Good morning, everyone, and thank you for coming in a little earlier than usual today. Welcome to our second quarter 2025 results media briefing. Today, we have with us our Deputy Chairman and Group CEO, Mr. Wee Ee Cheong, and our Group CFO, Mr. Leong Yung Chee. As usual, Mr. Wee will begin by giving a broad overview of how our franchise has done and the operating landscape we are in. Mr. Leong will then go into more details on the financials and business performances. After both presentations, we will take questions from the media. I would now like to invite our CEO to get us going, Mr. Wee.
Okay, thank you. Good morning. Thank you for joining us today. The ICO environment remains fluid, with geopolitical tensions and a shift in global trade in a multi-polar world. Amid uncertainties, regional economies are holding firm. ASEAN, while not immune, shows resilient growth. ASEAN fundamentals remain strong, with competitive cost structure, improving infrastructures, and deepening trade linkages. This positions the region well to adapt and thrive in a complex global landscape. Amid global uncertainties, our core business and financial performance held steady. Operating profit for the first half year rose 3% from the same period last year, driven by strong fee growth. After taking a conservative approach to increase our reserve, net profit came in at SGD 2.8 billion, down 3% year-on-year. Net interest income was flat as loan growth offset the impact of declining interest rates.
Margin compressed in line with the external environment, but we continue to proactively optimize our cost of funds and rebalance our portfolio. Fee income shows strong momentum, up 11%, led by loan and wealth fees and robust treasury income supported by healthy client flows. This performance reflects the strength of our diversified business model. We continue to pace our costs, keeping it flat year-on-year. We remain vigilant on asset quality. Our overall loan portfolio remains sound, with NPL steady at 1.6%. Total credit costs were higher at 34 basis points, including the preemptive general allowance set aside to ensure healthy provision buffers. Our balance sheet remains strong with CET1 ratio at 15.3% and robust liquidity ratios. The board has recommended an interim dividend of SGD 0.85 per share, representing a payout ratio of 50%. We also paid the second tranche of the SGD 0.50 special dividend to mark UOB's 90th anniversary.
For the second half of 2025, while the external environment remains challenging, we see pockets of opportunity. Governments across the region are also stepping up to support the crucial businesses through the transition. This includes recently announced 100,000 SME grants in Singapore and physical and sector-specific measures in other countries to keep growth on track. As a long-term player, we remain committed to our clients, including SMEs, standing by them through economic cycles, supporting them with working capital, cross-border financing, and digital tools to help them scale efficiently. Our strategy is clear and consistent, focused on ASEAN long-term potential. The region offers relative political stability, resilient fiscal positions, and growing economies. Its competitiveness as an FDI destination is supported by well-connected infrastructure and a young, upwardly mobile population. In a multipolar world order, opportunities arise with regional integration and trade diversification.
At the same time, megatrends, including digital and green economies, will continue to drive investment and generate growth. We are well positioned with our extensive ASEAN footprint, deep connectivity to China and global markets, and a diversified client base. On the wholesale front, we are seeing strong traction across multiple revenue drivers: rising card sale balances, growing regional trade flows and supply chain financing, robust trade and loan fees, strong treasury income from active client flows. We are intensifying our focus on emerging opportunities, digital and green economies, and infrastructure investment aligned with the ASEAN integration agenda. Our retail franchise has gained significant scale following the Citi acquisition, where our customer base has grown to more than 8.4 million. We are well positioned to ride on the region's rising affluence and Singapore's position as a leading global wealth center.
We see robust growth in card billings, underpinned by PEM regional partnerships, our latest being the principal partner for the Michelin Guide hotel, reinforcing our leadership in lifestyle privileges across dining, entertainment, and travel. Our Citi integration is complete across all four ASEAN markets, with Vietnam customers successfully onboarded last month. The focus now is on deepening customer engagement to unlock further growth. Since the Citi acquisition, our ASEAN four franchise has delivered robust growth in customer, card sale, wealth AUM, fund secure receivable, and card billing. To position for sustainable growth, we have been reshaping our business franchise. We see good progress in moving towards a more diversified and resilient revenue mix, including connectivity, fee-based, recurring income, and asset-light businesses. We have been investing to strengthen our capabilities and digital platform that will support our ambitions to scale.
Our strong balance sheet enables us to address risks and to seize the right opportunity to grow. This transformation takes time, and we are confident that it will reinforce our foundation for long-term growth. We have previously suspended guidance due to heightened volatility and limited visibility. We are now reinstating our this year guidance. Full year NIM of 1.85% - 1.9%, factoring in three expected rate cuts second half of June. Low single-digit loan growth, focusing on quality assets. High single-digit fee growth, driven by card, wealth, trade, and investment banking. Flat operating costs. Net credit costs of 25 - 30 basis points, and we expect further top-up to boost general provision buffer preemptively. As usual, we remain committed to our SGD 3 billion capital distribution plan. Now I will hand over to my CFO, Yung Chee, to share more.
Thank you, Ee Cheong . Good morning, everyone. If you allow me, I'll take you through the financials update. This quarter, we reported a net profit of SGD 1.3 billion. It's 10% lower quarter on quarter and 6% lower year on year. The net interest margin narrowed by 9 basis points for the quarter to 1.91%. This is driven by a sharp reduction in benchmark rates. In terms of the net fee income, it was SGD 636 million, a decrease from last quarter's high, but this is our second highest quarter. Investment banking activities returned to normalized levels while wealth fees were subdued as we took a more cautious approach amid macro uncertainties. In terms of treasury and investment income, it has softened, reflecting lower trading and liquidity management activities, but customer-related treasury income sustained momentum. On asset quality, NPL ratio was stable at 1.6%.
Total credit costs on loans were at 32 basis points. We continue to maintain prudent preemptive provision reserves. Our capital and funding positions remain robust with CET ratio at 15.3%, with post-dividend payout included, and NSFR at 118%. Now let me share an update on the performance for the first half. With this set of results, we delivered a positive operating profit rising 3% year on year. This was largely driven by double-digit growth in fee income across wealth management, investment banking, and credit cards. The performance underscores the continued strength and diversification of our franchise. Cost-to-income ratio improved to 43.5%. This reflects our continued focus on cost discipline across the bank. As we set aside preemptive allowances amid the macroeconomic uncertainties, our net profit after tax moderated 3% year on year to SGD 2.8 billion. This translates to a return on equity of 11.7%.
In the next section, we have included some new slides focused on our business segment performance. These slides are designed to provide deeper insights into our income drivers and strategic levers that are shaping future growth. These efforts are beginning to bear fruit. Moving forward, our focus continues to unlock value and monetize these investments for sustainable long-term growth. We'll start with a dive into our group retail business. Group retail delivered a strong performance for the first half of 2025. It reports a SGD 1.1 billion year on year. That's an 11% increase. This was the result of our focus on car sale wealth and cards, which countered income pressures from lower rates from the market, as well as competition. If you look at the deposits, our retail deposits have exceeded SGD 200 billion for the first time, driven by robust car sale growth and anchored by strong customer value propositions.
Our wealth management income recorded double-digit growth, 15%. This was boosted by the effective conversion of deposits into invested AUM. While AUM continued to build new momentum, net new money coming into the bank this quarter was about SGD 3 billion. Card billings grew year on year, 12%, supported by our ASEAN franchise, partnerships, and enhanced rewards offerings to our customers. In terms of the customer base, we have exceeded 8.4 million customers as at the end of June 2025. Again, a testament to the differentiated lifestyle offerings and consistent value delivery to our customers. Asset quality for this segment remains solid, with credit costs nearly halved to 22 basis points. The operating friction in Thailand we experienced last year as a result of the integration has subsided, further stabilizing our retail portfolio quality. I'll next turn you to the wholesale banking business.
Our wholesale banking business delivered a profit before tax of SGD 2.2 billion for the first half. This was down about 12% year on year, but reflected the impact of lower benchmark rates, intense competition for quality assets, as well as a rise in allowance from a low base. Transaction banking contribution remains a cornerstone of performance. It constitutes about 50% of wholesale banking income. This was supported by an enlarged car sale base and 12% year-on-year growth in our trade loans. This underscores a deeper client engagement because of our integrated cash, trade, and supply chain platforms across multiple markets. In terms of investment banking, we achieved a record fee in the first half of 2025, demonstrating strong execution and client confidence in our advisory capabilities. Our diversified growth strategy continues to gain traction, with stable income contribution from our non-real estate sectors at 69% and cross-border income at 26%.
Our regional connectivity and franchise development is growing from strength to strength. Expenses rose marginally by about 5%. This is through investments to enhance our product capabilities and deepen market presence across ASEAN. Allowance increased to SGD 167 million, primarily due to a collateral markdown for a few non-systemic borrowers, while overall portfolio quality remained within it. Global markets sustained strong momentum in our customer treasury income, supported by continued client demand for hedging and investment products. Non-customer treasury income also improved from lower cost of funds, capturing market opportunities across bonds, equities, FX, and REITs amid financial market volatility. Net interest income eased by about 3% quarter on quarter to SGD 2.3 billion, as asset growth helped to cushion the impact of lower net interest margins. Net interest margin declined 9 basis points to 1.91% this quarter.
Again, I mentioned earlier that this was primarily driven by sharp reductions in benchmark interest rates. If we give a breakdown of how the impact came from different areas, the SORA, which is the Singapore Overnight Rate, fell by 50 basis points, reflecting abundant domestic liquidity, partly driven by safe haven inflows, while the Hong Kong Interbank Offered Rate for HIBOR was at its lowest since 2022. These movements affected our asset pricing, contributing about 23 basis points decline to the NIM this quarter. Although there was pressure on asset yields, this was mitigated by our ongoing proactive efforts in managing our own cost of funds, and this includes repricing of fixed deposit and savings account rates, and also a mix of our asset liability. In terms of fee income, gross fee income reached SGD 829 million this quarter, marking the second highest quarter on record.
Again, this underscores the strength and diversification of our retail and wholesale banking franchise. Loan-related and credit card fees remain resilient. Investment banking fees returned to normalized levels after an extraordinary first quarter. Wealth management fees were impacted as we took a more cautious, preservation-focused approach, supporting our customers amid uncertainties in the market. Expenses declined 2% quarter on quarter to SGD 1.5 billion. This reflects the group's disciplined cost management initiatives. Cost-to-income ratio rose to 44.3% due to the lower income this quarter. We will continue to exercise discipline on how we manage costs and spends, but continue our targeted investments in talent and technology to support our franchise growth and regulatory requirements. Turning now to asset quality, new NPA formation edged up this quarter, and this stemmed from one large corporate account in the U.S.
This was within expectations, and with higher write-offs and recoveries during the quarter, our NPL ratio remained at 1.6%. The higher specific allowance this quarter resulted from one new U.S. NPL account. As mentioned, this was within our expectation, and preemptive allowance had already been set aside earlier, and net credit costs were at 32 basis points this quarter. While preemptive general allowance would usually be written back and reclassified to specific allowance upon an account downgrading to NPL, we continued the same level of general provisions this quarter as a prudent measure to strengthen the coverage in view of near-term macro uncertainties. As of June 2025, our total allowance was SGD 4.8 billion, of which SGD 2.8 billion relates to allowance for non-impact assets. Our general allowance coverage was maintained at 0.8%, while NPA coverage remained adequate at 88% or 209% after taking collateral into account.
Gross loans grew a healthy 4% year on year and 1% quarter on quarter. This was mainly from corporate and mortgages in Singapore. Our liquidity and funding positions remain sound, with LCR at 141% and NSFR at 118%, both well above the minimum regulatory requirements. CASA deposits continue to grow steadily, leading to an improved CASA to total deposits mix of 56.5%. Capital position stayed robust, CET ratio at 15.3%, even after accounting for the FY 2024 final dividend and special dividends as part of the capital distribution strategy we announced earlier. In appreciation of our shareholder support, the board has declared an interim dividend of SGD 0.85 per ordinary share, reflecting our commitment to a consistent dividend payout ratio of 50%.
We are also pleased to report that as at the end of June 2025, about 13% of the SGD 2 billion share buyback program that we had announced has been completed. We are on track to fulfill our commitment on the capital distribution to shareholders by 2027. With that, I conclude my presentation. Thank you.
Thank you, Yung Chee. We'll now begin the Q&A segment. For those dialing in on Teams, please use the raise hand function. If you'd like to ask a question, maybe we'll start from those in the group. Any question?
Yes, please. Congratulations on the numbers, and please could you talk a little bit about the tariffs that have been slapped on many countries in Southeast Asia in the past few weeks? Second question to Yung Chee, who mentioned often safe haven flows. Could you give more colors on this and whether such flows were more extraordinary than previously?
Based on our detailed analysis of our portfolio, I think the first order impact is manageable.
The what?
The first order impact.
First order impact.
People directly affected by the tariff.
Thank you.
I would say 1.3% of our total loans to exporter, with 25% of sales exported to the U.S. I think it's quite minimum, and trade loans make up about 10% of the total. The first order impact, I think, is generally quite manageable. We are a little bit more concerned about the second order impact, which would affect consumer spending. People stop investing. Consumers stop spending. That is something that is still quite fluid. We are monitoring closely. I would say generally, we are here to support our customers. I think it's important, especially because you can see the government also setting up committees to look at proactively how to manage the spending. We are on top of it. If any customer requires any assistance, any help, we are here, especially in a volatile environment. We're always here to help our customers to restructure.
Thank you.
On the second question, [Foreign language], the safe haven flows question. I think I mentioned earlier on that our net new money for the quarter was SGD 3 billion. We are still seeing flows in terms of wealth and deposit flows into our franchise. I think this reflects the fact that Singapore is very well positioned amidst all the uncertainties happening around the world.
I see. The flows of SGD 3 billion in the second quarter.
Yes.
Would it help with the Singapore dollar strength as well?
I think the Singapore dollar FX rate has other factors affecting it, given how open we are as an economy.
I see. Okay.
You see, as you asked the question, given the tariff situation, we see it's very volatile. The AUM, I would say, 60% stays as a fixed deposit.
Oh, wow.
Partly because we are conservative, we are more cautious. I don't want my customer to lose money, right? As a result, I'd rather sacrifice on some of the wealthy. I'd rather let them stay conservative. There's always a better opportunity out there.
I see.
Because these are all businesses.
I see.
They're already taking the front-end risk of running the business. The last thing I want is whatever capital they have put with us, they also encounter the risk. We are quite conservative in that sense.
Just to clarify, you said about 60% stay as deposits. You refer to 60% of the net new money?
Yeah.
Net 60%.
General.
Overall.
Overall, it's the deposit. Yeah, 60% is in deposits, 40% invested.
I see.
AUM.
Okay, thank you.
This increase in liquidity does help to support the Singapore dollar strength, but it actually lowers SORA rates as a result.
Good for mortgage.
Good if you're a mortgage borrower, yes.
We have a question from Zhaobao.
Yeah.
Hi, good morning. Thank you for the sharing and the congratulations on the numbers. Actually, Bloomberg already asked my first question, but could you help me clarify? Many ASEAN countries will face tariffs, and you also mentioned that you are concerned about the second order's impact from the tariffs. Could you help me clarify? Is it part of the reasons for trimming your loan growth forecast this year?
We are a financial intermediary, right? It's not whether I want to trim or not. At the end of the day, it's also customer demand. If customers don't feel comfortable given the outlook of the market, they will slow down, right? It's the end result of demand and supply. We continue to chase after the quality loan to start off with.
That affects both corporate as well as individual customer outlook. If that, in terms of these, create worries for whether businesses or individuals, you see some of these actually tapering off in terms of demand. From our perspective, the competition for quality assets becomes more intense as us and our competitors chase after growth from the quality portfolios.
I think the second question is about the competition from your peer bank. We have been seeing more and more severe competition, especially in the credit card sector. I'm just wondering, how will you manage to compete with this competition? What is the main strategy you all?
Credit card.
Yeah, credit cards.
Credit card, I think we do have some benefits because during COVID, we bought over, buy over Citibank before. That will give us a strong customer base. If you have a strong customer base, the ability for you to do things in a more competitive way, to deal with your partners, to deal with your merchants, because you have the sale, you can bargain better, and you also can offer a better quality product. This is what exactly we are doing. We have about 8.4 or 8.5 million customer base across the whole ASEAN region. We will continue to deepen our lifestyle products. Hopefully, people will start to see, "Hey, UOB is a card that you must have." For you to enjoy the lifestyle, for you to enjoy the tailored suite, for you to enjoy different kinds of that.
This is where, because at the end of the day, consumer business is scaled. If we are trying to take advantage, we are the big elephant in the room now in ASEAN. We should be able to capitalize on that. Hopefully, that takes time. Also, given the customer base, we are cross-selling a lot of products. Not only just credit card, the well product, make them open accounts, improve our car sale, boost our cost of product. This is a multi-pronged approach that hopefully. It's not every quarter you can see. We are moving towards that direction. Obviously, the execution is important. We like to see more of that because otherwise, what's the point of having quite a big customer base if you are not taking advantage of that?
That scale of customer base allows us to differentiate some of our offerings. I think your question earlier mentioned about what differentiation our lifestyle rewards is really geared towards some of the customer preferences that we see across our base. That's primarily around travel, entertainment, and dining. Our rewards with our card member of us, you would see that we've been very focused in terms of value propositions to clients along those three lines.
Thank you so much. The savings account, you have lowered the interest rate account. When can we see the effects from it? Maybe the third quarter?
We announced it in May. It will flow through and take some time. Yes, you should see it reflect through the financials in the third quarter.
In the third quarter?
Yeah.
Thank you.
A question from the business.
Hello, Manager. I also have a few questions. First on the risk data guidance, right? I think in Q4 projection was high single-digit loan growth, double-digit fee growth. Now it's sort of moderated to low single-digit loan growth, high single-digit fee growth. I think NIM was over from about 2% to 1.5%. Give a bit more color on this lower guidance.
I think generally it's a reflection of. You look at most of the ASEAN region, despite they are strong, they have a foreign reserve, but then the growth is also quite limited given the tariffs. We cannot grow for the sake of growing, right? The loan, I mean, the GDP growth of the country is not as high. This is why the first quarter last year, we did not give any sign. A little bit more certain. Of course, it's not a magic sign. We think, based on our own calculation, we think, I think the loan growth will be quite subdued.
If you look at what has changed from 2024 to now, in each of the countries that we operate in, the GDP growth forecasts have all been turned at in every market we've operated in. The benchmark interest rates for these countries have also been reduced. There is also the FX movements that [Foreign language] was referring to earlier. The environment has shifted significantly. For some of these metrics, if you look at the underlying numbers that we're still projecting, that actually shows the strength of the franchise, that the fact that the loan growth, we are still able to grow. The fee income, we are still able to grow. The income numbers are affected by asset pricing and market volatility. I think look at the underlying franchise, the strategy that said we would execute is paying off in terms of how we are shaping our portfolios.
If you look at the region, it is growing. If we translate Singapore dollar because Singapore dollar is high, and we are reporting in Singapore dollar . If you say Malaysia and all these countries, they are growing.
Quick question on housing loans, right? What's sort of the growth outlook for the UOB in the rest of 2025? I know the strategist is saying yes.
I think we projected about single digit.
Yes.
I know the market seems to be quite hot. At the end of the day, I think we are generally selective. This is a very uncertain world.
Are you sort of seeing customers shift more towards floating rate mortgages and not giving that interest to go down for the committees? I don't know if you have that number on it now.
No, we don't have it on hand.
Yeah, not that.
There was good loan momentum. I think if you look at our second quarter numbers, and this is corporate and retail, our loan growth has upped 4% year on year, right, and 1% quarter on quarter. Even on a constant current basis, you are seeing somewhat similar numbers. The underlying momentum in loans is intact. I mentioned that loan growth primarily was driven by two portions, corporate and mortgages in Singapore. That's underpinning some of the loan growth.
Do you sort of expect hiring to maintain, be flat for H2, right? According to SACCO, it's been about 100% year on year for H1. Do you sort of expect?
What was the?
Do you expect hiring to remain for the rest of the year? I mean, given some of the uncertainties you mentioned and recruitment, I guess we might hire for natural attrition, but overall headcount, do you expect to go up in the coming?
I actually saw a 1% drop in the headcount.
Yeah.
Right?
1% increase in staff costs.
1% drop.
Not headcount, definitely. Headcount, yes.
Why?
Natural attrition.
I understand.
The total number for H2 is going to.
I think we're keeping very prudent management in terms of overall expenses across the bank. I think in this sort of environment, there are certain things that we need to continue to do. Our regulatory compliance requirements amidst all these scams and KYC email matters, making sure IT is not obsolete. Obsolescence replacements are something we need to continue to invest. Technology to enhance productivity efficiency, those are areas we need to continue to invest. Overall, I think our position on expenses is very prudent. You see that we've actually reduced it over the quarter.
You see, all these expenses are very strategic in nature. Of course, we can try to make ourselves more efficient. Before you get yourself more efficient, you need some basic tools. You look at our ASEAN coverage, we are the most comprehensive in terms of the number of countries we are in. Can you imagine the investment that we have to do? We have to replicate all these countries. As a result, I think if the income drops, our expenses will be a little higher. I think that is an investment that we have to put in. 5- 10 years from now, then you start to see, hey, this is an investment work. You cannot, based on quarterly, quarterly, very difficult.
In terms of people's strategy, I think we adopt a very calibrated approach in terms of managing headcount. In good times, you don't want to over-hire, but in bad times, you also want to protect the employment of our people as well. This is our philosophy. This is how we've been managing our workforce.
Yes, now is the bad time or the good time?
Now is uncertainty.
Uncertainty.
I think I would say, wow, if you read my speech, the underlying is still quite strong in ASEAN. The volatility is something that we need to manage. If you have a tsunami coming, you know, you have to be strong. Otherwise, you'll get wet quiet. The underlying, you look at Singapore, Malaysia, they are generally okay. Even in Thailand, they are tight.
They are facing some headwind.
Generally, you can see the tourism is not coming. At the end of the day, you ask yourself, right? You still have a 100 million population, talented people. They are always strong in hospitality. One day, they will wake up.
Now we even heard about a Republican nominee for the 2028 presidential election. How long is this uncertainty going to go on? I mean, like with your strong capital base, are you still seeing any M&A on the cards for UOB ?
For what? For M&A?
M&A. You just finished the integration with Citi.
I think he is taking care of the M&A. I think we are always on the lookout, right? We are always on the good opportunity. You look at the Citibank acquisition. We are in a position to acquire, especially outside of Singapore, for us to attract or to improve, to increase our customer base. It's not easy because we are competing with all the big domestic banks in ASEAN. That, to me, is a good opportunity for us to have a good head start. If there are anything coming along, why not? This is something we are always on the lookout.
Would it be more on the retail side or on the corporate side?
I would address it this way, [Foreign language]. Our franchise, in terms of the footprint that we want today, we have the locations, we have the footprint that we want. We don't need additional licenses in each of these markets. If we look at M&A opportunities, it's opportunities where it fills skill or capabilities.
More assets rather than branches.
Rather than branches or adding more ATMs, that wouldn't be a priority in today's digitalized environment. However, if you look at our philosophy and approach to M&A, we have been very, very prudent and disciplined because the integration of acquisitions is not easy. Even the Citi integration took us three years. It takes away management bandwidth. We take M&A very seriously, and it's not an exercise we take lightly. The last time we did a major M&A acquisition before Citi was almost 15 years prior. This is a philosophy that.
A nd also, I echo what Yung Chee said. Even if you look at the integration, the deal from Citibank is four countries. We could have just done four countries at once. We make the effort of doing it in every country. Why? It's time-consuming. The synergy may not be so immediate because you're doing it.
We are doing it in a very calculated approach because we don't want to lose the customer base. We want each country to learn, and then we replicate some of the learning to another country. You spend the kind of money, last thing you want is to make your customer angry and walk out. It's time-consuming. It may not translate into cheaper costs to us. In the long run, I think that is a good way of doing it. You look at our logo right by you. Right? You've got to stay on that. Right? Otherwise, everything right by you, but you do it in advance.
I think the results speak to from that period of time, which is around 2021 to now. I think CEO mentioned in a speech earlier on, whether in terms of actual number of customers, whether it's in terms of AUM, card billings, unsecured lending, all of these have seen compound annual growth for us. That franchise has come together very nicely.
We have a few more minutes. Any last questions?
I have a few, but I may have to send them in later. I have a few. The first one is the large corporate account in the U.S. Can you tell us which sector it is? My second question is, what is your exit NIM? The third one is, you mentioned intensifying initiatives in digital and green trends. Can you share more color?
If you want to take on the first two questions, the U.S. account was real estate related.
Okay.
The exit NIM for the quarter was 1.84%.
Oh, okay. Very cool.
The third question was on digital and green energy.
This is something that I think we invest heavily on digital. Our tomorrow, I think that's important. I know they are not going to take advantage. All of you know, we announced our MOU with Accenture. The whole idea is to take full advantage of the partnership, take full advantage of Accenture being specialized in AI to see how they can help us speak to market to improve our customer service. At the end of the day, no point, I always say, no point to have a big customer base and your customer service. We are still on a journey to improve. We are not happy with the customer service. We will continue to improve that.
If there's any mistake that we make, I apologize to our customer, but I think we are genuinely wanting to help our customer to improve ourselves in a digital way, in a more systematic way so that we don't have more predictability.
Based on the exit NIM, are you expecting a firmer environment because your forecast is going 1.85%-1. 9%? That's one question. There was on the non-interest income line, an 11% Q on Q decline. I'm just wondering what that was. Also, for the treasury, was it part of the interest, your NIM, your interest rate management? Was that part of it? Is that an issue there? The treasury sales, whether it's bank or customer, that's a second. Those are the little questions there. There's a 15%, okay, your end, your CET1 at final is 15.1%. Does that also include the dividend payout and the capital payout?
Yes, that question doubled it. Let me go back to question two.
Go back to the.
On the NIM, our guidance was given at 1.85% - 1.9%. Your question around exit was at 1.84%. How did you get back to that 1.85%? I think there are three major assumptions on why we think it's going to get there. First, SORA fell quite significantly in the second quarter. It fell 50 basis points, even though the rates in the U.S. actually had grown. I think SORA maybe had.
That's diverged, or whatever.
Our view is that the three-month SORA will probably end the year at around 1.7%. That's one of the major assumptions underpinning that.
Isn't that lower than now? Is that right?
1.7%-ish. We think there's probably a little bit more room because we are expecting three more rate cuts from the Fed through the course of this end of the year. There will still be some impact, but probably the magnitude of the transmission will be more moderated. The second impact that I think your colleague mentioned earlier on in terms of one account, savings rates, while we've announced it in May, the impact of some of our initiatives in terms of reducing the NIM costs and so on, we will see in the second half of this year. Right? Now, the third is the HIBOR rate. Although the Hong Kong dollar, in terms of our book exposure, is small, it's only about 6%, but there is still an impact because of the significant shift in the Hong Kong rate.
We do expect that the present, circa 1% in terms of the one-month HIBOR rate should recover and stabilize around 1.6% by the end of the year. The HIBOR rate actually fell almost 200 basis points, just for perspective. If some of these assumptions pan out, I think that expectation in terms of where we get back to in terms of the NIM.
What about the wholesale funding? Will you sort of let go of some of the wholesale funding and move it?
Interbank and securities margins actually stayed constant. The liquidity in the system is actually quite flush. The movement was entirely mostly driven by asset repricing because of the rates movement.
Any final questions?
There was a second question. The second question around the non-interest income component. If you recall one of my slides I mentioned earlier on, actually, we have the second highest quarter on record.
This Q?
In 2Q.
In 2Q.
2Q is our second highest record, our second highest quarter on record. The only reason it dropped was because the first quarter was our highest on record. That was predicated upon a very chunky quarter for investment banking, where they saw extraordinary flows in investment banking fees generated. I would say it normalized in the second quarter.
Okay, good. It's not treasury income. I mean, not treasury income.
No, I think it's quite sustainable.
Okay. Can I just ask one last question? Because I think in Mr. Wee's speech, which I didn't quite expect, you said you are looking at sort of asset-light business. I mean, more asset-light high-ROE business. I think DBS also talked about this before. What sort of what?
It's a sector that we are looking at. If you look at our trade asset, our cash management, it's like we have to deal about 40% - 50% of the wholesale.
Of wholesale? Yes, but of the total loan portfolio, trade loans is about 10%.
Growing 12%. You can see that will improve our asset in terms of risk management.
Risk management.
It's slow business, right? You can't see it on a quarterly basis. It's accumulated, right? This is why our people are spending a lot of time talking about supply chains, talking about connectivity. These are hard work, but once you get them connected to you, the business is flowing. If you look at the number, the trade.
You see the green shoes already. That trade income is growing at about 12% growth rate. If you look at the customer treasury income that we are able to generate from that, that's actually grown very strongly. If you think about it, trade, if you have trade loans and trade assets with customers, you naturally would lead to having that hedging, right?
Oh.
FX. The rate is hedging. If you're proactive about it, it leads to operating customer accounts. If you look at our CASA ratio today for wholesale bank, that's at 57%. CASA ratio is at 57%. The same mentality we adopt in our retail business. Our retail CASA ratio is 56%. These are very important elements in terms of looking at how to grow stickiness of the franchise and shape it so that you have a better proposition.
I think this is important. I hope you, as a reporter, don't just analyze on a quarterly basis. Very easy for me to achieve better quarter. I just build up my loan base. Easy.
You just do it.
This is the one that is shifting the balance. We are a big banker. One, two years, two, three years from now, you can start to see it. Otherwise, in the past, it's all property-based. It's very easy. Something happens. We are trying to manage our recent. I think to continue to invest in our technology platform, our cash management, to improve our CASA, to improve our cost of funds. Hopefully, the margin is a lot better. Also on supply chain. Afford direct investment. You heard my story. It will be a lot more visible to everyone. At the moment, it's sort of a decimal point. That is an enjoyable business.
You said you spend about SGD 800 million a year on technology alone.
Yeah.
Okay. Thank you. Yeah, shift CASA is good.
All right. Thank you.
Thank you.
Thank you.