Oversea-Chinese Banking Corporation (OCBC) O39 has reported a net profit – or earnings – of $3.59 billion for the 1HFY2023 ended June 30, 38% higher than the net profit of $2.59 billion in the corresponding period the year before.
During the 2QFY2023, group net profit rose by 34% y-o-y to $1.71 billion.
The bank’s half-year earnings stood at a record high thanks to record income and drove its return on equity (ROE) to 14.3%, 3.9 percentage points higher y-o-y.
For the 1HFY2023, an interim dividend of 40 cents per share was declared, 43% higher than the interim dividend of 28 cents the year before. The current dividend payout amounts to around 50% of the group’s earnings for the six-month period, in line with OCBC’s policy to target a 50% dividend payout ratio. The group made the announcement to do so in its FY2022 results on Feb 24.
Unitholders will receive their dividends on Aug 15.
1HFY2023
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During the six-month period, total income rose by 30% y-o-y to $6.81 billion. Net interest income (NII) surged by 48% y-o-y to a record $4.73 billion driven by an average asset growth of 6% and a 65 basis point (bps) y-o-y uplift in net interest margin (NIM). For the 1HFY2023, NIM stood at 2.28%.
Non-interest income was up by 3% y-o-y to $2.08 billion as higher trading, investment and insurance income were offset by lower fee income. Net trading income rose thanks to the net gains from the sale of investment securities and increased profit from insurance while fee income fell from the drop in wealth fees from a decline in customer activities amid a risk-off investment environment.
Profit from insurance rose by 10% y-o-y to $500 million mainly attributable to improved investment performance. OCBC’s subsidiary, Great Eastern Holdings (GEH), adopted the Singapore Financial Reporting Standards (International) or SFRS(I) 17 on Jan 1. See GEH’s results here.
Wealth management income, which comprises income from insurance, private banking, premier private client, premier banking, asset management and stockbroking, grew by 36% y-o-y to $2.24 billion and contributed 33% to the group’s total income.
Group wealth management assets under management (AUM) continued to expand and stood 10% higher y-o-y at $274 billion as at June 30, driven by continued net new money inflows.
Operating expenses rose by 5% y-o-y to $2.57 billion from higher staff-related costs.
Share of results of associates was $510 million, 2% higher y-o-y.
Net allowances surged by 211% y-o-y to $362 million as the group took a “prudent approach” to raise allowances for non-impaired assets, which rose 221.5% y-o-y to $254 million.
Earnings per share (EPS) stood at $1.60 on an annualised basis and at 79 cents on a diluted basis.
The group’s cost-to-income (CIR) ratio improved by 9.3 percentage points y-o-y to 37.8% in the 1HFY2023.
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2QFY2023
Total income rose by 30% y-o-y to $3.46 billion.
Net interest income (NII) grew by 40% y-o-y to $2.39 billion underpinned by asset growth and a 55 bps points y-o-y increase in NIM to 2.26% on higher market interest rates.
n a q-o-q basis, NII for the 2QFY2023 rose from an asset growth of 3% and longer quarter but was partly offset by a lower NIM as higher funding costs outpaced the rise in loan yields.
Non-interest income also rose by 11% y-o-y to $1.07 billion for the three-month period mainly from net gains from the sale of investment securities and higher profit from insurance. This was partly offset by lower fee and trading income.
Operating expenses rose 2% y-o-y to $1.33 billion due to higher staff costs. CIR stood 10.5 percentage points lower y-o-y at 38.5%.
Share of results of associates rose 2% y-o-y to $250 million.
Total allowances rose by 248% y-o-y to $252 million, largely driven by increased allowances for non-impaired assets.
As at June 30, the bank’s non-performing loan (NPL) ratio stood at 1.1%, down by 0.2 percentage points y-o-y.
Customer deposits rose by 7% y-o-y to $372 billion. Current account savings account (CASA) ratio stood at 45.3%.
Common equity tier 1 (CET-1) ratio stood at 15.4% while the leverage ratio was at 7.1% as at June 30.
OCBC’s liquidity coverage ratio (LCR) stood at 158%.
Group loans-to-deposits (LDR) ratio stood at 78.8% as at end-June.
Cash and cash equivalents as at June 30 stood at $30.0 billion.
“We have delivered a robust set of results for the first half of 2023. The group achieved record net profit, which crossed the $3 billion mark for the first time on the back of strong contributions from the group’s banking, wealth management and insurance franchise. With the resilient performance and OCBC’s strong capital position, we are pleased to raise the interim dividend by 43% or 12 cents from a year ago to 40 cents, representing a payout ratio of 50%,” says group CEO Helen Wong.
“Our sustainability journey is progressing well. This year, we unveiled our sectoral decarbonisation targets, demonstrating our firm commitment to achieving net zero by 2050. Our sustainable financing commitments have crossed $47 billion, and we are on track to achieve our target of $50 billion by 2023, two years ahead of schedule,” she adds. “We are committed to leveraging the combined strength of our strong network and enhancing our One Group capabilities to drive the medium-term growth initiatives that we have identified. At the same time, we will continue to be prudent in our risk and capital management given the uncertain global economic outlook.”
Shares in OCBC closed 15 cents lower or 1.14% down at $13.04 on Aug 3.
