iFAST

[weijian]

When iFAST acquired the UK bank (now renamed as iFAST Global bank), I was a short and long term pessimist. The short term turned out to be right (normally it does, because of the way the capital cycle works). But Chairman/CEO/Founder Lim is calling out my long term pessimism as well. He will probably be more right than me as he has schooled me that "banking is the least competitive part of the finance sector".
We believe that several years down the line, shareholders will be able to see that our decision to buy a full-licensed UK bank in early 2022 has been a transformative move which substantially raises the Group’s long-term growth potential. In our view, banking is the least competitive part of the financial sector, as there tends to be very few new players in the banking industry in most countries. There are far more players in fund management, stockbroking and wealth management distribution and advisory, and many new players are emerging every year.
IFAST AR23:
https://links.sgx.com/FileOpen/iFASTCorp...eID=794401

iFAST Global Bank broke even in 4Q24. So I thought it would be interesting to take a look at its interest income, interest cost and net interest margin (NIM) via a rough calculation below:

Deposits (,000)
FY24: 1,013,338
FY23 358,622
FY22: 96,545

Interest income and Interest Income Margin (using avg of 2 FYs)
FY24: 36,613, 36,613/avg(1,013,338, 358,622)=5.34%
FY23: 8,945,  8,945/avg(358,622, 96,545)=3.93%

Interest Cost and Interest Cost Margin (using avg of 2 FYs)
FY24: 27,496, 36,613/avg(1,013,338, 358,622)=4.01%
FY23: 6,197,  8,945/avg(358,622, 96,545)=2.72%

Net Interest Margin (NIM)
FY24: 5.34 - 4.01 = 1.33%
FY23: 3.93 - 2.72 = 1.21%

- In essence, the bank has turned profitable with almost a tripling of deposits and a +12bp in NIM. This NIM of 1.33% is relatively low compared to the brokerages (eg. UOB Kayhian NIM~3%) or the traditional banks (DBS/OCBC/UOB NIM~2%).

- Matter of fact, it is also much lower than non-bank financing firms like Sing Investments and Finance NIM at 1.7-1.9%. The main culprit looks to be iFAST Global Bank's relatively high interest costs at ~4.01%. I suppose that is the sort of interest rates you need to put up to get "global customers" to put money with you. Money is a commodity and you can really make a lot of it at scale (as all the banks have attested) but if your NIM is consistently below peers and lack scale, it wouldn't be worth too much.

iFAST Corp: Record Performance in FY2024 Net Profit and Revenue; iFAST Global Bank Turned Profitable in 4Q2024

iFAST Global Bank’s profitability in 4Q2024 was achieved as customer deposits crossed S$1.01 billion mark at the end of 2024, an increase of 182.6% during the year. In 4Q2024, the bank’s gross revenue increased 163.7% YoY to S$17.22 million, while net revenue increased 136.4% YoY to S$7.72 million.

The Group expects iFAST Global Bank to build upon its profitable 4Q2024 and achieve a full year of profitability in 2025.

FY24 PR: https://links.sgx.com/FileOpen/iFAST_Pre...eID=832894

P.S. We are in the 2nd month of 2025. And still waiting for IFast to give its HK ePension revenue/PBIT projection for FY26 and beyond

[Curiousparty]

https://www.youtube.com/embed/MPc-IW_5NS...aXtCu_pEdm

Why would customers choose IFAST Global Bank instead of other banks? I think the starting point has got to do with the business model. I personally have actually been mentioning to many people that if I take the overall financial sector, the least competitive part of the industry, in my opinion, is actually banking.
If you take stockbroking, for instance, because there are so many stockbroking firms, they compete very aggressively. Our competitors, slash partner, Tiger, Moomoo, and so on, they pay you money to open an account. You put in $3,000, whatever $1,000, and then keep it there for a period of time, and then they give you one free Apple Share just to get the client to open an account. That's how the competitive environment is in stockbroking. That happens because there are many stockbrokers, and because to get a stockbroking license is much easier than getting a license at a bank.

So the banking environment is actually quite different. Banking is still what I call an old boys club. You can be a bank only if you are already a bank somewhere in the world. That is the name of it. So what that means is that in general, the level of competition in banking is not as high. And what it also means is that there are actually quite a number of business models that are in demand, but the existing banks are not keen to do.

So the most obvious one in our case, our example really, is to tap the global flow of money. Actually, the Singapore banks, the Singapore private banks, are tapping into the global flow of money. You have all the high-net-worth individuals opening accounts with private banks here, and then putting lots of money in Singapore. Hundreds of billions of dollars are here. So there is a huge global demand for a bank that allows the client to put the money outside the home country. So that part of the service, you actually find that many banks are providing.

But what they are not providing would be for the non-high net worth individuals. If you don't have a few million, but you only have 100,000 or 50,000 or 20,000, and you want to open an account outside your home country, you actually find that it is quite difficult. It is a painful process. Most banks don't make it easy for you.
A lot of banks, in fact, outright don't allow foreigners to open a bank account. But the truth of the matter is that there is actually strong demand for many people from around the world to open bank accounts outside the home country.

So we are actually catering to that part of the demand, that demand for that service, for massive loan and mass market. And by just being there to provide that service, we believe there is a huge potential for us going forward.

So why do people want to use us for that part of the service? I think there are just very few banks providing that service. The other reason I would like to provide would be for the domestic market, just the UK market itself.

Because cash is a simple product, but you actually find that the banking world is still a business whereby if you are talking about savings account, current account, the banks are actually not passing on too much of an interest rate for overnight money, especially.
So in Singapore we have auto-sweep, so it's basically overnight money, as in you can take out any day and so on. The savings account that you have with DBS and so on, these are actually overnight money. So by and large, generally, banks, most established banks, most of the big banks pay very little for the overnight money, including in the UK.

So just on this part, I think for us, as of today we are paying 4.25% for the savings or current account money to the investor, but we are not taking a risk. We have 4.25%, we take 4.25%, we give it to Bank of England, and then we get 5.25%, so we make 1% margin. So from our perspective, it's actually good business, but most banks don't pass on much because of, I would say, to a large extent, legacy reasons, traditional reasons. Traditionally, a lot of administrative work to do, they don't like to open an account for a small client, etc. And even when they open, they don't want to pass on too much interest rate. So just for a simple service like that, where you take the cash and pass on a decent interest rate. I think there's a big potential for us to grow from there. So these are just two examples that show that the potential growth for us is actually very substantial.


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Sadly, many people out there still don't quite understand iFast business models....iFast is more than happy with 1% NIM for IGB, better margins than wealth management businesses....haha...

[Curiousparty]

I think, yeah, so for a start, I think, because in our case, the bank is running a relatively simple business compared to most banks that you know. We are talking about mainly taking deposits and then placing out in safe assets and then we make it spread. So the initial part really is just to increase the scale and have that 1%, 1.25% margin, eventually 1.5% and then cost wise, we believe operating at lower cost than most start-up digital banks by a substantial proportion.



Yeah, then the next thing is to get to scale, profitable and once we get into that, then planning for the longer term. Certainly ROE is one of the metrics that we'll need to look at. ROE at the bank level but also ROE at the overall group level. I think because at the overall group level we have a lot of money in the bank, so we need to be careful about that. Yeah. Yeah.

A very strong fee income, so I think as a group then we will be able to have a quite healthy out-of-year as well so that we can grow on a very sustainable basis.

[Curiousparty]

Digital banks, also known as neobanks, have varied timelines to profitability, often influenced by their business models, market strategies, and operational efficiencies. Here's an overview of the time taken by the mentioned banks to achieve profitability:

1. Nubank (Brazil):

Founded: 2013
Profitability: Nubank achieved profitability in 2021, approximately 8 years after its inception.

2. Starling Bank (UK):

Founded: 2014
Profitability: Starling Bank reported its first monthly operating profit in October 2019, about 5 years after its establishment.
SIFTED.EU

3. Revolut (UK):

Founded: 2015
Profitability: Revolut became profitable in 2023, approximately 8 years post-launch.
FNLONDON.COM

4. Monzo (UK):

Founded: 2015
Profitability: Monzo reported its first annual profit of £15.4 million for the year ending March 2024, around 9 years after its founding.
EN.WIKIPEDIA.ORG

5. Cake Digital Bank (Vietnam):

Founded: 2021
Profitability: Cake Digital Bank reached profitability within 3.5 years of its launch, making it one of the fastest among digital banks.

6. iFAST Global Bank (iGB):

Acquisition: iFAST Corporation acquired the UK-based BFC Bank in April 2022, renaming it iFAST Global Bank.
Profitability: iGB turned profitable in the fourth quarter of 2024, approximately 2.5 years after its acquisition.
THEEDGESINGAPORE.COM

In summary, the journey to profitability for digital banks varies, typically ranging from 3 to 9 years, depending on factors such as market conditions, strategic decisions, and operational execution.

[weijian]

So just on this part, I think for us, as of today we are paying 4.25% for the savings or current account money to the investor, but we are not taking a risk. We have 4.25%, we take 4.25%, we give it to Bank of England, and then we get 5.25%, so we make 1% margin. So from our perspective, it's actually good business, but most banks don't pass on much because of, I would say, to a large extent, legacy reasons, traditional reasons. Traditionally, a lot of administrative work to do, they don't like to open an account for a small client, etc. And even when they open, they don't want to pass on too much interest rate. So just for a simple service like that, where you take the cash and pass on a decent interest rate. I think there's a big potential for us to grow from there. So these are just two examples that show that the potential growth for us is actually very substantial.


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Sadly, many people out there still don't quite understand iFast business models....iFast is more than happy with 1% NIM for IGB, better margins than wealth management businesses....haha...

hi Curiousparty,

It is a fact that AUM businesses charge less. For example, Keppel/Capitaland Investment's blended take rate from FUM is around 50bp (0.5%). And for private funds, the take rate is lower at ~30bp. But it would be unfair to compare banks with AUM business, just like it would be unfair to compare traditional banks that have NIM~2% with pawnbrokers/non-traditional financial lenders (eg. Aeon Credit Service) which have NIM from 4-8%.

How much it takes to attract funds and how are the funds used to extract income, speak for themselves. They are pretty clear to me - each have their pros/cons, scalability and durability. I definitely agree that banks are good businesses but how much ROE is altogether another thing. Rather than only listening to Mgt speak, it might be better to have the numbers speak for themselves to facilitate our own independent thinking.

Of course, maybe thinking is the hardest thing one has to do.

[Curiousparty]

Here is the transcribed text from the image:

Pension segment and new licence to grow wealth management business: iFast CEO

NII is a key growth driver for its digital bank, iFast Global Bank

By Benjamin Cher
benjamincher@sph.com.sg

The core wealth management business of iFast recovered in 2024, with net inflows of S$3.3 billion compared to S$2 billion the year prior.

Gross unit trust subscription increased to S$7.4 billion compared with S$4.5 billion in 2023, and fixed income turnover reached new highs in Q4 2024 of more than S$1 billion over the last seven years.

Now, iFast aims to hit assets under administration of S$100 billion by 2028 to 2030, up from S$25 billion at the end of 2024, said Lim Chung Chun.

“If we continue that 26 per cent annual growth we will hit S$100 billion by 2030, if we grow at 32 per cent we will (reach the target) by 2028-2029,” added the chief executive.

The company’s ePension services has contributed significantly to iFast’s increase in revenue and profitability for 2024.

This contribution is expected to increase in 2025 as the business onboards more customers and the Occupational Retirement Scheme Ordinance (ORSO) business will begin to contribute sometime in Q2 2025.

The delay in rolling out ORSO, which was previously slated for Q1 2025, has been chalked down to the need for more testing to ensure smooth service at launch.

There are also preparations for the potential expansion of iFast’s pension services into Macau through collaboration with a partner.

In Hong Kong, the company has consistently exceeded its gross revenue and profit before tax targets for 2023 and 2024. In 2024, gross revenue stood at HK$866 million (S$150 million), higher than the target of HK$800 million, and net profit before tax for the same period was HK$309 million, higher than a targeted HK$250 million.

Over in Malaysia, iFast has scored a registered market operator licence, allowing the company to trade bonds there.

“We will be going live sometime this year, and that is something that we expect will steadily allow our overall bond business to grow,” said Lim.

In Singapore, one of iFast’s biggest markets, the China desk was recently launched in December 2024.

This was an effort to capture a higher share of the Chinese money in Singapore, said Lim, with an aim to improve services to Chinese clients with a dedicated desk.

“Including having Chinese colleagues based here, it will allow us to better serve the Chinese clients,” he said.

iFast Global Bank (iGB) turned profitable in Q4 2024, with Lim expecting the digital bank to remain profitable through 2025. It took less than three years (since iFast acquired the UK bank in 2022) to become profitable.

Costs for iGB were managed, with Lim attributing the profitability drive to iFast’s capabilities. iGB also crossed S$1 billion in deposits at the end of 2024.

Net interest income (NII) will be a growth driver for the bank. The metric has consistently grown since Q2 2023 from £293,060 (S$492,000) to £2.1 million in Q4 2024. Only fees from E2Remit, iGB’s remittance service, of £2.2 million, were higher than the NII.

“As iGB grows its deposit base, NII is expected to grow along with it. We do expect that the NII will be the biggest driver going forward,” said Lim.

Even as interest rates fall, he is confident that NII will continue to grow, citing iGB’s different starting point. Unlike traditional banks, iGB has passed on more rates on the savings and current accounts initially as their services were not as developed.

Now as services have matured more, iGB expects to make better margins, and when rates are cut, rates for accounts can also be cut correspondingly.

In response to questions about any plans to potentially add another bank in Europe or Singapore, Lim said that the company does not intend to acquire another bank. Instead, it will apply for a banking licence in the European Union to expand its market.

On the dividend front, iFast expects that it would not pay out up to 50 per cent of profit like in the past. With its ambitions to grow as well as higher capital needs for its banking operations, dividend distributions will not be at the same level.

But Lim still expects to continue growing dividend per share each year.

“In 2024, we paid about 26 per cent, I think that can probably be taken as a ballpark payout ratio for 2025,” he said.

[Curiousparty]

From Webcast


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Competition Pressure Mentioned by iFAST in Q4 2024 Presentation
iFAST did not explicitly highlight direct competitive threats, but several indirect references suggest they are aware of market pressures:

1. Competitive Pressure in Wealth Management (Platform Fees & Margins)
Q: Are there pressures on trailer fees or platform fees due to competition?
iFAST acknowledged the shift towards ETFs, which do not generate trailer fees like unit trusts.
However, iFAST did not indicate a direct reduction in trailer fees from fund providers.
Management stated that as a large-scale distributor, they still hold pricing power.

💡 Key Takeaway:
iFAST does not foresee direct fee compression but acknowledges changes in investor behavior towards lower-cost investment options like ETFs.

2. Competitive Landscape in Banking (Interest Rates & Deposits)
Q: Does iFAST Global Bank face competitive pressure from larger banks, especially with falling interest rates?
Local banks have higher net interest margins (NIMs) due to lower deposit payouts.
iFAST offers more competitive deposit rates, especially for international clients.
As interest rates decline, traditional banks' NIMs may shrink, but iFAST expects its margin to improve as services expand.

💡 Key Takeaway:
iFAST competes on better deposit rates, but its challenge will be balancing profitability as it scales its banking business.

3. Competitive Challenges in Hong Kong E-Pension
Q: Are there any competitors affecting the e-Pension business?
iFAST did not directly mention competitors.
The first-mover advantage in Hong Kong’s e-Pension reform gives iFAST a strong position. Potential new entrants could emerge, but iFAST’s lead in trustee onboarding reduces risks.

💡 Key Takeaway:
No immediate competition threats, but execution speed and efficiency will determine if they maintain leadership.
4. Global Competition & Future Expansion (EU Banking License)

Q: Why is iFAST applying for an EU banking license? Is there competitive pressure driving this?
iFAST aims to tap into cross-border banking demand, not just local markets.
Traditional banks have limited global retail banking services, giving iFAST an edge.
However, competition in Europe is fierce, and regulatory hurdles will be a challenge.

💡 Key Takeaway:
First-mover advantage in global retail banking for mass-affluent clients.
Potential competition from fintech banks & digital challengers in the EU space.

Overall Competition Outlook for iFAST 🚀
✅ Wealth Management: No immediate fee pressure, but ETF shift could impact long-term revenue mix.
✅ Banking Business: Competitive deposit rates attract customers, but traditional banks dominate local markets.
✅ e-Pension: Strong positioning, but execution speed is key to maintaining market lead.
✅ Global Expansion: EU banking ambitions could face regulatory & competitive challenges.