[Company Representative] (OCBC): later, but before we do that, I will pass it to Chin Yee to present the results.
Goh Chin Yee: Thank you. Good morning, everyone. Thank you for joining OCBC's Q3 2026 results briefing. For the third quarter, OCBC Group net profit was SGD 2.04 billion. This was the second time on record we delivered a quarterly net profit above the SGD 2 billion mark. ROE was 13.1% on an annualized basis. Compared to a year ago, group net profit was 3% higher.
Goh Chin Yee: Banking net profit rose 16% to a record SGD 1.9 billion, but this was partly offset by weaker investment income from Great Eastern. This also impacted our group total income, which declined 2% year on year. Excluding the impact of GE's investment performance, group total income rose 6%. Net interest income was 4% higher. Fee income rose 8% from the strong Q3 in 2025, with sustained wealth momentum, stronger loan and trade-related fees, as well as higher investment banking fees.
Goh Chin Yee: Customer flow trading income continued to grow strongly, up 29% to a record SGD 480 million, driven by both wealth and corporate segments. GE's underlying business remained resilient, with new business embedded value growing 14%. Loans and deposits continued to grow, up 14% and 12% year on year respectively. Asset quality remained resilient.
Goh Chin Yee: NPL ratio was lower at 0.8%, and credit costs for the third quarter were 6 basis points on an annualized basis. Our liquidity, funding, and capital position remained strong. Common Equity Tier 1 ratio was unchanged from the previous quarter, staying at 14% on fully phased-in basis, or 15.5% on transitional basis. Moving on to our nine-month performance. Nine-month group net profit rose 10% from a year ago to a record SGD 6.24 billion.
Goh Chin Yee: Total income grew 7% to a new high of SGD 11.7 billion, driven by a record non-interest income from broad-based growth across fee, trading, and insurance income. Our annualized ROE was 13.5%. Moving on to our performance by key business pillars. Banking delivered strong results for the third quarter. Net profit rose year on year and quarter on quarter to a new high of SGD 1.9 billion, driven by record income, benign credit costs, and higher profit from our associates.
Goh Chin Yee: Our wealth franchise remained resilient. Banking wealth management income rose 7% year on year and 2% quarter on quarter to a record SGD 1.12 billion. Banking wealth management AUM grew 7% year on year and 2% quarter on quarter to SGD 358 billion, with continued net new money inflows. In the third quarter, net new money was SGD 6 billion, bringing total inflows for the nine months to SGD 17 billion. Turning to insurance. GE's underlying business remained resilient.
Goh Chin Yee: While profit contribution from GE for the Q3 was lower at SGD 147 million due to negative impact from adverse market movements, its nine-month profit contribution from insurance business grew 19% from the previous year. New business embedded value, or in short, NBEV, grew 14% year on year, lifted by strong sales in Singapore across both agency and bancassurance channels. NBEV margin also improved to 57.5% from 48.8% a year ago.
Goh Chin Yee: This reflects GE's success in shifting its focus to higher-margin products. We will now move on to performance trends, starting firstly with net interest income on slide eight. For the Q3, NII was higher at SGD 2.31 billion, up 4% year on year and 2% Q-on-Q. For the Q-on-Q increase in NII, this was driven by higher average assets volume and yields, partly offset by increase in funding costs, particularly from the higher US rates.
Goh Chin Yee: Average assets grew 3% Q-on-Q, mainly from customer loans. We have paused the deployment of assets liquidity into non-commercial assets this quarter, following strong loan growth in the H1. On net interest margin, SORA was higher in Q3, and this lifted our NII. Asset yields were higher, while the benefit from our deposit rate cut back in May 2026 was reflected this quarter.
Goh Chin Yee: However, the higher US rates resulted in a considerable rise in funding costs, contributing to the four basis points compression in our NIM to 1.66%. Three-month SOFR rose more than the overnight SOFR as the market priced in more rate hikes, resulting in our US dollar funding costs rising ahead of asset yields. The benefits from higher US rates should flow through as assets reprice progressively. Our exit NIM in September was 1.67%.
Goh Chin Yee: For the nine-month period, NII was just 1% lower as strong asset growth cushioned most of the impact from lower rates. We expect the rate environment to become more supportive and NIM to stabilize over the coming quarters. Our interest rate sensitivity, based on one basis point increase in rates across all currencies, was unchanged at about SGD 106 million.
Goh Chin Yee: Non-interest income for Q3 was SGD 1.42 billion, lower Q-on-Q and year-on-year due to weaker investment income from GE. Nine-month non-interest income was at a new high of SGD 4.93 billion, up 19%. This was lifted by record fee and trading income, as well as strong growth in insurance income. Non-interest income accounted for 42% of our total income. Let me move on to more details on fee, trading, and investment income. The next slide.
Goh Chin Yee: Q3 fee income remained strong, up 8% year on year, and broadly flat to the record level we had in Q2. This brought our fee income for the first nine months to a new high of SGD 2.15 billion. Q3 year-on-year growth was driven mainly by higher wealth management, loan and trade-related, as well as investment banking fees. Wealth fees growth momentum was sustained.
Goh Chin Yee: Q3 wealth fees of SGD 442 million were the second highest on record. This was 3% above our strong Q3 2025 wealth fees, led by higher bancassurance and fund management fees, although this was 6% below the record wealth fees that we had in Q2 of 2026. As of September, our invested AUM was slightly higher, although it remained at 62% on a rounded basis. Clients remained invested despite being more cautious in the Q3.
Goh Chin Yee: This is supported by our comprehensive product suite that enable clients to move to new enhancement strategies with defensive features, and that included structured products as well as selected funds. For the 9-month period, wealth management fees rose 25% year-on-year, underpinned by a larger AUM base and increased customer activities. Growth was broad-based across all product channels and wealth segments.
Goh Chin Yee: Wealth management fees accounted for more than 60% of our total fee income. Moving on to trading income. Our Q3 customer flow trading income continued its growth momentum and rose 29% year-on-year to a record SGD 418 million. This was driven by growth across all segments, in particular the corporate segment. However, this was more than offset by weaker investment results from GE, bringing our total investment and trading income 10% below a year ago and 33% below our record Q2.
Goh Chin Yee: In Q3, GE recorded mark-to-market losses, mainly on its shareholders' fund bond portfolio amid rising interest rates, compared to investment gains it had in the previous period, particularly the strong gains in equities in Q2. GE's investment portfolio are mark-to-market, which can at times result in quarterly volatility. Over a longer period, investment portfolios have positive returns in line with market performance.
Goh Chin Yee: These mark-to-market volatilities are not reflective of the underlying strength of GE's insurance business. Our 9-month trading and investment income grew 24% to SGD 1.6 billion, driven by record customer flow income. Customer flow income, in fact, grew 40%, with continued strong demand in wealth-related and corporate activities. Moving on to operating expenses. Our Q3 expenses remained well controlled, unchanged from a year ago and 3% below the previous quarter.
Goh Chin Yee: First 9 months operating expenses were SGD 4.6 billion, up 6% year-on-year, mainly from higher performance-related remuneration, as well as continued investments in technology to support business growth. Cost-to-income ratio for the 9 months was 39.2%, slightly below the previous year. We will continue to maintain cost discipline while investing strategically to support business growth. Customer loans grew 14% year-on-year and 3% quarter-on-quarter to SGD 372 billion on constant currency basis.
Goh Chin Yee: Loan growth continued to be driven by high-growth industries, including TMT and digital infrastructure, energy and renewables sectors, as well as Singapore residential mortgages and wealth financing. Sustainable financing loans rose 13% year-on-year to SGD 62 billion, accounting for 17% of total group loans. Our loan portfolio quality remained resilient. NPL ratio improved to 0.8% after remaining stable at 0.9% for the past 2 years.
Goh Chin Yee: NPAs declined 3% from a quarter ago to SGD 3.04 billion. Corporate NPA formation this quarter was benign, while we saw recoveries from some accounts in the Greater China real estate sector. Total allowances for the Q3 were SGD 52 million, lower than SGD 156 million in the previous quarter and SGD 139 million a year ago. As you can see from the chart, this was mainly due to the decrease in allowances for impaired assets.
Goh Chin Yee: For the 9-month period, total allowances declined 9% to SGD 424 million. Total credit costs were lower than a year ago at 14 basis points on an annualized basis. Our total NPA coverage ratio was 168%, while performing loan coverage ratio remains stable at 0.8%. Our strong coverage ratios continue to provide a healthy level of buffer to navigate uncertainties. Moving on to deposits.
Goh Chin Yee: Our customer deposits grew 12% year-on-year to SGD 461 billion, driven by broad-based growth across all customer segments. CASA grew 8%, while fixed deposits were 10% higher. Against the last quarter, deposits rose 1%, mainly from fixed deposits growth. We intentionally take in more fixed deposits this quarter to replace higher-cost wholesale funding.
Goh Chin Yee: Group loans to deposit ratio was higher at 79.5%. Our stable deposit base supports balance sheet resilience and flexibility in funding loan growth. Our funding base remained diversified and stable, with close to 80% from customer deposits. All funding and liquidity ratios remain well above regulatory requirements. Moving on to capital. Our fully phased-in CET1 capital adequacy ratio was 14.0%, unchanged from previous quarter. Transitional CET1 ratio was 15.5%.
Goh Chin Yee: Fully phased-in CET1 ratio was stable at 14% as profit accretion and benefits from balance sheet management initiatives mitigated our RWA growth and dividend payouts during the quarter. In particular, the impact of fair value to other comprehensive income, or FVOCI, on our CET1 ratio was minimal, at less than 0.1 percentage point. Despite increased market volatility in the Q3, our active bond portfolio management, including hedging and shortening of bond duration, had moderated the FVOCI impact.
Goh Chin Yee: Our target operating level of 14% for group CET1 ratio on a fully phased-in basis remains unchanged. We will continue to manage our balance sheet and maintain strong capital to support growth and navigate through uncertainties. With this, I end my presentation. Thank you for your attention, and I will now pass the floor over to Teck Long.
Tan Teck Long: Thank you.
Goh Chin Yee: Teck Long, please.
Tan Teck Long: Yeah. Thank you for joining us this morning. Maybe I should start by putting things into perspective. Last year, Q3 was our strongest quarter for the whole of 2025. So this quarter, we managed to beat the strongest quarter last year by 3%. This is despite the drag from GE's market. This quarter is also the second quarter where our group profit exceeds SGD 2 billion.
Tan Teck Long: The group profit of SGD 2.04 billion was about SGD 180 million lower than the last quarter, meaning Q2 2026. During our results briefing during Q2 2026, I highlighted that there is a trading income from the insurance operation which registered almost SGD 200 million gains in the equity portfolio. This is because there was a rebound in the equity market.
Tan Teck Long: In Q1 this year, or this year, it was the start of the US-Iran war, so the equity market plunged and corrected downwards. Then in Q2, there was a rebound. So GE's equity portfolio benefited from that. This quarter, GE does not have this SGD 200 million benefit. Secondly, because of the rate hike, GE's rates portfolio, the fixed income portfolio, was marked to market downwards.
Tan Teck Long: So this explains GE's performance this quarter. The underlying performance of GE remained resilient. New business embedded value is still growing double digit at 14% year on year for Q3 2026. Now, for us to achieve record high, for us to I will not say record high because Q2 was a record high quarter, right?
Tan Teck Long: For us to be above SGD 2 billion this year, it means, if you take into account the drag by GE, it means record banking income, record banking profit. I think that would be the first message. Some key highlights. Our net interest income hit the highest in six quarters. Our loan growth momentum was very strong, up 3% during this quarter alone.
Tan Teck Long: Year-on-year growth loans are up 14%. Year-to-date loans are already up double digit at 10%. Wealth fees beat last year's strongest per quarter, as I pointed out. Sorry. Wealth fees beat last year's strongest per quarter, while it was below last quarter's record fees. That means Q2 2026 record fees. This does not tell the whole story. We saw volatility in the financial markets, so customers gravitated towards low-risk product or products with defensive feature.
Tan Teck Long: So that income, we continue to capture that income, but it is captured under our customer flow trading income. Our wholesale banking franchise also has been growing strongly. Loans, trade, investment banking fees were all up. Customer flow trading income was up 29% to a record high, anchored by strong growth from our wealth business, which I mentioned just now. Customers actually moved from transaction fees towards defensive features kind of products, which is largely structured products.
Tan Teck Long: Wholesale banking franchise also grew strongly to contribute to the customer flow trading income. Now for Great Eastern, I mentioned just now, Q3 NBEV was up 14% year on year. Over nine months, Great Eastern's NBEV grew 23%. Profit contribution for nine months from Great Eastern is up 5%, including the market. Asset quality remained resilient. NPL ratio improved to 0.8%, and SPs was low this quarter.
Tan Teck Long: Our NPA coverage remained high at 168%. Finally, on capital. During the quarter, we registered strong growth of about 3%. We paid our H1 dividend, and we kept our CET1 stable quarter on quarter at 14%. With profit accretion, we can maintain CET1 at 14%, supporting mid to high single digit loan growth. To wrap up, we have a strong Q3 from our banking operations.
Tan Teck Long: Nine months group profit crossed SGD 6 billion for the first time to a record high, bringing our ROE to 13.5%. On this note, if we move to the next slide, we are going to upgrade our 2026 financial guidance. We are raising our 2026 guidance for the second time this year on the back of very strong performance. On loans, we started the year guiding for mid to single digit loan growth.
Tan Teck Long: We raised it to high single to double digit, and now we have to be in the double digit range. We are raising it to the low double digit range. On total income, we are now guiding to grow at least mid single digit growth. We started the year guiding stable to growing, but now we are guiding at least mid single digit. Net interest income now flat to a slight decline.
Tan Teck Long: Also a second upgrade since the first guidance was slight to moderate decline. Cost-to-income ratio, no change at low 40% range. Credit cost guidance lowered to 15 to 20 basis point. Chances are we will come in at the lower end. Ordinary dividend payout unchanged at 50%, and we will complete our SGD 2.5 billion capital return plan by FY26 with no plans for scrip dividend.
Tan Teck Long: We will share our 2027 guidance at our full year results in February. On outlook. Outlook-wise, a lot will depend on how the energy crisis triggered by the US-Iran war pans out. We continue to monitor closely the market conditions in Indonesia. Financial markets are expected to be volatile. We are focused on executing our Next Frontier strategy and sail a steady ship through choppy waters.
Tan Teck Long: Our loan pipeline remains robust and credit costs well contained. On wealth, customer investment sentiment has been cautious since July. Notwithstanding this, we are pleased that our customer acquisition remains healthy and long-term demand for wealth solution continues to be strong. We have the full suite of products to capture the customer inclination or preference on quarter to quarter, depending on market conditions.
Tan Teck Long: In end September, we enhanced our wealth proposition in Hong Kong with the launch of our OCBC Premier Private Client segment in Hong Kong. In Indonesia, I would like to give an update. Our integration of HSBC International Wealth and Premier Banking acquisition is progressing well. On this note, I shall hand it over to Qingqing.
[Company Representative] (OCBC): All right. Thank you, Chin Yee and Teck Long. With that, now we will open to questions. Okay, maybe from CNA.
[Analyst] (CNA): Hi. Thank you for the presentation. Angie here from CNA. Can you share more about what you mean by monitoring Indonesia market conditions? I was wondering, is it like the macro or the stocks of it, or is it related to haze? I mean, given what we can see in the news so far, and even the Parliament has also been talking about haze legislation as well. Is that something that you are monitoring?
Tan Teck Long: Yeah. We are monitoring what happened to MSCI's classification of the Indonesian market. That is all.
[Analyst] (CNA): Related to the haze, is there any sort of changes that you might be doing to operations or even changes in terms of how you screen the borrowers, or is it something that you are considering at the moment?
Tan Teck Long: We have a strict ESG policy, so we are very explicit about no burning of the forest. We will continue with that. Any of our corporate customers who are held responsible, established responsibility over causing the haze, we will consider reducing the relationship, downgrading the relationship, or even exiting the relationship.
[Company Representative] (OCBC): Yeah. Who you want to go next? Tanya?
[Analyst 1]: Yes. Hi. Congrats on the numbers. Very nice surprise. Just on Indonesia still, how much does Indonesia account to your group income as of Q3? Do you have concerns apart from monitoring? Second question, sir. You have strong CET1 ratio still. How much room do you have for decisions that require capital raising? Maybe ends in F5 or 6.
Tan Teck Long: Yeah. We have the number for Indonesia, I think it was 5%. So Indonesia accounts for 5%.
[Analyst 1]: Of the group
Tan Teck Long: of our income.
[Analyst 1]: Okay.
Tan Teck Long: Yeah, operating income. We are looking at Indonesia. Indonesia economy actually registered high GDP recently.
[Analyst 1]: So far.
Tan Teck Long: Yes, that's right.
[Analyst 1]: The number credibility. Qualifying group.
Tan Teck Long: But I can also share how we have been navigating Indonesia. We dialed back a little bit on our risk asset, our loan book last year. This year, we are back on the growth track. Based on local currency, that means in rupiah, using rupiah as a currency, we actually managed to grow double digit in our loan asset, and we grow double digit in our AUM.
Tan Teck Long: So that's pretty decent growth. What really impacted us is that when we translate it at the group level, there's an FX transmission. Now, we are able to do that. If we backtrack a little bit, when we actually announced The Next Frontier strategy, what I shared was that we are aware that there could be volatility and uncertainty in the environment.
Tan Teck Long: Then we asked ourselves how to grow our franchise, and the way to grow it is to leverage our knowledge and capabilities, including our product capabilities. So in Indonesia, we have been operating there for a long time. So we managed to find niches to grow. There are some sectors which are still growing in Indonesia.
[Analyst 1]: Such as?
Tan Teck Long: Sorry?
[Analyst 1]: Such as?
Tan Teck Long: Such as the tech sector. There are still data centers being built there, for example. We also see logistics as a growth sector. At the end of the day, Indonesia is an archipelago, therefore there will always be opportunities. We focus on that. There will still be more vulnerable segments, so we try to manage that exposure conservatively.
[Analyst 1]: But you are not curbing on some?
Tan Teck Long: We curb where we should curb.
[Analyst 1]: Now for capital question.
Tan Teck Long: Okay. On the capital question, there is still further room to optimize the balance sheet. Is there capital for growth? Yes, there is capital for growth because of 14%. If you want to buy something, you may buy. We can probably repair. Yeah, we can repair it. We can restate it back to 14%. So in any big acquisition, a bank will see a drop in CET1, but it can be restated later on.
[Analyst 1]: The main thing is to optimize balance sheet.
Tan Teck Long: Optimize balance sheet as well as reduce certain type of lower-yielding credit loans, for example.
[Analyst 1]: Sorry, and capital return plans extending into 2027?
Tan Teck Long: No, we have not announced anything on that. Certainly not in the Q3.
[Analyst 2]: Sorry, just one more question on this. You disclosed the SGD 234 million non-impaired allowance.
Tan Teck Long: Non-impaired allowance.
[Analyst 2]: Yes. Can I ask how much does it relate specifically to, because if you said Indonesia and the US.
Tan Teck Long: Sorry, 200. Can we show the slide just now, page 2? What we were showing on the screen. You are talking about 9 months.
[Analyst 2]: Yes.
Tan Teck Long: The 9-month number.
[Analyst 2]: Yes.
Tan Teck Long: Nine months. Oh, 9-month number. Sorry, I was talking, I was thinking of quarter. Okay. For the 9 months, you are asking us to talk about the non-impaired. So if you look at the slide, in January, sorry, in the Q1, because it was the onset of the US-Iran war, as well as there was the impact on the energy prices. So we were prudent, and we took provisions largely on the non-impaired loan provisions.
[Analyst 2]: How much of the allowance is related to Indonesia specifically?
Goh Chin Yee: Which is related to-
Tan Teck Long: Oh, how much is related to Indonesia? Some. We will not be disclosing it, because the nature of this non-impaired allowance is a portfolio management. It is not a single item management.
[Analyst 2]: And just now you mentioned some AI-related, like data center, this kind of sector. How much of your loan book exposure is currently exposed to these projects?
Tan Teck Long: Our loan book exposed to data centers is about 3% of our total loan book. AI-related is actually less than 1%.
[Analyst 2]: What is the outlook for this sector? Do you see AI can Do you expect AI risks?
Tan Teck Long: I get this question a lot. From our perspective, it is a little bit different. When we see the narrative about AI bubble, are we talking about equity prices, or are we talking about the players cannot meet their debt obligation? I will not comment on the prices, the stock prices of the AI players. The kind of deals we look at, we are very focused on the risk aspect. So we structure the deals around to make sure that the cash flow is there. So we prefer, for example, hyperscalers. We confirm take-out of the capacity, and we prefer hyperscaler with a portfolio of businesses as opposed to being a mono-line business.
[Analyst 2]: Thank you.
[Company Representative] (OCBC): Okay, Golam.
[Analyst 3]: Well, I was just wondering if I could. Anyway, congratulations on the best results amongst the banks. Just one little aside from us. Jamie, what do you mean by balance sheet optimization? Because you had quite a lot of loan growth, and your RWA couldn't have grown much because you said 140%. Could you explain what you did? I mean, is that your secret sauce? And yeah.
Tan Teck Long: Maybe we should not share with the media.
Goh Chin Yee: That is secretly and privately.
[Analyst 3]: Yeah. Okay.
Goh Chin Yee: Another occasion. We will do that privately. We will please answer the question.
Tan Teck Long: Yeah.
Goh Chin Yee: Whether or not we brought the secret. The secret sauce is secret now. No, no. Balance sheet optimization is things that we work on ongoing basis. Looking at areas of RWA, where we could, for example, managing of the limits, collateral usages. These are part and parcel of keep growing our book in terms of the RWA. We also look at hedging of our positions and all. So that resulted in sort of RWA staying steady, notwithstanding that there was some RWA growth due to loans.
[Analyst 3]: Also because you have 35% of the loans, based on what you have announced in the slides, is to high PB and wealth customers, consumer PB and-
Tan Teck Long: Yeah, for the wealth customers.
Goh Chin Yee: Wealth financing.
[Analyst 3]: Wealth financing, yes. Does that carry a higher risk rate under the-?
Goh Chin Yee: No, that is not true.
[Analyst 3]: Or not?
Tan Teck Long: Typically lower risk rate.
[Analyst 3]: It is a lower risk, yes.
Tan Teck Long: I can add on the balance sheet optimization is a continuous effort. There is still room to optimizing. That is a point that I can give.
[Analyst 3]: When you, the Indonesian acquisition, has that been paid for already? Is that in the CET1?
Tan Teck Long: The legal completion is May next year.
[Analyst 3]: Oh, okay.
Tan Teck Long: Legal completion. Right now, we are at the integration stage. Like I mentioned just now, it has progressed well. We are happy with that acquisition. We see a lot of opportunities because based on our own business, we registered double-digit growth in Indonesia.
[Analyst 3]: That acquisition is already within the set, is accounted for in the CET1 in your-is it assumed as paid or not yet?
Goh Chin Yee: Yeah.
[Analyst 3]: When is it?
Goh Chin Yee: Only upon completion.
[Analyst 3]: Upon completion.
Goh Chin Yee: Yes. Next will be Q2 of next year.
[Analyst 3]: It will be after that that you will see, you can give us more details on some capital management. Anyway, I assume it will be after that. I am asking for the share.
Tan Teck Long: Oh. No, we see that as a bolting on to our franchise to scale up. It is not so much about, I think, the overall financial planning in terms of capital return is, we look at it holistically.
[Analyst 3]: Now, dividend policy, you have already been very clear, it is 50%.
Goh Chin Yee: Yes, it is.
[Analyst 3]: You have grown your profit capital this year.
Tan Teck Long: That is right.
Goh Chin Yee: It will be higher than last year's 50%. That will be announced accordingly.
[Company Representative] (OCBC): Okay. Maybe Alicia from BT.
[Analyst] (BT): Thank you for the presentation. Earlier, Ms. Goh mentioned that under NPAs, there was some recovery in accounts for the Greater China real estate sector. I wanted to ask, in light of China's new tax rules on outbound investment and trust, have there been any other impacts on OCBC's client activity or AUM?
Tan Teck Long: From a wealth side, ever since the rule was announced, we were watching for customers monetizing their assets to pay the tax obligation. What we found, now that it is on high side, the customers actually kept their existing liquidity and facilities to pay for it. We did not see a lot of outflows because of that.
[Company Representative] (OCBC): Great. Over to-
[Analyst 4]: Hi. Thank you for the presentation. I have a couple of questions, if you do not mind. On Indonesia, could you share year-to-date performance from the franchise, like in terms of total income, what profit, and so on? Secondly, it is on AI funding. Earlier you mentioned about the loan book exposures to data centers, AI-related companies, and so on.
[Analyst 4]: With the midterm results kind of now past us, and there has been quite a huge sell-off as markets rethink the outlook for the sector. Could you share, is there any changes that you foresee in terms of how you think about some of these loans, or are you becoming more circumspect in the deals that you enter? Third question is regarding the results. I mean, trading income, say, for GE has held up well for the bank. It is quite a contrast to what we saw with the other two banks that reported earlier.
Tan Teck Long: GE?
[Analyst 4]: As in OCBC's trading income
Tan Teck Long: Yeah
[Analyst 4]: has held up well
Tan Teck Long: Yes
[Analyst 4]: outside of the GE part.
Tan Teck Long: Yes.
[Analyst 4]: Could you share what is it exactly that has kind of helped to push and or produce the result?
Tan Teck Long: Yeah.
[Analyst 4]: One final question is, earlier this week, Yongki mentioned that they noticed it is becoming a bit harder to cash in on the wealth aspect in a sense that everyone is competing for quality assets, and that is where you see funding costs going up and so on. Are you seeing
Tan Teck Long: Yeah, the wealth, right?
[Analyst 4]: Yes, on the wealth side. Are you seeing that trend kind of playing out, and especially with everyone kind of ramping up your wealth services?
Tan Teck Long: It is a competitive business. We are very competitive. We have executed well. There are still things to run. Let me tackle
Goh Chin Yee: one question first.
Tan Teck Long: Okay.
Goh Chin Yee: First on Indonesia.
Tan Teck Long: Okay performance. Our Indonesia performance, I think we can get the number. Yeah, we can share that. Because of the NISP.
Goh Chin Yee: Because the OCBC Indonesia outfit is a listed company. Their financial performances are also announced.
Tan Teck Long: Yes.
Goh Chin Yee: We will pass it to you if you want that. Okay. All right.
Tan Teck Long: Sure.
Goh Chin Yee: The second question on AI and data center.
Tan Teck Long: AI and data center. Like I say, for us, we have a prudent credit underwriting policy. We are not really investing into AI per se as a bank. Meaning not investing into AI equities. From a prudent policy, when we finance data center project, we require the data center project to secure power.
Tan Teck Long: We require data center project to secure the hyperscaler to enter a large part of the MSA before we will even consider. Just because there is a midterm election and therefore there has been noise over some of these projects, it does not affect the way we look at things because of the deep of our way. We do not do what we call in our language, speculatively.
Tan Teck Long: We say, "We have the data centers and hope that it will pick it up." There are some very lucrative deals out there, I would say, where if you have a hyperscaler deal, the amount you can charge for selling the compute, meaning the capacity, is actually lower. But you sell the spot prices, that means when the demand is today, it is actually a lot higher. For us, we are not tempted by this. We are tempted by projects where secure the offtaker, and we require it to be investment-grade at the scale of the offtaker.
Goh Chin Yee: There are data centers that are not related to AI. I think just now, just want to clarify again that the data center exposure, less than 3% for OCBC, and AI is less than 1%.
Tan Teck Long: Less than 1%, yes.
Goh Chin Yee: Yeah.
Tan Teck Long: Yeah.
[Analyst 1]: May I just ask, since we are on AI, not specifically to OCBC, but from your perch?
Tan Teck Long: Sorry, can. That's a third question.
[Analyst 1]: Sorry, sorry. But maybe
Goh Chin Yee: No, no.
Tan Teck Long: Maybe we can.
Goh Chin Yee: Maybe we can finish all the AI part, and then after that, we can. We have two questions about. Data center.
Tan Teck Long: AI is so popular.
Goh Chin Yee: It is like very popular.
Tan Teck Long: I am happy to answer.
[Company Representative] (OCBC): Okay. Right. Maybe, Shanya, do you want to follow up with AI? We have two questions first.
[Analyst 1]: Oh. No, no. Because we have a market round that continue from Q2 Asian hours, from your perch, what are you seeing in terms of client activities and flows? Is it a busy day in your market team? I don't see.
Goh Chin Yee: Oh, I see. Okay. Yes, it's a busy day. So we hold that off first. Okay, compared to trading.
Tan Teck Long: I just say one more thing about the midterm election. Let's say the midterm election slow down the new data centers formation, or especially AI-related. The existing data centers which are already completed, where they have full approval in progress, actually become more valuable because the capacity is in fact, there's not enough capacity.
Tan Teck Long: So big investment going there because they saw the demand. So now suddenly on the supply side, I'm not saying it will be, but if there's a constraint, then existing data centers are actually more valuable because it is an existing capacity. The second thing I would say is that, if the AI players cannot build new data centers or it's finding it harder to secure data center, their demand for funding actually will come down in the US.
[Analyst 4]: Oh, then the rate will go down more, maybe.
Tan Teck Long: Yeah, that I cannot know, man, because it is just one part of the whole interest rate.
[Analyst 4]: Yeah. The third question is about trading income. How is it that our trading income,
Tan Teck Long: Okay.
[Analyst 4]: can slow down?
Tan Teck Long: For us, strategically, we focus a lot more on customer flow trading income for the banking operation. Customer flow trading income means, for example, how do we help customers hedge their interest rate risk, FX risk, how we can create products which are more defensive in nature to help customers invest. This is basically the treasury-related fee business, that is the easy way to understand it, driven by our customers, us helping our customers to create products to solve their FX or interest rate or investment needs.
[Analyst 4]: Yeah. The last question is about wealth.
Tan Teck Long: Actually, our wealth, this is our wealth. Our trading income, customer flow from wealth is more than 20% growth. This is very strong. So fee, you see a dip because fee, there is a it is just from fund and transaction fee. If there is a change in market sentiment, obviously that transaction fee can affect us. When customer pivot, we are a bank with a full suite of product, so we are able to capture that income. That goes under the customer flow trading income from wealth.
[Analyst 4]: Do you foresee the whole wealth story to become a lot more competitive going forward and feeding into higher funding costs and so on?
Tan Teck Long: No, because it has always been competitive. We have to create our value proposition for our customers. Right now, everywhere in our franchise, we have become more competitive, and I am still continuing to invest in our systems, in our product capabilities, even in our RMs. We are investing in all parts of the business.
Tan Teck Long: We have not yet integrated or completed the transaction for Indonesia. Once that is completed, it will give us a scale. In the meantime, we are investing in upgrading our system all around. In Hong Kong, we are a challenger to the market, and we have been growing very successfully at very high rates. We are quite happy with that. We are competitive.
[Company Representative] (OCBC): Okay. Because The Straits Times is actually online, let's give Angela the opportunity to ask. Okay, so Angela's question is about outlook for lending margins. Margins for fees, trading, and insurance, are they sustainable?
Tan Teck Long: Sorry, again, outlook for?
[Company Representative] (OCBC): I think basically, I believe, Angela, if you are online, you can clarify. But basically, I think what Angela is asking is the outlook for fees, for lending. Yes, NIM. That is okay. The lending margin, but margin for fees, that is not margin for that is not so hot margin, but maybe the fee income, trading insurance, are they sustainable?
Tan Teck Long: We decided not to provide the outlook for 2027. For the last quarter of the calendar year, normally it is a softer season because of holiday season, people going for Christmas, aside from the more cautious market environment, which we see in October itself. So we are not giving guidance for next year, but we are giving guidance for the board this year.
[Company Representative] (OCBC): Okay. What would investors can expect from OCBC after we complete our capital return? I guess it is the same question as
Tan Teck Long: Well, we have said that we will revert back to the 50% dividend policy. Of course, the 50% of the larger profit is a weaker number than before.
[Company Representative] (OCBC): Okay. Angela, if it is okay, not okay, just let us know. Otherwise, I go back to Chania, your question, and then to Golam.
[Analyst 1]: Yes, this is not related to OCBC per se, but because today is a very big market day, like with the rally.
Tan Teck Long: Oh, yes.
[Analyst 1]: in AI, in stock, tech coming from US into, extending to Asian hours. What are you seeing in terms of client activities and markets? Like how busy, your analysts taking calls, your brokers are taking calls and stuff. Any colors that you could share?
Tan Teck Long: Oh, that's a-
Goh Chin Yee: I guess, the thing that they were doing was to prepare for that.
Tan Teck Long: No, I don't think the day-to-day changes. I mean, the stock market move up and down very rapidly. So, of course, our OCBC Securities will see some action. But generally, we see customers for the wealth business diversifying the portfolio. So, there could be a shift. They're seeing the shift towards more defensive kind of products.
[Analyst 1]: What?
Tan Teck Long: Defensive-
[Analyst 1]: Defensive
Tan Teck Long: yeah, kind of products. Yeah.
[Company Representative] (OCBC): Okay, Golam, the last question of the day.
[Analyst 3]: You talked about Indonesia, Hong Kong. Ask about Malaysia. You know, the nature of the Malaysian economy has changed so much, even from 10 years ago. It has gone more high-tech, there is this Silicon Island view and all that.
Tan Teck Long: Oh, yeah.
[Analyst 3]: Where are you in what you want for Malaysia, if I could ask that?
Tan Teck Long: Our Next Frontier Strategy, we took into account what is happening globally, and we took into account what we want to do with our ASEAN domestic markets. Malaysia, why I started with global, because Malaysia is actually part of the global supply chain for semiconductors and tech. Regionally, you find Malaysia having a lot of data centers because Singapore is land scarce and power scarce.
Tan Teck Long: Malaysia has that growing. You see the GDP of Malaysia is actually coming in pretty strongly. Up until recently, ringgit was also appreciating. We will benefit from that as part of our strategy in the tech shift. Under our franchise shift for Malaysia, we encourage collaboration between our Great Eastern ecosystem and our Malaysia banking.
Tan Teck Long: Great Eastern in Malaysia is dominant. They have even more customers than the bank. I think there is quite a lot of cross-sell opportunity. The second is we are also replatforming Malaysia to focus on the wealth business.
[Company Representative] (OCBC): Okay, Vivian.
[Analyst 5]: Thank you for your presentation. Once again, I have questions on AI. Just to reply, with the midterms and the sell-off as my second connection. Do you expect demand for AI financing to go down? Do you still see it as a growth opportunity?
Tan Teck Long: Okay. So, all right. If you all don't mind, I have gone a little bit technical, so like how we underwrite fees for AI and so on and so forth. If you talk about the views of AI, we see that the order book is actually pretty strong for the next two years. So, in the physical world as opposed to financial market world, all this has been taken up in terms of capacity. Data centers have been built, the equipment need to come in, the semiconductors need to build, and there's bottleneck in the supply chain. So, huge demand for that. The order book will be there for at least two years, three years.
[Analyst 5]: Related to AI, some US banks have blocked agents from accessing bank accounts. I'm just wondering for OCBC side, what are your views on this, and have you seen instances where buyers try to access accounts through such agents?
Tan Teck Long: We haven't seen that for banking as much as, say, in the badminton court or something. So, we haven't seen that. But for us, because we are prudent, we actually wouldn't allow that. Yeah, we will not allow agents to directly access to transfer money or autonomously, if you
[Analyst 5]: I'm trying my luck also. I know you intend to share your 2027 guidance later on, but maybe could we get some early insights on how you're seeing next year?
Tan Teck Long: If I can see the insights over the next quarter, given current market, you will be very good. We will not be sharing 2027. I think market is moving very fast. For us, we have been able to produce strong results because, like I say, The Next Frontier Strategy is anchored by our insights and capabilities. This is very important. We have very good insight in Indonesia, for example. We managed to grow even under current market situation in Indonesia. We managed to grow all around.
[Analyst 5]: The rupiah came up a lot just back in Q3.
Tan Teck Long: Yeah.
[Analyst 5]: Are you still, I mean, in SGD, how do you report that money? Is it still a-
Tan Teck Long: Although OCBC Indonesia, for example, grew the loan book by 10%, when it translate to the SGD part, then it is a lot lower. It is like, I think, 9% or 10%, I think.
[Analyst 5]: Yeah. It is more than 10, and then we translate it, and then fine, but still growth.
Tan Teck Long: Yes.
[Analyst 5]: Because they are growing quite strongly.
Tan Teck Long: Yes. If rupiah stop depreciating, it will be beneficial for us.
[Analyst 5]: But you had the appreciation of the ringgit this year, didn't you? You had appreciated.
Tan Teck Long: Earlier on. Earlier on, yes.
[Analyst 6]: Okay. Just one final question. On the decision to not share the 2027 outlook, is it because of how volatile the markets are? I guess, where do you see the biggest risk? Is it over the geopolitical tensions or tension out of AI?
Tan Teck Long: I think all these risks has pre-existing risk for the last one year. Traditionally, we do not share in the Q3 for next year. For us, we typically share in the Q1 next year when we announce the last quarter result.
[Analyst 6]: I guess I want to maybe have a sense of your view about next year. Maybe not in quantitative, not in numbers but your sensing of the outlook for next year.
Tan Teck Long: Well, for our business, I do believe we can continue to grow. If we really look at our franchise, we are anchored by our four core markets. If you look at the four core markets, Indonesia, we are monitoring it and see what happens, partly because there is an MSCI downgrade, or not downgrade, reclassification to standalone status. So we have to watch what happens to that.
Tan Teck Long: But otherwise, our sense of Indonesia, the GDP is still growing. Our sense of Malaysia is that it is benefiting big time from the global industries. Indonesia is still benefiting from natural resource, by the way. Hong Kong, we still see a lot of potential in Hong Kong. If you think about the Chinese economy, because Hong Kong is a gateway in and out of China, if you think about Chinese economy, the consumption downgrade is true, the real estate problem is there.
Tan Teck Long: But if you really look at it registered 4%. Now, 4% is an average number of those which did not do well and those industries which do very well. Another way to interpret this is this. From a strategic viewpoint, what is important to the Chinese government, they are actually growing very strongly. So there is a foundation for growth there.
Tan Teck Long: Those sectors which are not very good, like for example, real estate, we have been digesting the greater China real estate portfolio in the past few years, proactively downgrading, increasing provisions, and so on. I think that, I think we are okay. So we are poised for growth in the greater China region.
[Analyst 6]: Malaysia, I think they do not have so many shares. So, very good potential there?
Tan Teck Long: So, yeah. In terms of tone of the market, it will be like this year. I don't think it will change very much in terms of tone of market. The risk factors are similar. Yeah.
[Company Representative] (OCBC): Okay. With that, thank you very much everyone for joining us this morning. Thank you.
Goh Chin Yee: Thank you.
Tan Teck Long: Okay. Thank you.
