Operator: Welcome everyone to UOB's media briefing for Q3 2026 results. Today we will hear from our Deputy Chairman and CEO, Mr. Wee Ee Cheong, and also our Group CFO, Mr. Leong Yung Chee, who will take us through the financial numbers in more details. After both presentations, we will be taking questions from the media. For those who are online, please remember to use the raise hand function on Teams if you have questions. I will now like to invite CEO to get us started.
Wee Ee Cheong: Mr. Wee, thank you.
Wee Ee Cheong: Good morning and thank you for joining us this morning. I said it many times, the operating environment has become more complex and continue to be more complex. Geopolitical tensions, trade measures, and high energy costs are reshaping investment and supply chains. At the same time, investment in AI, digital infrastructure, and energy security is driving business activity across the region. Having said that, we continue to see healthy customer activity, loan demand, and deposit inflows in Singapore, as well as sustained investment across ASEAN. In a way, this plays to our advantage as we have the biggest ASEAN footprints. We are sharpening our strategic focus, investing in capital-light businesses that broaden our sources of revenue, and we will strategically reinvest gain from recent divestments to accelerate growth and unlock greater value across our franchise.
Wee Ee Cheong: We will deliver even stronger platforms and capabilities with more diversified growth engines. As all of you know, wealth is one of our key initiatives. We are confident of achieving our ambition to double wealth income by 2030. For the first 9 months of this year, wealth income grew 13% year-on-year, a result of our investment in talent, advisory capabilities, and customer engagement. This, together with strong loan and card activities, help us achieve record fee income for Q3. There is tremendous potential in our franchise. With more than 8 million customers and growing across ASEAN, we have significant scope to deepen customer relationship across banking, investment, and wealth. Many of our customers have become more affluent with more sophisticated wealth.
Wee Ee Cheong: To capture this opportunity, we have strengthened our customer value propositions and advisory approach, increased our team of relationship managers, sharpened our focus on liability-led wealth acquisition, and added capabilities in North Asia, particularly Hong Kong. We are also strengthening our private banking service platform. We have established a dedicated strategic client coverage team and added three regional market heads to accelerate our transformation and strengthen regional coverage. Our discretionary portfolio management capabilities are among the industry's strongest. We are bringing together our strength under our One Bank program. Many of these customers have banked with UOB for many years and even decades. We have built on that trust as their wealth needs grow. I am very encouraged to see more entrepreneurs looking to deepen their relationship with us, from growing their businesses to managing and preserving their family wealth.
Wee Ee Cheong: We will accelerate our investments in wealth in the coming year. Over the past few years, we have been reshaping our wholesale banking business. We invested in our transaction banking capabilities, strengthened our regional network, deepened our sector coverage. This is not something new, and some of you has been with me for a long time and continue to articulate our strategy. The results are actually shown now. You look at the trade loans grew 31%. Cash mandates increased 20%. Digital transactions rose 37%. Anchors onboarded onto our financial supply chain management platform increased 13%. This reflect how our customer relationships are deepening. We are moving beyond lending to become an integral part of our customer day-to-day operations. This creates more sticky relationship, allowing us to capture more transactions and deposit flow and grow recurring income. We are also attracting more new-to-bank customers across the region.
Wee Ee Cheong: We are positioning our portfolio for the next phase of growth, including sectors shaped by AI and digital transformation. We remain disciplined in credit underwriting. We are managing our legacy asset quality hotspots closely and have adequate provision coverage. Our capital, funding, liquidity positions are strong, and this give us the flexibility to support our customers and invest for growth. We are confident our ASEAN franchise is a unique differentiator. Few banks have the network, customer relationship and regional capabilities that we have built over the years. This unmatched advantage is becoming increasingly relevant as businesses, capital, and wealth move across into our region. Customer increasingly want a trusted banking partner that can support them across the market and their business, personal, and family needs. UOB, I believe, is well-positioned to connect our customer regionally.
Wee Ee Cheong: We are already seeing the benefits through stronger fee income, deeper customer relationship, and growing cross-border business flow. Our strong balance sheet give us the capacity to support customers and invest through the cycles for the long term. Looking ahead, I see significant upside for the group. We have a differentiated franchise, trusted customer base relationship, and the financial strength to deliver sustainable growth. With that, I think let me hand over to Yung Chee to walk you through the result in more detail. Thank you.
Leong Yung Chee: Thank you, Ee Cheong. Good morning, everyone. I will take you through the financials update. Starting with the overview, I wanted to leave you with four key takeaways. The first key takeaway is that we had a quarter of very broad-based income streams that support our earnings stability. In this quarter, we had a record fee income, sustained momentum in our wealth and cards business, and our customer treasury income in the global markets business also reached new highs. The second theme is our balance sheet continues to grow very healthily. There is strong momentum in our loan growth in wholesale, particularly in trade, where we grew 31%. But in our mortgage loans, as well as our other non-trade loans in wholesale continue to grow robustly. In terms of asset quality, as CEO mentioned, our credit cost is under control. NPL ratio has eased.
Leong Yung Chee: Our GP coverage remains unchanged and adequate at 0.9%. In terms of capital, we have a resilient capital position. Strong capital buffers allow us to absorb any market volatility. I will next take you to some of the financial numbers. Q3 net profit was at SGD 1.3 billion. Our net interest income broadly stable, net interest margin did narrow 6 basis points this quarter to 1.68%. This is largely due to higher funding costs. I have some additional slides which I can go through that in more detail. Net fee income, as mentioned earlier on, rose to a record high. We were record high both on a gross as well as a net fee basis. This was driven largely by an all-time high wealth piece and stronger loan-related activities. Trading and investment income moderated this quarter to SGD 322 million.
Leong Yung Chee: This is amidst a less favorable market condition, but within that, the customer-related treasury income hit a new record. I have mentioned NPL ratio eased to 1.5%. Our NPA coverage at 86% or 269% after taking collateral into account remains adequate. I have talked about our resilient capital position as well post our interim dividend payout, and our funding positions remain strong. Next. Q3 versus last quarter, net profit was lower largely from an absence of non-recurring divestment gains. Total income declined slightly from higher funding costs and softer trading and investment income. Our fee income and treasury income recorded highs. Expenses fell in line with income moderation, while our total allowance increased mainly due to higher loan allowances from loan growth. Next, let me dive into some of the business segments.
Leong Yung Chee: If you look at our retail business, the key takeaway was that the income at the net profit before tax line is stable despite margin pressures. Wealth maintained a double-digit growth. Our wealth grew 13% in terms of income. We have invested AUM up 9% year on year, improving our invested AUM mix to 43%. Similarly, our credit cards business registered double-digit growth, 25% increase year on year from higher card billings along with normalization of rewards costs. Net new money totaled about SGD 5 billion for year to date, while conversion, as I mentioned, the invested portion grew to 43% from 41% a year ago. Next, in terms of wholesale banking, you will see that the profit before tax grew 32%. Our allowances normalized following higher provisions set aside last year.
Leong Yung Chee: Transaction banking remains a key driver, constituting about half of GWB income, underpinned by solid growth in CASA, trade balances, and deposits growth. If you look at our contribution from investment banking, it continues to see healthy deal flows, although year-on-year fees eased from the record levels delivered last year. Income mix from non-real estate sectors at 72% remains steady. Cross-border income contribution remains stable at 28%. In terms of global markets, I mentioned earlier on that the treasury customer income, which is driven by strong demand for hedging and investment solutions from our customer base, both in retail and wholesale, that grew to a record quarter. The non-customer treasury income was moderated amid market volatility. Next, on net interest income and margins, our NII was broadly stable at SGD 2.3 billion, supported by healthy loan growth. Net interest margin, however, came under pressure.
Leong Yung Chee: It went from 1.82% a year ago to 1.68% this quarter. On the next page, we will show you a little bit more detail about where this came from. Net interest margin was impacted by higher funding costs, as there was intense competition amongst banks for deposits being raised. Even though an external environment of firming interest rates, the pricing of asset yields versus the pricing up of cost of deposits were acting in different directions. Longer term, a rising benchmark interest rate will be supportive to a better margin. Of the 6 basis points decline this quarter, you will see that 3 of the basis points decline was from higher US dollar funding costs, and 2 basis points was from Sing dollar margin compression. We did, however, also do very active balance sheet management, which provided us with a 2 basis points uplift.
Leong Yung Chee: Next, on gross fees, I mentioned earlier on that our total fees are at a record. Year-on-year fee growth at 2% within our guidance. The last quarter, in particular, you will see an 8% rise in our fee income. On expenses, we continue to exhibit very disciplined cost management. Our total expenses rose 2% year on year, within our guidance. On non-performing assets, our NPL ratio has eased to 1.5%. Our new NPL formation has improved from the previous quarter. There are new inflows still concentrated in a few Greater China real estate accounts, but our coverage remains adequate. If you look at the credit costs in our next page, we are guiding towards a 25 to 30 basis points credit cost operating range, which has been the case. Our total credit cost for this quarter was at 24, year-to-date at 26 basis points.
Leong Yung Chee: In terms of provision coverage on the next page, our GP coverage stays at 0.9%. NPA coverage and unsecured NPA coverage, I mentioned earlier, is at 86% and 269% respectively. In terms of gross loans, customer loans expanded 6% year on year. It is quite broad-based across our different industry sectors, as well as across geographies. Both wholesale, trade, retail mortgage portfolios all exhibited growth. On our funding and liquidity positions, it remains solid. Both our LCR and NSFR are both comfortably above regulatory requirements. Which brings me to my last page on capital ratios. Our CET1 ratio at 14.6% post-dividend payouts in the quarter remains well-positioned and with adequate buffers to navigate any potential market headwinds, as we have seen in the last quarter with some significant swings in terms of high yield bonds, bond yields. In summary, let me just recap again the four key takeaways for you.
Leong Yung Chee: Broad-based income streams supporting our earnings stability, a very healthy balance sheet expansion, our asset quality with adequate provisions remains stable, and our capital position remains stable. We are giving some outlook on 2027 along the following lines. We expect loans to be in the mid-single-digit growth vicinity. NII is likely to be above 2026 numbers, supported by the balance sheet growth. Fee income, mid to high single-digit growth. Operating costs of mid to high single-digit increase. And credit costs within the 25 to 30 basis points range. With that, I end my presentation, and we open up to questions and answers.
Operator: Yeah. Okay. Thank you. We will take questions from the room. Any questions?
[Analyst 1]: I have three questions.
Operator: Yeah, Tanya.
[Analyst 1]: Yes. Could you talk about measures to improve ROE, which I saw a slip in this quarter? Second question, Yong Chi flagged a higher operating cost for 2027, and it seems to be higher than the nine-month rate. Could you share why? The third question, One Raffles Place transaction, do you see a closing soon? Thank you.
Leong Yung Chee: Okay.
Leong Yung Chee: These questions, maybe I go in no particular order. On One Raffles Place, I think the question has come up from there a few times. We have reiterated we do not comment on speculation on transactions. Even when the transaction gets materialized, we will be sure to announce that. We do not comment on speculations. On cost guidance, I think if you look at the particular quarter, it may look high, but if you look at it across the time period, you need to understand some of the costs incurred may be lumpy in quarters, but the more reliable view on cost increase actually is across the year. If you look at year-on-year, actually our cost increase is 2%. We are guiding next year, the cost level likely will be elevated from a few perspectives.
Leong Yung Chee: We are investing, trying to accelerate a lot of our business areas to drive ROE, and you think to your first question as well. Wealth is a very key area that we are investing, which we have articulated before in previous quarters. We are also investing in areas such as AI and technology core. These areas all require us to make investments and continue to invest in our people as well. If you looked at the last four quarters prior to this, our costs have remained largely flat. Despite our balance sheet and income growing, we have actually kept our costs last year, the entire year, relatively flat. I think it is inevitable that we will have some variable costs that will kick in, that will pull some of the cost numbers upwards. We will remain very disciplined with how we manage our costs.
Operator: Katana had a question.
[Analyst 2]: So trade loan and wholesale deposit, they actually grew strongly. Yet transaction banking income fell short per se over the nine months. So how do you count those numbers into account in the 2027 study?
Leong Yung Chee: There are some parts of the income that is not recorded. It is captured in our global markets, which we will look to rationalize that when we go into 2027 reporting. But if you look at transaction banking, it is fundamentally driven by a few areas, cash management, trade. It is also driven by some of our other cross-border type supply chain financial management. Our trade loans grew 31% for the period. And if you look at our trade loans today, it constitutes about 19% of our wholesale banking loans, or rather about 13% of total bank loans. That trade business actually has been a big contributor in terms of cross-sell and increasing our return on RWA. Even though trade loans per se have lower margins, but trade loans comes with our ability to cross-sell FX, rates, and also our cash management services.
Leong Yung Chee: From a total returns, actually, it is very returns-enhancing for us.
Operator: Any other questions so far?
[Analyst 3]: Can I ask about the NPL? Because I thought that you have reduced the Greater China real estate and hospitality exposure, but the NPL ratio seems to be rising to 5%. Can you explain the reason? And also, I saw you mentioned that you are repositioning the portfolio. Can you give more details on which borrowers, properties, are being targeted?
Leong Yung Chee: As you would be aware, we cannot comment and do not comment on individual borrowers. There is an active reshaping of our portfolio that is taking place. So in terms of REH as a percentage of our loan portfolio, that has been gradually declining. You do see recovery in Greater China asset quality issues, but they are recovering slower than what we are seeing in the US portfolio. We intend to manage that very actively, and we will see that gradually decline in terms of non-performing loan numbers, but it will take a bit of time.
Operator: Guna?
[Analyst 4]: I think I have three questions, but can I start with the first one on, your NPA coverage has dropped to like 86%. I thought a year ago you emphasized that it was at 100%, and I was under the impression, maybe wrongly, that you were going to maintain it at 100%. So if you could address why you have not done that.
Leong Yung Chee: I think a year ago when we raised the one-off preemptive provisions of SGD 615 million, we did highlight the focus was around the GP ratio and managing to total credit cost. At the same conversation, we brought the GP coverage ratio from 0.8 to 1, and we also articulated that we would like to operate between the 0.9% to 1% range. We are at 0.9%. It is the low end of the range, but we are within the range that we said we will comfortably operate in. And in terms of total credit cost guidance as well, we said 25 to 30 basis points. We are within that guidance. In fact, we are slightly below that this quarter.
Leong Yung Chee: I think from an asset quality and how we are managing the non-performing loans, we have been executing as we had articulated, and you have seen significant improvements in our US portfolio and how we manage it, and overall numbers are trending down. Greater China, as our Zaobao friend has also highlighted, it is taking us a little bit longer. We are seeing recoveries, but it is taking a little bit longer than we expect.
[Analyst 4]: You also just mentioned that you are actively reshaping the portfolio.
Leong Yung Chee: We are growing in some of the other non-real estate sectors, such as digital infrastructure, energy sectors. These are higher growth areas. Some of our loan growth that you are seeing in these markets are from these areas. If you look at the loan numbers, even though you may see loan growth in these markets, they are not from our REH sectors. Although the overall pie looks stable or maybe slightly increasing, the mix of the loan portfolio from REH has declined.
[Analyst 1]: In better sector, basically.
[Analyst 4]: Better sector.
[Analyst 1]: Like digital
Leong Yung Chee: That is right.
[Analyst 1]: infrastructure rather than real estate.
[Analyst 4]: I have just asked whether you have tightened your credit processes. The last question is, of course, on the securities book, because Q3 was a volatile quarter. Did you take any initiatives to hedge any of the positions, or is there just no way to do things like that with the way the interest rates trended?
Leong Yung Chee: No, of course, we are always actively managing our asset liability book. There were some significant movements in Q3, particularly in the bond markets. If you look at the 10-year US Treasury yield, it shot up to about 4.5%. It has come back down to about 3.94, 3.95. Yeah. There was huge volatility, but it has receded some 40 basis points since. The height of that volatility coincided with the Q3 financial close, and I think that is something you will see across the industry.
[Analyst 4]: Will your CET1, the fully loaded CET1, rebound by the end of this year because the volatility caused your book to come off a bit?
Leong Yung Chee: Q3 has some anomalies. Even without market movements, historically, Q3 is usually the lowest because of the dividend payouts. With each quarter's income coming back in, it actually replenishes your CET1 ratio anyway. Yes, the answer is we expect that to strengthen.
[Analyst 4]: Okay. Have you tightened your credit processes so this whole Greater China CRE issue does not arise again?
Leong Yung Chee: Yes, of course. It is not just Greater China. I think when we went out with the one-off provisions last year, we highlighted there were a few hotspot markets. Primarily it was US, primarily it was Greater China, a little bit in Thailand, but that has receded. US has rebound significantly. Our NPL ratio in US was about 4% last year. It has come down to below 2% currently. The US market recoveries that we have seen actually have been very significant and better than we expected. In Greater China, it is recovering, but not at the speed that we saw.
[Analyst 4]: Then the additional SGD 500 million in your NPA books, where was that from?
Leong Yung Chee: Majority of that was still Greater China, and majority of that was in real estate related. Just bear in mind, you take this into context with what I said earlier on. We have reshaped and reduced our exposures in real estate. But these are the ones that we have had on our books for a while.
Operator: Any other questions?
[Analyst 1]: Just to follow up on this, but will we see more like a spike in provision because of the slower-than-expected recovery in China going forward?
Leong Yung Chee: Not likely.
[Analyst 1]: Not likely. Okay. Thank you.
Operator: Venetia.
[Analyst 5]: On the topic of, I guess, diversifying the portfolio to have more digital infrastructure-related financing, like how much exposure does the bank have to AI-related financing?
Leong Yung Chee: AI-related financing, yes.
[Analyst 5]: Are you tightening your lending standards for such projects?
Leong Yung Chee: Maybe to share a few data points. Our AI-related financing today constitutes less than 5% of our loan book. Yes. It is a mix of short-term and long-term tech loans. So, of course, we have very tight discipline in applying our credit processes to this so that we do not have the same sort of CRE issues. You have to look at the different types as well. First of all, longer-term facilities, which we call term facilities, have to be based on cash flow lending and match with strong credit profiles of the borrowers and off-takers. So, we do look at the off-take contracts and examine who are the off-takers. There could also be shorter-term facilities where it is working capital against purchases of inventory. That has to be based on legal contracts from strong credit profile buyers, right?
Leong Yung Chee: You have to look at a mix of long-term and short-term facilities. Today, total, the facility less than 5% of our loan book. I will also stress that there are no NPLs in this portfolio at the moment.
Operator: Yes.
[Analyst 5]: Do you guys believe that the 5% growing in the coming quarters?
Leong Yung Chee: It is one of the areas where it is exhibiting the strongest growth across industries, but we also, we are not immune or ignorant about what is happening across the AI-related financing space. Credit default swaps and yields for some of the lower credit rated ones obviously have shot up. We have to be very selective about which ones we do, but we cannot be ignoring that this is a very exciting and high-growth area right now.
Wee Ee Cheong: I think this is something I agree. We have to have the discipline on the portfolio limit. We look at even real estate, right? We are very strong in real estate lending. We look at Hong Kong the last 10, 20 years, real estate was boom. This is where we got us into a bit of trouble, right? But I think end of the day, it is a discipline, it is a balance sheet management that I think we are a commercial bank, right? We cannot avoid some of this up, down, up, down. But end of the day, with the discipline, with the balance sheet strength, I think we can overcome some of this.
Leong Yung Chee: That discipline applies across different levels, right? Discipline in how we select, discipline in terms of how we evaluate. Our risk management also applies across certain geographical limits, to individual limits, to sector limits, and so on. So there are multiple sort of parameters that we assess when lending to the sector. Vivian?
[Analyst 6]: Thank you for your presentations earlier. I have several questions. Maybe related to build on what Venetia asked, do you see this financing being tightened daily, or have the standards remained? Another question on net interest margin declining largely from higher deposit rate cost. Do you expect this pressure to persist? Because I note that your net interest income is expected to rise in 2027. Another question, color on trade and investment income this quarter. How much of this decline was due to mark-to-market losses from rising bond yields?
Leong Yung Chee: Okay.
[Analyst 6]: Final question. Maybe I can ask that later. Yeah.
Leong Yung Chee: Maybe let me take the first.
[Analyst 6]: Yes, yes.
Leong Yung Chee: first few questions because I think similar to my response to Venetia on AI-related, we definitely see it as a growth area, but we got to do it in a very disciplined manner. If you want more detail, actually the exposure has to be a lot more granular because there are data center physical infrastructure players. There are also people who are doing new cloud services. If you extend that, there is also financing that we may do in terms of working capital for GPU to OEM or ODM players. The totality of all that amounts to the 5% that I mentioned, less than 5% of our total loan book.
Leong Yung Chee: But the important thing is that when we underwrite to these sort of areas, the focus is really on making sure there is reliable cash flow, reliable off-takers, strong credit profile of the borrowers, especially if they are borrowing, if the borrower is from a hyperscaler, for example, with long-term off-take contracts. Those are very important considerations, and the shorter-term ones have to be from very reputable, strong credit profile, global buyers. Net interest margin, I think the issue is in the past when you are in a rising rate environment, asset prices tend to reprice and cost of funds actually hold. But we are in an interesting environment where we are all competing very aggressively for quality assets. So asset pricing actually has not grown that much, even though benchmark rates have started to come up.
Leong Yung Chee: But yet, we are also in an environment where we are all competing very aggressively for wealth. Your funding costs relating to deposits actually has a big bearing in terms of your spending point to develop your wealth franchise. If you notice, your deposit rates have all been creeping up lately. Very good for consumers, but from a funding cost and net interest margin, it applies pressure and compression. Some of these will obviously start to adjust as benchmark rates come up, but usually it takes one to two quarters before it flushes through the financials. For example, you may lock in a mortgage rate today, but you are not actually drawing down on your mortgage loan until your property transaction closes, right? Sometimes there is a one to two-month delay.
Leong Yung Chee: So things like this actually impact when you see the flow-through or financial impact, even though you observe the rates coming up. Yeah. Sorry, TNI, what was the question again, Vivian?
[Analyst 6]: How much of this decline was due to market losses due to bond yields? Or maybe just provide some color on those would be helpful.
Leong Yung Chee: It was not insignificant. As I mentioned in Q4, actually the bond yields spiked using the US 10-year Treasury. It went to 4.5, but it is now receded back to 3.95-ish. It was a significant swing. I think across the board, you will see that the non-customer portion, which was why in our last quarter, you see that contract. That is largely based on the reactions to market volatility.
Wee Ee Cheong: Yeah, of course.
[Analyst 6]: A last question on AI agents. Have you detected third-party AI agents accessing customer accounts, including cases where they acted beyond users' instructions? Because US banks have seen this problem. Some of them have blocked access. How does the bank distinguish authorized activity from rogue transactions?
Wee Ee Cheong: I think he is hitting this. I think we are generally quite strict. I think responsible innovation is the key. At the end of the day, I think we are using technology basically for productivity, customer engagement, revenue, and risk management. The human element is still very important, the trust, the judgment. This is where hopefully we get a better portfolio. We have the machine to help us improve our productivity. We have the people that UOB as an organization has been around for 90 years. The trust element becomes very important. This is where I think overall we are very confident in our franchise because we are talking about One Bank. We are basically commercial bank. Now that we want to double down on wealth, you can see. And your hard-earned money, you put your savings, you want someone to be trusted, not just machine.
Wee Ee Cheong: Machine will help you to analyze, help you to make sure the accuracy, the productivity, but you still need human, you still need trusted organization. And I think we have the advantage. As you talk about the NIM, as you talk about income, we have multiple products. Our consumer business, not just mortgage, card business, lifestyle business. You look at our credit card, the spending is SGD 60 billion. You don't underestimate that portion of it. So when a customer engages with us, it's the multiple product. It's an institutionalized relationship that hopefully will give us the kind of profit that we are looking for. Otherwise, very difficult to face a challenge. You want the deposit, high deposit, then at the end of the day, if you don't have something to offer them, then you will go back to your, you will hit your P&L.
Leong Yung Chee: Within the question actually opens up a very broad area, but if I distill in a few areas. I think if the concern is around use of Gen AI agents like news to access account and so on, I think these are effectively quite ring-fenced off. We do want to promote use of AI amongst our employees, but we want to do this in a very responsible way. And trust with our clients, trust with our staff, I think is paramount for us. In conjunction, I think some of the AI threats that you are referring to, whether it's because the ability of tools today to detect vulnerabilities in our system actually has gone up significantly. But the very same tools allow us to also react faster in doing patching. So some of these are done in conjunction as an industry with our peer banks.
Leong Yung Chee: Some of it is coordinated with MAS and our cybersecurity agency. So there is quite a lot of collaboration across the industry in identifying and sharing information so that we can react and patch some of these vulnerabilities as quickly as we can. So it's a double-edged sword, but we also want to be careful that we don't discourage our employees from actually adopting some of these tools, but we do that in a safe environment within our cybersecurity defenses.
[Analyst 6]: Oh, I was actually referring to customers using AI agents to access your account.
Leong Yung Chee: In the news type example. No, that is not available.
[Analyst 6]: Okay.
Leong Yung Chee: Just a quick question on, any comments on the impact of the MSCI announcement on Indonesia and the ensuing market volatility? Is there any impact on your exposure to the country? It is a proposal for reclassification. I think we got to be very precise with the terminologies being used. As the proportion, it roughly makes up, Indonesia makes up roughly about 3% and under 3% of our loan and profit contribution. We do not see a significant impact. As CEO mentioned earlier on, our long-term view on Indonesia is positive, even if short term there could be some volatilities.
[Analyst 7]: Thank you.
Leong Yung Chee: Yeah.
[Analyst 6]: On margin, what is your outlook for next year given the pressures on deposit cost this quarter?
Leong Yung Chee: It is becoming quite difficult to forecast margins reliably because of the flow-through rates between benchmarks, particularly US Fed rates to SORA. Strengthening SORA definitely will be very supportive and constructive for our business. As I mentioned earlier on, the dynamic in terms of how much, when, and to what extent our assets are able to reprice versus cost of funds moving in the opposite direction, and our ability to dynamically shift our asset liability mix and react to it actually has an impact on the NIM outcome. We will definitely keep an eye. I think balancing our NIM is certainly a priority, but we are also guiding to a NII outlook next year that should be better than 2026. We expect that to continue to strengthen in terms of overall NII. There are some levers available.
Leong Yung Chee: For example, we can accelerate some of our balance sheet growth to compensate for it, in addition to the other tools we have in terms of pricing both assets and liabilities.
[Analyst 2]: Okay.
Operator: Sorry, we will take a question from online. I think Amanda from Dow Jones has a question. Can you unmute yourself and ask your question?
[Analyst] (Dow Jones): Hi. Can you hear me?
Operator: Yep.
Leong Yung Chee: Yes, Amanda.
[Analyst] (Dow Jones): Yeah. Hi. Thanks for sharing the outlook for NII for, I think, next year. I just wanted to check, because during the last quarter, the guidance was largely maintained. Is there any changes in guidance for 2026 this year?
Leong Yung Chee: You are referring to NIM, is that correct?
[Analyst] (Dow Jones): Yes. Referring to NIM, fee income growth, loan growth, net interest margin.
Leong Yung Chee: No, for the full year, I think most of those metrics are intact as guided, save for NIM. I think NIM, our guidance previously was 1.75% to 1.8%, likely to be on the lower end of that range. That was the guidance we gave last quarter. But with this quarter's continued pressure on NIM, that is likely to fall below the 1.75% for the full year. We still got one more quarter to go. But with the pressures that we are seeing projected forward, we think that is going to be below 1.75% for the full year. I hope that addresses your question, Amanda.
[Analyst] (Dow Jones): Yes. Thank you very much.
Operator: You had another question?
[Analyst 2]: One last question. What share of group profit now comes from Malaysia, Indonesia, Thailand, and Vietnam, and where do you think that will be in the next few years?
Wee Ee Cheong: Well, I think you would know the number better, but I think ASEAN franchise will constitute about 25%, 26%. It is growing. You can see the ASEAN is growing. Malaysia has done relatively well. I think this is something that we continue to strengthen, especially now our next neighbor is Johor, right? This is a big thing that I did not sign MOU with the authority. We are next to it. RTS is going to come in next quarter. This is something that, again, is a new area that I think we should take full advantage of. That is good. Thailand, we are the second-largest foreign bank in Thailand. Yes, Thai economy going through up and down, but I generally think it is a long term, right? I think Thailand will be able to put the action in place.
Wee Ee Cheong: You can see the number, Leong Yung Chee may have the number. It is actually, the growth is quite satisfactory. I am quite pleased. We are long term. We have been there for 25 years. So it is a question of having the commitment, and we just move, right? If you do not have a long-term commitment, every day you worry about volatility. Every quarter, I have to come and tell you up, down, up, down. It is very taxing, right? You have to look beyond all this, right? You take a view. Otherwise, every quarter you say, "Indonesia, why are you not doing it?" Right? This now, I cannot answer. Right? Take the long term if you believe in ASEAN.
[Analyst 4]: Can I ask another question? Because a lot of people are very short term, so I have to ask a short-term question. Everyone looks at share price, which depends on your dividend payout, dividend growth, your ROEs, your cost of equity.
Wee Ee Cheong: Your job is short term, right?
[Analyst 4]: Do you have any?
Wee Ee Cheong: Your job is short term. You want to report to inflation. My job is long term.
[Analyst 4]: Yes, yes. But we still have to look at the share price.
Wee Ee Cheong: Yeah, yeah.
[Analyst 4]: Sorry.
Wee Ee Cheong: Yeah, but share price is too up.
[Analyst 4]: I know it goes up and down.
Wee Ee Cheong: Too high, you worry about it coming down. Too low, you worry about
[Analyst 4]: Okay. I think last quarter, I think Yung Chee gave a guidance of the ROE of 13%.
Leong Yung Chee: 12% to 13% in the mid-teens.
[Analyst 4]: Right, yes. Is there a time period? Would it be in my lifetime?
Wee Ee Cheong: Honestly, I want to do it.
[Analyst 4]: Oh, hello.
Wee Ee Cheong: No.
Leong Yung Chee: Definitely.
Wee Ee Cheong: Oh, yeah. We have to have the discipline. But end of the day, you got to understand, it is a highly competitive market. Right? You look at the whole ASEAN region, where can you go today outside of ASEAN? Everyone is coming to ASEAN. If I do not grow, it just focus on one ratio. Someone will take away my lunch. This is why we are very disciplined. We are monetizing a lot of non-core assets. Okay? And it is to benefit our core business, right? We are building people. We are building platform. We are building products. We tied up with Allianz. These are all geared towards a long-term strategy.
[Analyst 1]: My medium-term question, when can we see ROE returning to 12% to 13% as you guided?
Wee Ee Cheong: Not medium-term, short-term ROE.
[Analyst 1]: Short-term also wants to do ROE at 12% to 13%.
Wee Ee Cheong: By end of the day.
[Analyst 1]: Yeah, thank you. Now it's 10.
Wee Ee Cheong: We have to invest in order for you to see the return. If I don't invest, immediately you can see the return. I cut off my technology investment, I cut off this, you will see 13%, 14%, 15%. You look at your entire operation, you look at the Thai bank, what kind of ROE you're looking at? No. What do you expect me to do? In Thailand, I double the ROE? It's not possible, right? If I cut off Thailand, I fly to Singapore, I can get a ROE. Is that what you want to see?
[Analyst 1]: Spending is necessary to boost ROE.
Wee Ee Cheong: Yes.
[Analyst 1]: Back to 12%, 13% in maybe.
Wee Ee Cheong: This is why I.
Leong Yung Chee: To do it sustainably, yes.
Wee Ee Cheong: Yeah. We have to do it. We have to hire people. Even though AI is we have to invest, right? Hopefully, we are projecting SGD 900 million economic value by 2030. We have to have certain ROI in mind. But it doesn't mean that I have to fire people. I have to improve the productivity, make sure the revenue starts to increase. So it's a process. It's not just one single point in time how much we can achieve now.
[Analyst 1]: Eugene, what other non-core assets do you have that you're looking to sell?
Wee Ee Cheong: You already see some of the property that non-core we are selling.
[Analyst 1]: Yeah, probably, but you've got a lot. You still have significant stakes in companies like-
Leong Yung Chee: We do, but we don't want to give rise to.
[Analyst 1]: Haw Par and UOL.
Leong Yung Chee: We don't want to give rise to speculation.
[Analyst 1]: Oh, okay.
Wee Ee Cheong: People say, "Think I want to sell," they will come and knock.
[Analyst 1]: Right.
Wee Ee Cheong: We are long-term strategic player, okay? You know directionally, it is a bank that we are focusing on banking, create powerful platform, we are able to compete. The people that we engage there, look at it well. They will see opportunity for the bank because we offer multiple products. Whoever want to join UOB will have the growth mindset to say, "Hey, this is the bank. I have the institution customer, I have the wholesale customer, I have the retail customer." They want to join us.
Leong Yung Chee: The discipline around it, Lula, is we have constant reviews in terms of the performance of our businesses, geographies, products, and so on. Obviously, this obviously has to look at financial operating and strategic rationale in terms of what they mean to the group. Any divestments that we do, will be directed towards investing back into our core so that we can enhance and deliver better earnings and stability over the long run. So, that should be a reinforcing flywheel where any divestments gets diverted into core business to drive our earnings and ROE. We do not want to give rise to speculation to any sort of divestment.
Operator: Okay. Any last questions?
[Analyst 1]: So, you did not give a NIM guidance, is that right? You gave a
Leong Yung Chee: We did not give a NIM guidance for 2027. I was answering, I think, Amanda's question around 2026. Our earlier guidance was 1.75% to 1.8%. We are likely to fall below that.
[Analyst 1]: I think we will fall below that.
Leong Yung Chee: Yes.
[Analyst 1]: For next year?
Leong Yung Chee: Oh, no, for 2026.
[Analyst 1]: Oh, what about
Leong Yung Chee: Next year, we did not give a guidance on it too. We gave a guidance that our NII for 2027 will be better than 2026.
Operator: All right. Thank you, everyone.
Leong Yung Chee: All right. Thank you.
