SINGAPORE (Aug 2): Oversea-Chinese Banking Corporation (OCBC Bank) saw its earnings rise 1% to $1.22 billion for the 2Q19 ended June, compared to $1.21 billion a year ago, on the back of record earnings from the group’s banking franchise.
This brings earnings for 1H19 up 6% to a new high of $2.45 billion, from $2.32 billion a year ago.
Net interest income for 2Q19 grew 10% year-on-year to a record $1.59 billion.
This was largely driven by a 4% increase in customer loans and a 12-basis-point rise in net interest margin (NIM) to 1.79%, attributed to increased asset yields in Singapore, Hong Kong and China.
The group registered non-interest income of $1.03 billion in 2Q19, up 1% from $1.02 billion a year ago despite a 26% drop in life insurance profit from insurance subsidiary Great Eastern Holdings.
Wealth management fees rose 8% to hit its highest level in five quarters, driving the group’s net fees and commissions to $522 million in 2Q19.
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Net realised gains from the sale of investment securities jumped to $48 million during the quater, from $2 million in in the corresponding quarter last year.
Operating expenses rose 11% to $1.15 billion, from $1.04 billion in 2Q18, which included an expense accrual reversal a year ago.
Operating expenses from the group’s banking operations rose 7% to $1.08 billion, mainly from higher staff-related costs associated with annual salary increments and a rise in headcount to support business needs.
The cost-to-income ratio (CIR) for the quarter was 44.0%.
Share of results of associates grew 30% to $146 million in 2Q19, from $112 million in 2Q18.
As at end June, total non-performing assets dipped to $3.91 billion, down from $3.92 billion in the previous quarter.
The non-performing loans ratio remained stable quarter-on-quarter at 1.5%, while net allowances for loans and other assets declined 56% from the previous quarter to $111 million in 2Q19.
Customer loans grew 4% y-o-y to $263 billion as at June 30, 2019, while customer deposits increased 2% to $297 billion, led by a 3% rise in current account and savings deposits which represented 47.9% of total non-bank deposits.
This brought the group’s loans-to-deposits ratio to 87.6%, some 1.7 percentage points higher than a year ago.
As at end June, OCBC’s Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR and Total CAR rose to 14.4%, 15.1% and 16.8% respectively, up from the corresponding ratios of 13.2%, 14.3% and 15.9% a year ago.
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The group has declared an interim dividend of 25 cents per share for 1H19, 25% higher than the interim dividend of 20 cents declared a year ago.
The Scrip Dividend Scheme will be applicable to the interim dividend, giving shareholders the option to receive the dividend in the form of shares.
The issue price of the shares will be set at a 10% discount to the average of the daily volume weighted average prices during the price determination period from Aug 15 to 16, inclusive.
“We are pleased to report another strong quarterly performance. Loan growth was sustained and NIM continued to improve. Fee income rose quarter-on-quarter, led by higher wealth management fees, with our private banking AUM climbing to new levels,” says OCBC CEO Samuel Tsien.
“While economic growth in our key markets is slowing, our healthy capital, funding and liquidity position will allow us to comfortably navigate the challenging operating environment and pursue our long-term growth strategy. This also gives us the flexibility to capitalise on market expansion opportunities as they arise,” he adds.
Shares in OCBC closed 12 cents lower, or down 1.0%, at $11.42 on Thursday.
