Oversea-Chinese Banking Corporation (OCBC) has reported earnings of $4.86 billion for the FY2021 ended December, bringing it back to its pre-pandemic levels, says the bank on Feb 23.
Earnings per share (EPS) for the FY2021 climbed 33.8% y-o-y to $1.07.
The surge in earnings were underpinned by strong growth in non-interest income and lower allowances. This offset a decline in net interest income (NII) amid a low interest rate environment.
During the 4QFY2021, OCBC saw earnings decline 14% y-o-y to $973 million due to a 15% y-o-y growth in operating expenses.
The higher quarterly expenses were due to higher staff costs linked to strategic expansion and business activity growth. The higher expenses were also attributable to the absence of government job support grants.
The quarter’s EPS stood flat at 48 cents.
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In the FY2021, NII fell 2% y-o-y to $5.86 billion, mainly due to a seven-basis point drop in net interest margin (NIM) despite a 3% growth in average asset balances.
Non-interest income for the FY2021 rose 14% y-o-y to a record $4.74 billion, lifted by net fee income, which rose 12% y-o-y to a new high of $2.25 billion and profit from life insurance, which surged 63% y-o-y to $1.14 billion.
The higher net fee income was due to broad-based fee growth on the back of higher transaction volumes and customer activities.
Wealth management fees passed the $1 billion mark for the first time, while wealth management income saw a new high of $3.92 billion, up 11% y-o-y.
As at end-December, OCBC’s wealth management assets under management (AUM) was $258 billion, up 7% y-o-y.
During the year, net trading income fell 12% y-o-y to $763 million, mainly due to a decline in non-customer flow income.
Net realised gains from the sale of investment securities fell 55.8% y-o-y to $92 million.
Profit from life insurance during the year grew due to favourable market conditions and higher operating profit from Great Eastern Holdings’ insurance business.
Total income for the FY2021 increased by 5% y-o-y to $10.6 billion.
In FY2021, OCBC’s share of results from associates rose 35% y-o-y to $824 million.
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Total allowances for the year fell 57.2% y-o-y to $873 million, which mainly comprised allowances for impaired assets of $855 million and allowances for non-impaired assets of $18 million.
Customer loans grew 8% y-o-y on the back of broad-based loan growth across the bank’s corporate and consumer segments.
During the year, current accounts saving accounts (CASA) deposits were up 14% y-o-y.
OCBC’s non-performing loans (NPL) ratio stood stable y-o-y at 1.5%.
Loan-to-deposits ratio was 83.6%, almost stable compared to the previous year’s 83.7%.
The bank’s return on equity (ROE) increased two percentage points y-o-y to 9.6%.
As at end-December, the group’s Common Equity Tier-1 capital adequacy ratio (CET-1) stood at 15.5%, slightly higher than the 15.2% in the FY2020.
Its leverage ratio stood at 7.7%, stable y-o-y.
A final dividend of 28 cents per share has been proposed, bringing the year’s total dividend to 53 cents, back to FY2019’s pre-pandemic level.
The total dividend for FY2021 is above the 31.8 cents declared in FY2020.
“Our strong 2021 performance demonstrated the resilience of OCBC’s banking, wealth management and insurance franchise,” says OCBC’s group CEO Helen Wong.
“Supported by our solid balance sheet, diversified funding base, and continued investment in people and technology, we are back to pre-pandemic profitability levels. We achieved good momentum across our customer franchise and reported record wealth management and fee-based income, broad-based loan and insurance sales growth,” she adds.
Looking ahead, Wong is “cautiously optimistic” that the operating environment will improve.
In her outlook for 2022, Wong says the global economic recovery momentum is expected to carry through, with Asia being the fastest-growing region.
That said, the tapering of stimulus measures and the tightening of US monetary and fiscal policies, along with inflationary pressures, an uncertain geopolitical environment and the emergence of new Covid-19 variants could be potential headwinds during the year, she adds.
“We will work towards executing on our long-term goals and refining our strategic priorities to capture the opportunities arising from Asia’s growth and Covid-19-driven acceleration of economic, social and structural trends.
"We continue to stay focused on growing OCBC’s leading position in our key markets and making further investments to deepen our network, accelerate digital transformation, and develop talent to deliver long-term sustainable growth,” she continues.
Shares in OCBC closed 19 cents lower or 1.42% down at $13.16 on Feb 22.
Photo: Bloomberg
