NIM – The 7bps HoH drop in margin to 1.94% was driven by higher cost offunds, squeezed from higher FX deposit rates as asset yield was largelystable. As the HK rates have not moved in tandem with the US, the bankhopes to maintain similar margins in 2H17.。    Fee income – Both securities fees and insurance distribution have been keystrengths for the bank YoY, helped by better market activities. Goingforward, besides the recognition of c.HKD173m per year (HKD2.6bn over15-year partnership) of committed fees from Tahoe, DSB will receivecommission from selling Tahoe’s life insurance policies.。    Volume growth and asset quality – Loan growth lags system growth as thebank remains prudent and disciplined, while system loan demand wasprimarily driven by Chinese corporates. Management was cautiouslyoptimistic on asset quality, hoping to see steady charges in 2H17.。    Use of proceeds from Dah Sing Life disposal – Following the specialdividend, the company will use HKD1.45bn for its general insurance (GI)business, HKD600m-1bn to subscribe to DSB’s future AT1issuance, andHKD3.3bn for working capital and/or re-investments. While there is noidentifiable target at the moment, the company does not rule out M&As forsmaller niche focused GI or other FI-related businesses in the long run.Meanwhile, the excess capital will be deployed in short-term investments.。    More details about strategies in GI business – DSF may witness short-termRoE pressure from the excess capital, but management believes there isgood growth opportunities in GI, such as personal insurance (e.g., healthand medical), in the long run. This industry remains fragmented in HK. Webelieve that under a normalized environment, its GI business can achieve acombined ratio of

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