Oversea-Chinese Banking Corporation (OCBC) reported net profit of $1.16 billion for the 2QFY2021 ended June, a 59% y-o-y increase from $730 million previously.
On a q-o-q basis, OCBC’s net profit fell 23% from the 1QFY2021 net profit of $1.5 billion.
1HFY2021 net profit amounted to $2.66 billion, up 86% from $1.43 billion the year before, largely driven by a 29% increase in non-interest income and substantially lower allowances.
OCBC has declared an interim dividend per share (DPS) of 25 cents, representing a payout ratio of 42% against the group’s net profit, similar to interim DPS paid in FY2019. In comparison, the group had paid out an interim DPS of 15.9 cents in FY2020, when the dividend was capped at 60% of the prior year’s dividend in line with MAS’ guidance.
Net interest income (NII) for the 2QYF2021 came in at $1.46 billion, declining 2% y-o-y, mainly from a two basis points decline in net interest margin (NIM) to 1.58%.
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On a q-o-q basis, NII for the period increased by 1%, underpinned by a two basis points increase in NIM as the group continued to optimise its balance sheet.
NII for the 1HFY2021 totalled $2.9 billion, declining 7% y-o-y from $3.1 billion previously, due to an 11 basis points contraction in NIM to 1.57%, as asset yields declined faster than the drop in funding costs in the low interest rate environment. The average loan-to-deposits ratio was also lower at 84.6%, compared to 85.4% a year ago.
Non-interest income for the 2QFY2021 declined 3% y-o-y to $1.11 billion, mainly attributable to lower trading, investment and insurance income, but partly offset by a 28% increase in fee income.
On a q-o-q basis, non-interest income fell 25% mainly due to lower fee and trading income, and insurance profit.
Non-interest income for the 1HFY2021 grew 29% y-o-y to $2.58 billion, from $2.01 billion previously. The higher non-interest income was driven by 17% higher net fee income of $1.15 billion, a 25% increase in wealth management income to $2.14 billion, a 54% increase in net trading income to $528 million, and an85% increase in profit from life insurance to $627 million.
Operating expenses for the 2QFY2021 grew 3% y-o-y to $1.13 billion, in-line with increased business activities, but fell 1% on a q-o-q basis.
Operating expenses for the 1HFY2021 increased 3% y-o-y to $2.29 billion, while cost-to-income ratio improved to 41.7% from 43.3% a year ago, on positive operating jaws.
2QFY2021 allowances fell 69% y-o-y to $232 million but grew 43% q-o-q. The higher allowances q-o-q follows higher allowances for non-impaired loans, largely attributable to management overlays set aside above the ECL model requirements in view of the prevailing operating environment in OCBC's regional markets. Allowances for impaired loans were lower q-o-q.
1HFY2021 allowances totalled $393 million, 72% lower y-o-y from $1.41 billion previously.
As at June 30, total non-performing assets (NPAs) stood at $4.08 billion, 6% lower y-o-y as a result of higher recoveries and upgrades. The decline was led by a fall in NPAs in Singapore and partly offset by a rise in Malaysia and Indonesia.
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The non-performing loan (NPL) ratio of 1.5% was unchanged from the previous quarter and 1% lower than the 1.6% recorded a year ago.
Customer loans rose to $275 billion as at June 30, up 3% y-o-y and 1% q-o-q, while customer deposits were up 2% y-o-y to $317 billion.
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The group’s CET1 CAR was 16.1% as at June 30.
“OCBC continued to deliver a resilient set of results for the first half of 2021, underpinned by the strength of our diversified business franchise. Net profit growth was driven by robust banking and insurance performance, while wealth management income grew strongly and private banking assets under management continued to expand. While net interest margin remained relatively stable amid a low rate environment, fee and investment related income grew in tandem with renewed consumer and business confidence," says group CEO Helen Wong.
"We maintained our strong capital, funding and liquidity position and have raised our 2021 interim dividend to 25 cents per share. While the long-term trajectory of global economic recovery is positive, we remain watchful on the current operating environment in view of the recent virus resurgence and heightened safety measures in our key markets. We stay firmly committed to supporting our customers during this difficult period," she adds.
Shares in OCBC closed down 6 cents or 0.49% lower at $12.24 on August 3.
Photo: Bloomberg
