang Mo Kio, okay, the response was very good, right? All of you get excited. It happens to be one of our project. Okay? First of all, the location is good in a mature environment. Secondly, it's also because of limited supply, right? Given the COVID situation. Okay? Difficult to get worker, construction delay. As a result of that, this project happens to be, from the timing standpoint, it was a good timing. If you notice, the typical profile of some of these, successful launches is, many parents are actually helping the children to buy. Okay? Because the control is already very tight. As far as Singapore, as far as bank is concerned, we control the affordability.
There's no way you can have a spiked up situation and you can afford to buy because you can't do it. The parent will come in and support. These are the typical. Right? Don't take it as it's a, it's a blanket thing. I still err a little bit on the cautious side because, yes, Singapore we have the benefit of foreign people coming and buy. I think these are something how sustainable, we don't know. We don't know. I would still like to be a little bit more prudent, when it come to real estate market, because it's a long-term investment. You have to make sure that you are able to afford, whether the market is going up and down. Okay? Now, on the rate, I believe there is a scenario that we are working on.
If you look at the Fed, the way they adjust the rate. What is our internal
If you really look at where the rate hikes are and the impact to us, right? You could argue that the last rate hike does not affect us because it came after. It only came out in the second half. The other aggressive 25 basis points was in May, so halfway through the portfolio. We grew nine basis points quarter-on-quarter, which means that we can sustain more than that. Okay? It is quite easy for us, and we are confident that we can sustain that at least for the next two quarters, and maybe even improve on that because of that thing. Looking at it, I mean, a lot of these are scenarios. Looking at whether we can grow NIM by another 20 basis points, I think is a possibility. Okay?
You could argue that at 1.6%, we could exit probably at 1.9% or even better.
By end of the year.
By end
by the third quarter?
By the end of the year.
Okay. From Nikkei.
Uh,
Yeah.
Firstly from Nikkei. In terms of taking over Citi's business in Indonesia, it seems to be a bit delayed compared to three other countries, and the retention rate is also lower than three countries. Are there any specific reason?
Indonesia, we are getting some clarification with the regulators. Because the regulatory requirements is a bit steeper. We find that in order to fulfill those regulatory requirements, we take a bit longer. Especially if I can't touch anything on the customer, because consider confidentiality until they want. I think it's something that we are negotiating. It's not a problem with approval. The regulators are very supportive of the deal. These are sort of technical questions on combined and some of those details, of course.
It's taking a bit longer and more complex, and the different regulators that we have to deal with. Indonesia is a little more complex. The operation side, the people side, and the support from regulators, and some of the customers' partnership, I think those have been all very positive. Okay? Even Indonesia.
In the overall scheme of things, I think Malaysia, Thailand is the main bulk of the acquisitions. Yeah.
The next question from Chanya.
Hi. Just to clarify one thing, you may say that you have a 24% market share in mortgage, that's for Singapore specifically, right?
Mm-hmm.
Mainly. My second question is about Myanmar. I mean, with the developments and you have a franchise there, what is your thought on sanctions and the situation in Myanmar? Via S-ESG lens, do you think that Singapore or UOB should continue to be investing there?
I think as far as Myanmar is concerned, we go according to the sanctions right? If it's sanctioned, there's nothing we can do, right? The people there is still in place. The country head is still there. I'm stating the motherhood statement, but it's obviously we are. It's a holding strategy. I hope politically, things can be resolved.
Mm-hmm.
The whole ASEAN leadership is talking about how we can, further improve and open up Myanmar. I still think it's a country that with 100 million population, if they put their act together, we are in for the long haul.
Yeah.
Right? Yeah. At the moment, I think, we are basically supporting our customer. If our customer are not going there, what can I do from there?
Mm-hmm.
Right?
Mm-hmm.
So far it seems okay. There is no riot, nothing. It's still peaceful.
Mm-hmm.
We still, we just have to wait, how to resolve it. But.
You will observe sanctions rules, right?
Yes. Yes. Yes.
I see. Okay. Thank you.
Thank you, Chanya. We have a question online by Prisca from ST. Maybe we can put forth the question.
I think for the presentation, I've a question about loan growth. I noticed that it's been downgraded from mid- to high-single-digit last quarter to mid-single-digit now. Are there any specific factors that have been considered in adjusting this target? Or is it largely due to the slowdown in growth that you expect? My second question is on CASA. Do you have a rough timeline of when you expect to raise the CASA rates?
CASA rates or FD rates?
CASA rates. Yeah.
I think as far as the loan growth is concerned, it's a reflection of how the overall market economy as well as sentiment. Okay. I mean, today, if I were to tell you it's a high single digit, you may not believe me. Okay. We are just putting a very sensible projection. It is still a projection, right? We have to actually track the development. If the market turnaround is better, sure, why not? Our people are there to actually serve our customer base. As a projection, I would say, you know, it's relevant to what it is today, right? The market is slowing down. Inflation is coming in, so we tend to take a. Our customer is actually, you don't just look at loan growth.
There is a lot of pay down, right? A good customer, they say, "I want to pay down the loan." Right? So you still have to generate more loans. So it's not as straightforward as just loan growth. Right.
I think like Wee Ee Cheong said, it's a reflection of the market and the customers. The customers themselves are also turning cautious. If they are turning cautious, then it reflects it. Like I say, if the environment change, we do have the balance sheet strength to support them. This is just realistic. Your second question on when will I raise FD rates. I think we were debating that at ALCO. It's always when do I raise FD rates? After that, when do I raise housing loan rates? I know that's the next question that will come. Those are we are watching as to how our funding there. We are hopeful that our CASA funding will be a bit stronger so that I don't have to avoid aggressive FD rates to protect funding needs.
As a consumer bank, that's our strength. Wholesale has actually improved on their CASA capabilities with all the new systems that's going in. Besides retail FDs, wholesale CASA has been a strong part of sustaining that. It's a balance. At the end of the day, we will look at the market competition. We also look at our funding book strength, to see whether we need to increase in order to do that. If we do that, do I get back into housing mortgage rates as well? They are the whole thing that we are discussing. This is something that we are observing. There are still some strength of liquidity in the corporate world, whether that's enough. Basically give us some time.
We observe the market, we observe our funding, we also observe competition.
Okay. Thank you, Prisca. Okay, we'll move back to Goolab.
On the short term, how does your portfolio, your loan portfolio reprice? I mean, are they, like, short term, or is it are the three years or the five years? Can you reprice them with the higher rates?
Technically, there are two things, okay, where we talk about maturity of the loans. You look at the loans profile we just disclosed, less than one year to this, 41%. It used to be 21%, now it's 41%. Which means that from a repricing, from a structure standpoint, every one year, the SGD 140 billion of loans, I have to negotiate with the customers. When you negotiate with the customers, there are two things. One is looking at where the base rate will be, and number two is whether you want to increase the credit spread.
Mm.
81% of my portfolio is variable, okay? Which means that variable means that you will be adjusting it according to base rate. If the base rate comes in and you think about short end today, yeah, we are saying that will go up, all those will be repriced. The repricing impact, the flow-through, will be 80% within three months. That's actually very fast. The second part of our portfolio is that we have actually increased the U.S. a little bit, U.S. base. U.S. is the flow-through that is actually most obvious. The SORA, sorry, the SOFR part of it, as the rate goes up, and SOFR rate has gone up quite significantly more than Singapore rates, we will have the quickest flow-through.
80% you'll see that variable, from a structure standpoint. One year itself, I can reprice and add to the credit spread, but the repricing impact of the short-term rates will flow through very quickly, probably within three months.
Just a very quick time check. We only have time for one more question. Okay, from CNA.
An overview on the outlook for the company, and going forward, what are some key drivers of growth you guys expect, and headwinds that you guys expect as well?
I think as I articulated, I mean, the few things we are looking at, the flow, FDI. This is something that we strongly believe in our ASEAN franchise, the connectivity. If the business coming from different part of the world flowing to Asia, and Singapore we will be able to capture it. You can see the consumption has been also picking up, right? Credit card has been, right? With the COVID situation, there is a pent-up demand of people want to go and travel, right?
The consumer side especially, we are a big consumer bank. If you look at the Citibank portfolio, they are actually all trading quite well, right? Also sustainable financing. As I said, there is a lot of investment going on. These are the bits and pieces that I think should be able to generate the growth.
How about the headwinds?
Hmm?
The headwinds, the challenges.
Well, the headwind, as I said, the market is uncertain, right? I don't believe there is a strong headwind. I believe there is a slowdown in the market. That is our view, right? That is our house view. I believe in Asia, we are, as I said, we are the net exporter of commodities. The trade flow and all these things, I think is important for us.
Thank you.
So I just have a-
One last question. Going back to the loans to the Chinese developers. I know you know, CEO and CFO have said that it's manageable and all that.
Yeah.
I'm just wondering the two points. One is, you know, what are the mechanisms that the bank have in place to make sure that, you know, you can detect early signs of distress that, you know, perhaps in a scenario that they couldn't repay back the loans? And, number two, I mean, there's, you know, growing dissatisfaction among investors with regard to, you know, the property turmoil in China, and especially with, you know, the developers. And, you know, UOB has also commenced a lawsuit against, Shimao. So, maybe if you can comment about, you know, those two points.
No, I think as far as in China, basically we are more in the wholesale space. Okay? I mean, my wholesale banker will tell me they look at the customers, look at the leverage of the developer, the quality of the developer. This is where the first line of defense, right? You have to make sure that there's creditworthiness, right? If the gearing is low, I mean, if the market were to slow down, I mean, they can take on the balance sheet, there's no issue, right? But if you look at the newspaper, some of this mismanagement, this is something that it can happen to any countries, right? I cannot comment on all this. That part, you just have to deal with it.
If it happens to be, you have a not so good customer base with you, they have to live with it. Our selection process, our credit criteria is very robust, yeah. Especially China, we don't have a big exposure. Most of our China operation actually is more the flow business, right? The competitive advantage for UOB today is more the ASEAN, not so much China. Right? China, we are supporting our franchise customer going to China, right? Most of it are actually we are supporting some of the Chinese company, coming to ASEAN. This is where we have the competitive advantage, right? I cannot compete head on with a Chinese bank, right? They are too big, too powerful in their own domestic market.
Yeah. Thank you, Mr. Wee. Thank you, Mr. Lee. That's all the time that we have today. Thank you, everybody, for joining us this morning. We wish you a very good day ahead. Thank you.
Thanks.
Thank you.