Sun Hung Kai & Co Stock

Ladies and gentlemen, and welcome to Sun Hung Kai & Co. 2026 Interim Results Presentation. This presentation will be conducted in English. I am Christian Arnell from Christensen Advisory.

The senior executives here with me on the call today are Mr. Tony Edwards, Deputy Chief Executive Officer; and Mr. Brendan McGraw, Group Chief Financial Officer. In today's call, we will talk you through the company's business performance in the first half of 2026, outlook and future plans. Following the call, we'll open the floor to questions.

Before we start, I would like to take the opportunity to remind you that today's discussion will contain forward-looking statements, which are based on assumptions and factors that are beyond the control of the group and are not necessarily indicative or guarantees of the group's future performance.

Now I'd like to pass the call to Tony to begin the presentation. Tony, please go ahead.

Thank you very much, and good afternoon, everyone, and thank you for joining us today.

Let me begin with the key figures. Despite the challenging operating environment in the first half of 2026, the group continues to create value, staying focused on downside protection and risk-adjusted returns. Total income decreased 10.9% year-on-year to HKD 2.5 billion, while EBIT declined 9.3% to HKD 1.3 billion. Attributable profit was HKD 688 million, down 22.4% year-on-year, primarily driven by lower net investment income against the high baseline in the first half of 2025 from a major position's IPO valuation markup, partially offset by an improved contribution from our credit business.

On the growth side, our Alternative Solutions business, SHK Capital Partners, continued to expand with total AUM rising 17.7% since the end of 2025 to USD 3.7 billion. Investment assets increased 7.4% since the end of 2025 to HKD 16.9 billion, while the consumer finance loan book grew steadily with gross loan balance up 4.6% since the end of 2025 to HKD 12.3 billion. The Board declared an interim dividend of HKD 0.13 per share, an increase of 8.3% year-on-year.

Turning to our key messages. The group's profitability remained resilient and aligned with our alternative investment platform strategy, although reported profit was lower this period, reflecting the absence of a sizable liquidity event compared with the preceding period. Total AUM reached USD 3.7 billion with 17.7% growth in the first half, demonstrating the flywheel effect of our expansion in strategic partnerships, enabling Sun Hung Kai Capital Partners to build long-term recurring revenues and enduring relationships.

Our proven track -- investment track record supported by a resilient balance sheet, continues to drive external capital growth, strategic partnership expansion, consumer finance scaling and asset growth in mortgage servicing. We maintained a low cost-to-income ratio and an EBIT margin of around 50%, reflecting disciplined and well-managed operating model. Importantly, our investments in technology infrastructure, AI implementation and top-tier talent are actively driving business traction. As the uncertain market environment is likely to persist, the secular investment case for alternatives remains compelling.

Now I'll pass to Brendan to talk about the Investment Management business.

Thank you, Tony. In the first half of 2026, our Investment Management business delivered a profit before tax of HKD 403 million, contributed evenly across private equity, special situations and structured credit and hedge funds. Overall, our return on assets remained solid at 3.8% for the 6-month period. Total investment assets reached HKD 16.9 billion, an increase of 7.4%, with private equity, external funds and direct or co-investments representing approximately 57% of the portfolio.

We also increased our exposure to special situations and structured credit, now accounting for 11.2% of assets, providing downside protection while preserving upside optionality. Investment income of private equity was propelled by liquidity events, including IPO and M&A, portfolio markups from new financing rounds and technology investments and ongoing distributions. The decrease in direct and co-investment returns was largely a high base effect because the first half of 2025 included a one-off IPO gain.

Our fund of -- hedge funds strategy delivered strong returns outperforming market benchmarks. Gains from special situations and structured credit were driven by value appreciation in a U.S. payments co-investment and some special situation funds alongside steady income from the private credit portfolio, such as the Wentworth Private Credit platform that we invested in last year. The public portfolio recorded a small loss amid broader market volatility and sector rotation in the second quarter.

Our portfolio remains well diversified, both by geography and sector. We monitor it using a total portfolio approach. Geographically, Asia, North America, Europe and Australia accounted for approximately 33%, 34%, 15% and 8% of investments, respectively. By sector, exposure is well balanced across financials, TMT, diversified, consumer, real estate, supporting resilience across market cycles.

Private equity remained the largest contributor to investment income in the first half of 2026, generating HKD 128 million of profit before tax. Total assets increased 2.9% from the end of 2025 to HKD 9.7 billion, while return on assets was 2.1% for the 6-month period. Net IRR since inception was 15.8% and DPI improved to 0.87x, reflecting ongoing realizations and liquidity events. The successful public listing of HKD 1.7 billion of the private equity portfolio provides us with strong liquidity flexibility.

I will now hand back to Tony to discuss alternative solutions.

Thank you, Brendan. Our Alternative Solutions business, SHK Capital Partners, delivered strong growth momentum during the period. Despite a challenging fundraising backdrop, our total AUM increased by 17.7% from the end of 2025 to USD 3.7 billion, while fee income rose 24.7% year-on-year to HKD 21 million. Pretax loss -- pretax loss narrowed significantly by 82% year-on-year to a nominal HKD 1 million. This improvement was primarily driven by accelerating AUM and fee income growth, partially offset by planned operating expenses.

During the period, we leveraged strategic partnerships with leading global alternative and private market GPs, and this has allowed us to access privileged risk return through co-investments and tailored solutions for our institutional and family office clients. New developments include partnering with Janus Henderson to co-develop and distribute alternative investment solutions, partnering with Aquilius to unlock unique access to Asia Pacific secondaries, and expanding our alliance with Pinegrove Credit Partners, broadening Asian investor access to venture debt in a high-growth sector.

Over the past few years, SHK Capital Partners has delivered strong and consistent growth with both AUM and fee income expanding at a high CAGR, demonstrating the scalability of our platform and solutions-driven business model. Our AUM growth was attributable to net capital inflows, satisfactory performance across various strategies and new strategic partnerships. Both the AUM and fee income growth reflects our success in accessing unique alternative opportunities with differentiated risk-adjusted returns, which further transforms into solutions for our clients and GP partners.

With the completion of our investment in Aquilius in the second quarter and with most other alliances only commencing last year or this year, this collaborative model will continue to generate a flywheel effect that unlocks proprietary deal flow, expands the network effects and enables Sun Hung Kai Capital Partners to build long-term recurring revenue. Importantly, these expanding partnerships benefit not only SHK Capital Partners, but also the wider group, driving investment returns and creating compelling co-investment opportunities for our Investment Management segment.

This next slide shows you how we activate our strategic partnerships to unlock the flywheel effects. At its heart, strategic partnerships and disciplined origination compound into investment returns and recurring income growth, a self-reinforcing flywheel that powers everything we do. On the supply side, we back the best GPs and funds with capital, better governance and distribution, helping strong managers build and scale, while we institutionalize and amplify what they do. These GPs and funds, in turn, produce differentiated privileged risk-adjusted returns, which we transform into solutions for our clients.

On the demand side, the family offices and institutional investors who gain access to investment opportunities they could not reach on their own with better access, better alignment with SHK Capital and better outcomes. As capital inflows -- as capital flows through, we grow our LPs' AUM and franchise value and the whole wheel turns again, each rotation strengthening the next.

Ultimately, this compounding cycle drives the platform monetization and relationship development in 2 forms: investment returns captured in the Investment Management segment, of which approximately HKD 681 million of gains have been associated with AUM from our partners within the alternative solutions platform since 2021 and recurring income captured in SHK Capital Partners. The more partnerships we add, the more powerful these flywheel effects become, and it is exactly what we are seeing in our AUM, fee income growth and investment returns.

Now I'll hand back to Brendan to walk you through the credit business model.

Thank you, Tony. Our Consumer Finance business conducted by UA Finance delivered a strong performance, recording a pretax profit of HKD 565 million in the first half of 2026, up 50.7% year-over-year. Excluding the exchange loss of HKD 42 million relating to the liquidation of certain Chinese Mainland subsidiaries, the adjusted pretax contribution was HKD 607 million or a 43.8% year-on-year increase.

The total gross loan balance of UAF increased by 4.6% from the end of 2025 to HKD 12.3 billion. Supported by disciplined underwriting and portfolio management, the return on loan of UAF reached 28.1% in the first half of 2026, while the loan charge-off ratio improved to 6.6%, down 30 basis points from the end of 2025.

In the first half of 2026, UAF Hong Kong delivered satisfactory growth in both profitability and transaction volume, maintaining a disciplined credit underwriting policy and robust credit scoring system while bringing down the loan charge-off rate. Total gross loans of UAF Hong Kong increased 3.4% from the end of 2025 to HKD 10.1 billion. Our SIM Credit Card business has begun generating profit with growth in card receivables, interest and fee-based income. With rising revenue yields and acquisition among younger demographics, overall performance remains satisfactory.

UAF China continued to focus on its secured loan business with tight cost control. Total gross loans in China increased by 9.7% from the end of 2025 to HKD 2.3 billion. Overall, total income of the consumer finance business increased by 6% year-over-year to HKD 1.7 billion in the first half of 2026.

The cost-to-income ratio stood at 31% in the first half of '26, broadly stable versus 30.6% in the first half of 2025 and around 90 basis points lower than the 31.9% recorded in the first half of 2024. This demonstrates the continued strength of our consumer finance platform and the effectiveness of our prudent credit approach.

In the first half of 2026, our mortgage loan business conducted by Sun Hung Kai Credit, recorded a pretax profit of HKD 26 million, up 140.7% year-over-year. Growth was primarily driven by a significant reduction in impairment charges with the net impairment losses ratio down by 160 basis points year-over-year, reflecting improved asset quality and prudent risk management. As such, the return on loans improved by 50 basis points year-over-year to 10.4% in the first half of 2026, demonstrating enhanced profitability and portfolio performance.

The mortgage servicing business continued its momentum. Total mortgage loans serviced by Sun Hung Kai Credit reached HKD 1.5 billion at the end of the first half of 2026, up 40.7% from the end of 2025, while loan servicing income increased 81.3% year-over-year to HKD 3 million. This growth was driven by new mandates, underscoring the market's recognition and trust in Sun Hung Kai Credit amongst institutional investors and reflecting growing demand across developers. Expanding the mortgage servicing business advances our strategy to broaden the revenue base through capital-light recurring income while solidifying our position as an institutionalized mortgage solutions platform.

Now let me go through our key financial performance in the first half of '26. Attributable profit was HKD 688 million, down 22.4% year-on-year. Total income reached HKD 2.5 billion, down 10.9% year-on-year. Both declines were mainly due to the absence of a sizable liquidity event compared to the preceding periods.

Looking at the broader 2-year trend, performance has strengthened since the 2024 interim. Attributable profit has grown from HKD 75 million to HKD 688 million, while total income is up 29.4% from HKD 1.93 billion to HKD 2.5 billion, underscoring the group's improved earnings base over the period even against a strong 2025 comparative. The cost-to-income ratio of our fees and interest-based business stood at 31.8%. Interest cover remained strong at 3.9x.

Net debt decreased by 5.1% year-over-year to HKD 6.2 billion, while shareholders' equity increased 3.4% year-over-year to HKD 22.8 billion. Consequently, our net gearing ratio reduced from 29.6% in the first half of '25 to 27.1% in the first half of '26, reinforcing the strength of our balance sheet.

Charts highlight our long-standing commitment to disciplined asset growth and value creation, which has consistently translated into strong EBIT and attractive shareholder returns. Our capital has been deployed with a clear focus on quality and sustainability, underpinned by a long-term proven track record of stable capital return across market cycles.

Operationally, our EBIT margin stood at 50%, demonstrating our continued focus on profitability. The Board declared an interim dividend of HKD 0.13 per share for the first half of '26, an increase of 8.3% year-on-year. The group also repurchased 2.8 million shares in the first half of 2026. Since 1997, we have returned a total of HKD 16.2 billion to shareholders through dividends and buybacks while maintaining a strong and flexible balance sheet. Together, these elements underscore our focus on disciplined capital management, sustainable earnings and long-term shareholder value.

Now I'll pass you back to Tony to talk about the outlook.

Thank you, Brendan. Let me close with our outlook. We expect the macro backdrop to remain dynamic, shaped by geopolitical shifts, interest rate trends and ongoing AI disruption. Rather than trying to predict the cycle, we are positioning the group to stay resilient across market conditions guided by 4 pillars: Firstly, capital discipline. Disciplined capital allocation and proactive risk management remains central to maintaining resilience across -- through market cycles. That discipline is reinforced by cross-segment synergies. Deeper collaboration across our credit, investment management and alternative solutions businesses is where we believe much of our differentiated value can be created.

We're extending that value further through strategic partnerships. New GP investments and co-developed solutions will unlock further flywheel and network effects across our ecosystem, supporting investment returns, recurring income and proprietary opportunities. And underpinning all of this is agile execution. Our nimble operating model and group-wide AI integration enable SHK to capitalize decisively on high conviction asymmetric market opportunities while progressively diversifying and expanding our revenue base. Together, these pillars are aimed at one clear outcome, sustainable earnings growth and long-term value creation for our shareholders. Thank you.

Thank you, Tony. That concludes management's prepared remarks, and we will now proceed to the Q&A session. [Operator Instructions] The first question comes from Kate Luang at UOB Hong Kong. Could you provide more color on our -- on the latest partnership with Clipway and Aquilius? What are the opportunities that we expect to see from these partnerships?

I think maybe, Tony, you could answer that one.

Thanks, Brendan. Yes, the -- both with Aquilius and Clipway, who are both secondaries managers, Clipway in Global, Aquilius more in Asia. Their job is really to provide liquidity to other LPs or investors that are looking to sell some of their private equity or real estate fund positions. And with that, it gives us significant insight into the market for secondaries and provides us with a lot of information in terms of the pricing of secondaries and also the valuations of the holdings within those secondaries funds.

And that makes us a lot smarter when it comes to determining our own and other investment opportunities as we can bring all that information and insight together within our organization. And -- but those investment opportunities are also very scarce and unique. And those that have a significant discount have a significant edge, and that's really what our clients are also interested in access to those exclusive investments with an edge. That's what we call privileged risk return. Thank you.

We have a follow-up question from Kate. How do we see the Investment Management segment performing in the second half of the year? And what strategies and priorities do you have amid the current market volatility?

Okay. Maybe I'll take that one. Yes, I think the answer -- short answer to that is that we will maintain our strategy for investment management, which is really embedded in deep research, selective investments and not just chasing return, but looking for downside protection as well. So this is why we've been able to maintain a strong net IRR of 15.8%, and that's the same strategy that we will maintain in the second half of the year. Obviously, I don't have a crystal ball. I can't tell you exactly how that will turn out in terms of performance, but you can see yourself over the cycle that, that strategy does work.

Thank you, Brendan. The next question comes from [ Robert Lam at TPG Investment ]. The period's lower profit largely reflected the absence of a sizable liquidity event compared with last year. As the platform scales towards more recurring fee-based income, how quickly do you expect the earnings mix to become less dependent on episodic realizations? And what proportion of income do you ultimately see coming from recurring sources?

Okay. Maybe I'll take that one first, Tony, and then you can add on if there's anything to add there.

Yes.

I mean I think this has been obviously a very conscious effort by the company to change the earnings mix over the last few years where we've been seeking to have this fee and interest-based income more prominent even within our financial reporting and within how we structure our business.

We do see that it is growing. It grew by almost 4% over the year. But obviously, it will take time to scale as the AUM builds within the platform. So I don't think it will change extremely quickly, but it will change over time, and that is the direction of travel for the group.

Yes. And if I could add to that question, though, it's -- the realizations might be cyclical, but the actual process is very systematic in the investment team. And that's borne out with our IRR that we published. So 15.8% over the last 15 or so years, which really -- which is a proof statement that the processes, the people, and the culture within the organization is -- has the capability to invest in a systematic way.

And what we've done more recently is enhance that by actively investing and engaging with GPs to allow us to build on that access to better opportunities and share those opportunities with third parties and bring their capital to bear and allow us, therefore, to create better risk return for ourselves and our third-party capital. And that's really the flywheel effect or the network effect that we're trying to take advantage of. And I think you'll see that come through over the results over the next few years.

[Operator Instructions] The next question comes from Eudora from DealStreetAsia. Could you share more details into your new GP investment plans? Amid the current AI-centric market boom, what is your view on the 2026 vintage of primary fund investment opportunities?

Should I talk to that first, Brendan?

Yes, you go ahead.

I think on the -- we are continuing to look to expand our GP partnerships. We have a number of JV partners in the pipeline. We don't -- we have an opportunistic view on that as we're trying to find the right people in the right asset classes that we believe have the right qualities and the business is set up in a way that we'll be able to scale with our capital and with our assistance.

And that assistance can be in various forms. We have been invested in that, specifically in the credit space. I think that's where we see the greatest opportunity over the course of the next few years, maybe in Europe, maybe elsewhere. And I think that's where our client capital is also looking to diversify into those sorts of opportunities where the outcomes are much more known rather than variable.

And that's really what we're seeking is consistency and clarity and transparency in an investment world, which has become more volatile. So hence, we don't typically chase the latest investment theme, but create investment opportunities where we see that downside protection where we have limited downside and the asymmetric exposure where things go very well, we can participate in that growth as well.

Maybe I'll just add to that as well. What we tend to do when we're looking at GPs, we do look at the track record in quite a lot of depth, and we do re-up with good GPs that have given us good returns over multiple vintages. So that also provides some protection against just chasing the latest trend or the latest GP.

We have a follow-up question from you, Eudora. Are you concerned at all about the tech AI-focused funds launching this year becoming another high-priced vintage where exits in 5 to 6 years down the road could be challenging?

Yes. Maybe I'll take that one. Yes, I mean, there's always that risk. There's always that challenge when looking at private equity and these types of investments. I think the honest answer to that is that you need to have very deep research. You have to have discipline in the investment strategy and make sure that you are investing in different sectors, different geographies, different GPs and to have a more of a portfolio approach, not just to focus on the latest theme or the latest trend.

Yes. If I could add to that because I think that's the key is not chasing the latest trend. Our heritage is as a credit investor. And so philosophically, price is really important to us. And that's really a big component in determining our investment appetite and the opportunity and also our risk control.

So if you look at the recent investments in, say, Janus, for example, where we're very attracted to Janus Henderson's strategy of implementing an AI solution across its business. And we invested in Janus in the high single-digits multiples. based on an AI thesis rather than investing in a lot of AI names with a very extremely high and extended multiple. So we're a lot more comfortable philosophically using price and valuation to justify investment opportunities rather than expectations of what might happen in the future.

The next question comes from Alex Chan at Singtel. How is Beijing's tightening on cross-border capital flows impacting your credit business, specifically borrower repayment capacity, loan demand and collateral recovery? Given these headwinds, do you anticipate higher bad debt provisions and tighter lending standards in the second half of the year?

Okay. I'll take this one. Yes, we are aware of tightening on the cross-border capital flows. So far, the impact in -- for our business in Hong Kong has -- we haven't seen any large impact from this. In fact, I think if you look at the financials, you can see that our impairment has dropped by about 20% over the period.

So we're not experiencing any repayment issues because of this particular issue. And whether we anticipate any headwinds or higher tightening of lending standards, we already have tight lending standards, and we will continue to apply that model, which I think is why we've been able to control the charge-off ratios in the past.

We have a follow-up question from Alex. As borrowing costs stay elevated and price competition in unsecured lending heats up, how do you plan to defend your net interest margins without taking on riskier subprime borrowers? Looking into the next 6 to 12 months, where do you see the ceiling for your loan book growth if risk-weighted assets must be kept in check?

Okay. Maybe I'll take that one as well. Yes. I mean, our -- obviously, our net interest margin has been maintained, as we mentioned in the presentation. I think the way in which we do that is not just by chasing after more clients. We also develop our products.

So we've seen quite a good initiative within our UA Finance to develop new products, in particular, the credit card, which gives us new forms of income as well. So that helps us to maintain our net interest margin as well. I don't see any particular limit in terms of a hard limit for the size of our loan book. Obviously, we need to make sure that we keep it within levels that we are comfortable with from an overall balance sheet perspective, but we wouldn't be setting any set limits.

The next question is, you've spoken about the flywheel effect underpinning your platform. Could you give some concrete examples of how this dynamic translates into platform monetization and tangible revenue?

Okay. I think, Tony, you'll be well placed to that one.

Yes. No. Thanks, Brendan. If we use an example, I think -- well, if you look at the flywheel effect in general, it is looking at activating the GPs that create a privileged risk return, so investment opportunities with an edge that are exclusive that we can wrap into solutions for our family office and insurance clients who provide us more capital and that cycle allows us to activate more GP opportunities. That's the flywheel effect.

And I think that we would -- there are many different ways where we can work together in partnership with GPs. A good example of that would have been recently with our credit platform and equity -- property equity platform or real estate equity platform in Australia called Wentworth. They -- and we were looking to invest in some hotels in Darling Harbour in a couple of hotels in Sydney, which we sourced from a Middle Eastern sovereign fund.

And together, through our expertise and structuring and investment capabilities, purchased those hotels at a very good valuation, particularly relative to the opportunity as we see it in Sydney with the new airports opening. And that has allowed our clients also to participate in that hotel acquisition, and they've provided more capital to Wentworth to invest in future investment ideas.

And that's the cycle, the flywheel effect that I'm talking about, and it's driven by essentially good investment ideas, good underwriting capabilities, access, expertise and ultimately, the proof statement of good investment risk returns. And I think as we're achieving that, that improves relationships with GPs that we activate with, and therefore, we get better opportunities and improves relationships with the LPs. And ultimately, those relationships will provide our success in the future.

[Operator Instructions] There appear to be no further questions. This now concludes the Q&A session. Thank you, everyone, for participating in today's earnings conference call. If you have any further questions, please feel free to reach out to the Christensen or Sun Hung Kai & Co. Investor Relations team. Thank you very much.

Thank you.

Thank you.

Good afternoon, everyone. And welcome to the Sun Hung Kai & Co. 2025 annual results conference call. I am Christian Arnell and here with me today from the senior management team are Mr. Tony Edwards, Deputy Chief Executive Office; and Mr. Brendan McGraw, group Chief Financial Officer. Today's presentation will be conducted in English and will consist of prepared remarks reviewing the group's financial and operational performance in 2025 and outlook for 2026. Following management's prepared remarks, we'll open the call to questions from the audience.

[Operator Instructions]

Before we start, I'd like to remind you that today's discussion will contain forward-looking statements. These forward-looking statements are based upon management's current expectations and current market and operating conditions, which are difficult to predict and may cause the group's actual results, performance or achievements to differ materially from those in the forward-looking statements.

With that, I'd now like to pass the call over to Tony. Please go ahead.

Thank you, Christian. Good afternoon, everyone. 2025 was a strong year for the group, delivering resilient performance despite a challenging external environment. Our total income increased by 28.4% year-on-year to HKD 5.5 billion, while EBIT rose 50.1% to HKD 2.7 billion, reflecting a better operating performance and platform realizations. The attributable profit reached HKD 1.6 billion, representing more than a threefold increase year-on-year, primarily driven by robust investment gains from our investment management business.

The Alternative Solutions business, Sun Hung Kai Capital Partners, continue to scale rapidly with total AUM rising 56.7% to HKD 24.6 billion. And finally, our investment assets increased to 18.9% to HKD 15.7 billion, while the Consumer Finance loan book grew steadily with gross loan balance of 6% to HKD 11.8 billion.

Turning to our key strategic messages. The group's profitability remains strong, driven by strong investment returns, which have benefited from good network effects of the alternative investment platform. Total AUM reached USD 3.2 billion with 57% growth, demonstrating the scalability and resilience of our solution-orientated business model. and its ability to generate enduring cash flows. Our long-term investment track record of 16.3% IRR and flexible balance sheet continue to support the growth across external capital inflow, investment partnerships, consumer finance and mortgage servicing.

We maintained a low cost-to-income ratio and an EBIT margin of around 50%, reflecting a disciplined and well-managed operating model. Recent investments in technology infrastructure, including AI enablement and talent are gaining traction and supporting future growth and resilience. As the uncertain macro environment is likely to be persistent, the secular investment case for alternatives remains compelling. As you can see, our solution-orientated business model is designed to leverage the benefits of a holistic ecosystem for alternative investment stakeholders. At the core is our alignment strategy, with the aim to align the interest of third-party capital, the group and investment partners, whilst benefiting from mutual platform benefits.

This is underpinned by our deep expertise, built up over 20 years of alternative investment experience, supported by a systematic data-driven investment processes and rigorous due diligence. We also provide access to proprietary deal flow and GP networks leveraging the group's investment capabilities to deliver privileged opportunities. Strong governance supported by transparent processes, proprietary research and a principles perspective, further enhances risk management and provides better long-term outcomes.

With that, I'll hand over to Brendan to walk you through the investment management performance.

Thank you, Tony. In 2025, our Investment Management business delivered a profit before tax of HKD 1.8 billion, driven by higher net investment income across nearly all asset classes. Return on assets improved significantly, increasing 11.9 percentage points year-on-year to 15.1%. If you look at the charts on the right, the improvement in return on assets was broad-based across the portfolio. Private equity saw the most meaningful uplift, reflecting strong realizations and valuation gains while hedge funds and public investments also delivered solid returns.

Special Situations and Structured Credit continued to perform defensively, contributing stable returns with improved capital efficiency supporting the overall increase in group return on assets. Total investment assets reached HKD 15.7 billion, with private equity, external funds and direct or co-investments representing approximately 60% of the portfolio. We also increased exposure to Special Situations and Structured Credit, now accounting for 11.8% of assets, enhancing downside protection while preserving upside optionality.

Our portfolio remains well diversified by both geography and sector, reflecting an overall portfolio management approach. Geographically, North America, China, Asia and Europe accounted for 33.6%, 19.9%, 14.6% and 14.3% of investments, respectively. By sector, exposure is well balanced across financials, TMT, diversified consumer and real estate, supporting resilience across market cycles.

Private equity was the largest contributor to investment income in 2025, generating HKD 1.3 billion profit before tax. Total assets increased 18.6% to HKD 9.4 billion, while return on assets rose 15.3 percentage points to 16.5%. Net IRR since inception improved to 16.3% and DPI increased to 0.86x, reflecting ongoing realizations and liquidity events. The successful public listing of HKD 2 billion of the private equity portfolio further enhanced liquidity flexibility.

I will now hand back to Tony to discuss Alternative Solutions.

Thank you, Brendan. Our Alternative Solutions business, Sun Hung Kai Capital Partners, delivered HKD 63 million of pretax profit, up 28.8% year-on-year. This was driven by the strong growth in AUM and fee income, partly offset by higher operating and reorganizational costs associated with platform optimization. During the year, we deepened existing partnerships and formed a new strategic alliances, expanding platform capabilities and revenue streams. Key developments included collaboration with Wentworth, continued partnership with GAM, co-investments in the take-private of Janus Henderson with Trian Investment Partners and a strategic alignment with Mubadala Capital for co-investment flow and other privileged risk return.

Despite a challenging fundraising backdrop for asset markets, our total AUM increased by 57% year-on-year to USD 3.2 billion. Growth was driven by good risk return outcomes for our customers, which drove strong net inflows and activated new investment and third-party capital partnerships.

Fee income rose 83% to HKD 104 million. This significant growth serves as clear validation of our strategic initiatives as they are activating platform effects that we have created. We anticipate more market volatility and therefore, more demand for alpha generated by our investment alternative investment capabilities. Looking ahead, we will continue to invest in this platform as we expect additional monetization opportunities from these flywheel effects.

I'll now pass back to Brendan to cover off on our credit business.

Our consumer finance business conducted by UA Finance delivered stable performance, recording a pretax profit of HKD 794 million in 2025. Excluding the exchange loss of HKD 97.4 million from the liquidation of Mainland China subsidiaries, the adjusted pretax contribution was HKD 890.9 million, representing a 4.4% year-on-year increase. Total gross loan balance of UAF increased 6% year-on-year to HKD 11.8 billion. Supported by disciplined underwriting and portfolio management, the return on loans for UAF reached 28.4% in 2025, up 30 basis points, while the loan charge-off ratio stood at 6.9% up 20 basis points.

In 2025, UAF Hong Kong generated growth in profitability and transaction volume as well as tightening its measures to mitigate credit risks and manage loan charge-offs. Total gross loans of UAF Hong Kong increased by 5.6% year-over-year to HKD 9.7 billion. UAF China continued to reduce operating costs and focused on its shift from unsecured to secured lending. Total gross loans in China increased by 7.9% year-over-year to HKD 2.1 billion.

The sim credit card delivered solid results, supported by a substantial expansion in customer base with increased transaction volume. Total credit card usage amount reached HKD 1.7 billion in 2025, up 54.6% year-on-year. Overall, with rising loan volume, new revenue streams from credit card business, higher return on loan and disciplined cost control, total income of Consumer Finance business increased by 4.2% year-over-year to HKD 3.3 billion in 2025. The cost-to-income ratio improved slightly by 10 basis points year-over-year to 31.1% in 2025.

In 2025, our mortgage loan business conducted by Sun Hung Kai Credit recorded a pretax profit of HKD 7 million. The year-on-year reduction was due to our active management of the existing loan portfolio, cautious new loan originations and prudent provisioning policy. However, the return on loans improved by 30 basis points year-over-year to 10% in 2025, indicating enhanced profitability despite prevailing market pressures.

Meanwhile, SHK Credit extended into mortgage services business in late 2024. During 2025, it was appointed servicer for 2 portfolios totaling USD 170 million owned by developers and institutional investors. As at the end of 2025, total mortgage loans serviced by SHK credit amounted to HKD 1.1 billion, up 34.3% year-over-year, whilst loan servicing income reached HKD 4 million in 2025.

Now let me go through our key financial performance in 2025. Attributable profit increased by more than threefold to HKD 1.6 billion. Total income reached HKD 5.5 billion, up 28.4% year-over-year. The cost-to-income ratio of our fees and interest-based business, which include Credit and Alternative Solutions, stood at 31.2%. Our interest cover improved to 4x. Our net debt decreased by 12.8% year-over-year to HKD 5.8 billion, while our shareholders' equity increased by 5.6% year-over-year to HKD 22.3 billion.

Consequently, our net gearing ratio reduced from 31.2% in 2024 to 25.8% in 2025, reinforcing our balance sheet strength.

The charts on this slide highlight our long-standing commitment to disciplined asset growth and value creation, which has consistently translated into long-term strong EBIT and attractive shareholder returns. As illustrated, our capital has been deployed with a clear focus on quality and sustainability, underpinned by a long-term proven track record of stable capital return across market cycles. Operationally, our EBIT margins are around 50%, demonstrating our continued focus on profitability.

The charts also reinforced our consistent dividend policy. The Board declared a second interim dividend of HKD 0.15 per share for the year ended the 31st of December 2025. Together with the interim dividend of HKD 0.12 per share, total dividends for 2025 are HKD 0.27 per share, increased by 3.8% year-on-year. Since 1997, we have returned a total of HKD 15.9 billion to shareholders through dividend payments and share buybacks while maintaining a strong and flexible balance sheet. Together, these elements underscore our focus on disciplined capital allocation, sustainable earnings growth and long-term shareholder value creation.

Now I'll pass to Tony to talk about our cross-sector synergies and outlook.

Thank you, Brendan. As a principal led alternatives investment platform, we are dedicated to delivering aligned investment solutions for our investment partners, third-party investors and ourselves. Below are key collaboration achievements from this year. Our adaptable capital enabled Wentworth to establish a new business vertical resulting in the creation of distinctive investment solutions for clients seeking diversified exposure to Australian credit opportunities. In Hong Kong, through close collaboration with our investment partners, our Special Situations and Sun Hung Kai Credit teams successfully acquired several residential mortgage portfolios. This initiative assisted deleveraging in developers balance sheet and expanding our mortgage servicing operations.

On a global scale, we have strengthened our partnerships with Mubadala Capital and GAM. Most recently, our private equity team together with third-party clients participated in a take-private transaction of Janus Henderson, offering Sun Hung Kai Capital Partners clients exclusive access to a compelling co-investment opportunity. We are now strategically positioned to capitalize on the ongoing expansion of alternative investments, reinforced by our commitment to grow global strategic partnerships. By prioritizing capital efficiency and prudent risk management and leveraging our integrated platform and experienced team, we strive to continue to deliver sustainable growth and enduring value to our shareholders.

Thank you very much.

Thank you, Tony. [Operator Instructions]

We have our first question. This is a 2-part. Profit before tax from the investment management business increased significantly in 2025. What drove this performance? And is it sustainable? Second, what does the exit pipeline look like for 2026?

Okay. Maybe I'll take that one. Yes, I think the main driver in 2025 has been in North America, where we have seen some significant listings and some companies been able to come back to the market as interest rates have decreased and share valuations have increased. So that has been a good contributor to the pipeline in 2025, but we do also expect that notwithstanding current events, obviously, in the Middle East if things can normalize we do expect that to continue into 2026 as well.

And if I could add, I think I'd just point out that for the first time, we've disclosed the performance of the investment portfolio, which is a 16.3% annualized IRR since 2010. What's important about the repeatability is the systematic nature of our investment teams and their capabilities, which is based on their experience and competence, our processes, our governance and the culture, which has driven significant value for shareholders over many years, and we expect that to continue in an environment when it's difficult and also in more mundane environments as well. So I think that repeatability and consistency of our investment returns is very strong, and we're very capable to do that.

Thank you, Tony. The second question is also a 2-part. What were the key growth drivers for the Alternative Solutions business in 2025? And is there any AUM target for 2026? Second, where do you expect fee income to come from and are there new partnerships or seeding projects in the pipeline?

Thank you. In terms of the growth of nearly 60% of AUM or just over HKD 1 billion, that essentially has come from the fact that we've continued to deliver a good risk return to third-party capital, whether that's directly through our co-investment deals or through our investment partnerships. The mission of our Sun Hung Kai Capital Partners is to allow third-party capital access to our investment capabilities and enduring risk return opportunities. And I think we've managed to do that. And I think we'll continue to invest in our capabilities to continue to provide those returns, both for our principal and also for our external shareholders.

We are very excited about the future. We have a number of opportunities that we are working on as we had last year. We're very pleased with and continue to invest in the partnerships with our investment partners such as ActusRay Partners and Wentworth Capital, Cornell and E15. And we will -- we continue to committed to invest in future partnerships with other general partners and invest in our partnerships with other funds and other LPs in the region, including Mubadala Capital, GAM and in the future, following the closure of the privatization with Janus Henderson.

The next question comes from Kate Luang at UOB. I believe the investment management question has already been answered, but what are the longer-term strategies for the investment management business? And then second, is there any update for the dividend payout policy?

Okay. Maybe I'll take those. So for the investment management strategy, I mean, longer term, yes, is to generate strong risk-adjusted returns, as Tony has referred to. And as we started to publish some of those returns within this particular report, our aim is to maintain them, and we maintain them through discipline and good execution.

The second question on dividend policy, obviously, you'll have seen with yesterday's announcement, we have increased the dividend in light of these good results. And what I would say is the Board will continue to monitor the results of the business to see how we will continue with that in the future.

Thank you, Brendan. [Operator Instructions] The next question is a 3-part. Fitch ratings indicated that the default rate of its monitored U.S. private credit portfolio reached 9.2% in 2025. Major private credit lenders like Blue Owl and BlackRock are facing liquidity concerns for their private credit funds. Question one, what is the asset quality of your legacy private credit loans; two, do you have any new loans made by your special situations in Structured Credit and real estate segment? And if yes, what is their asset quality? And lastly, what is the outlook of these 2 business segments in terms of funding sources, asset quality and risk management.

Okay. I'll take that one first, Tony, and then maybe you can contribute as well. So yes, I mean, overall, clearly, it's in the news, what's happening with private credit lenders, particularly some of the larger ones. What I would say is that we're a bit more boutique in this area in the sense that we are not broker-driven. We are not largely involved in retail driven evergreen funds. We tend to do more targeted and bespoke private credit deals. We don't do deals where we just accept covenant-light packages. They are done deal by deal. The underwriting is very thorough. And so therefore, I do not have any concerns on the asset quality part of the question.

The second part is, has there been any new loans in 2025? Yes. As you can see, we have deployed more assets in this area during 2025. We do believe that we've done that judiciously in areas where the asset strength is good, and we're not just relying on the borrower. We're actually relying on the underlying assets and cash flows as well. And our outlook for this area is that we think it will continue to be a stable part of our business. And if there are dislocations in credit markets or equity markets in terms of Special Situations, we remain balanced and flexible and we can take some of those opportunities.

I can't add much to that, Brendan. But I'd say that we have a 55-year heritage in the credit business. I think we apply that every day to all our underwriting. We do not look to underwrite on cash flow or business growth, but very much focused on those loans and those credit opportunities that have significant real asset backing and can provide us the comfort and the downside protection that we strive for.

The next question is, do you have any AI-related PE public market investments in your portfolio? And if so, what percentage do they make up in Sun Hung Kai & Co.?

We do have AI-related investments. I wouldn't disclose the absolute percentage, but this is an area that we do invest in and follow very closely. We do like to -- we don't just look at it from the software angle. We do also look at it for some of the other subsidiary angles as well like energy demand as well because we think there are also subsidiary effects from this AI take-up.

The next question is a follow-up. How have you been deploying AI across your business?

Okay. I'll take that one. Yes, this has been very interesting for us. We've gone for an enterprise AI approach, where we have deployed a large-scale platform across the business, which all staff have access to. All staff have had training on how to use that platform as well and are now capable of creating and publishing their own agents. We did it this way specifically so that we could also maintain cybersecurity, so we wanted to make sure that any confidential documents would stay within our wrapper, but our AI tools could go out and gather intelligence from the web and bring it back in to be processed. We're quite advanced in this, and we've invested a lot in 2025. We will continue to do so because we are already seeing productivity benefits.

Thank you, Brendan. There appear to be no further questions in the queue. This concludes the Q&A session. Thank you, everyone, for participating in today's call. If you have any further questions, please feel free to reach out to the Sun Hung Kai & Co. Investor Relations team or Christensen Advisory. Thank you, and have a good evening.