OVERSEA-CHINESE BANKING CORPORATION LIMITED Media Release
OCBC Group Half Year 2023 Net Profit
Rose 38% to a Record S$3.59 billion
Interim dividend raised to 40 cents, up 43% from 28 cents a year ago
Singapore, 4 August 2023 - Oversea-Chinese Banking Corporation Limited ("OCBC") reported net profit of S$3.59 billion for half year 2023 ("1H23"), 38% higher than S$2.59 billion in the previous year ("1H22").
The Group's resilient performance demonstrated the strength of OCBC's diversified business franchise. Total income rose to a new high, underpinned by record net interest income, higher trading and investment income, and increased insurance profit. These compensated for softer wealth management fees amid subdued global investment sentiments, although the Group's wealth management Assets Under Management ("AUM") rose 10% year-on-year to S$274 billion on continued inflows of net new money. Expenses were well controlled and cost-to-income ratio improved from 47.1% in the previous year to 37.8% in 1H23. Loan portfolio quality was resilient, with non-performing loans ratio at 1.1%. Allowances were higher, as the Group took a prudent approach to raise its allowances set aside for non-impaired assets. The Group maintained its strong capital, funding and liquidity positions, which provide for sufficient headroom to drive future growth and buffer for uncertainties.
We are pleased to raise the 2023 interim dividend to 40 cents, up 43% or 12 cents from a year ago. This represents a payout ratio of 50% of the Group's 1H23 net profit.
1H23 Performance Highlights
Group | ||||
Net | S$3.59b | +38% YoY | ||
Profit | ||||
Banking | S$3.23b | |||
Operations | +33% YoY | |||
Net Profit | ||||
EPS | S$1.60 | |||
+39% YoY | ||||
(annualised) | ||||
ROE | 14.3% | |||
+3.9ppt YoY | ||||
(annualised) | ||||
YoY | ||
Total Income | S$6.80b | +30% |
Net Interest Income | S$4.73b | +48% |
Non-Interest Income | S$2.08b | +3% |
Operating Expenses | S$2.57b | +5% |
Net Interest Margin | 2.28% | +65bps |
Credit Costs | 21bps | +14bps |
Customer Loans | S$297b | +2% |
(in constant currency terms) | ||
Customer Deposits | S$372b | +7% |
NPL Ratio | 1.1% | -0.2ppt |
CET1 CAR | 15.4% | +0.5ppt |
All-ccy LCR | 158% | +10ppt |
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Half Year 2023 Performance
S$ million | 1H23 | 1H22 | YoY (%) |
Net interest income | 4,727 | 3,203 | +48 |
Non-interest income | 2,078 | 2,020 | +3 |
of which: Fees and commissions | 883 | 999 | -12 |
Trading income | 513 | 492 | +4 |
Profit from insurance | 500 | 454 | +10 |
Total income | 6,805 | 5,223 | +30 |
Operating expenses | (2,573) | (2,458) | +5 |
Associates | 510 | 499 | +2 |
Operating profit before allowances | 4,742 | 3,264 | +45 |
Allowances | (362) | (116) | +211 |
Amortisation, tax and NCI | (791) | (556) | +43 |
Group net profit | 3,589 | 2,592 | +38 |
Group ROE - annualised | 14.3% | 10.4% | +3.9ppt |
Note: The Group's insurance results are prepared under SFRS(I) 17 basis and comparatives have been restated.
1H23 Year-on-Year Performance
- Group net profit rose 38% from 1H22 to a new high of S$3.59 billion, driven by record income.
- Net interest income grew 48% to S$4.73 billion, attributable to a 6% increase in average assets and a 65-basis point expansion in net interest margin ("NIM") to 2.28%.
- Non-interestincome was S$2.08 billion, up 3% from S$2.02 billion in the previous year. Higher trading, investment and insurance income were offset by lower fee income.
- Net fee income was S$883 million, down 12% as higher loan-related and investment banking fees were offset by softer wealth management-related fees from a decline in customer activities amid a risk-off investment environment.
- Net trading income was higher at S$513 million, compared to S$492 million in the preceding year, while net gains from the sale of investment securities were S$38 million, against a net loss of S$78 million in the previous year.
- Profit from insurance of S$500 million was 10% higher than a year ago, mainly attributable to improved investment performance. Great Eastern Holdings ("GEH") adopted Singapore Financial Reporting Standards (International) ["SFRS(I)"] 17 on 1 January 2023, and the Group's insurance results for 1H23 are prepared based on SFRS(I) 17 and respective comparative periods have been restated. Total weighted new sales and new business embedded value ("NBEV") were S$726 million and S$351 million respectively, while NBEV margin improved to 48.4% from 37.1% a year ago attributable to favourable product mix.
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- The Group's wealth management income, comprising income from insurance, private banking, premier private client, premier banking, asset management and stockbroking, rose 36% to S$2.24 billion for 1H23, from S$1.64 billion in the previous year, and contributed 33% to the Group's total income. Group wealth management AUM continued to expand and was 10% higher at S$274 billion as at 30 June 2023, compared to S$250 billion in the preceding year, driven by continued net new money inflows.
- Operating expenses rose 5%, largely from higher staff-related costs associated with headcount expansion to support business growth and annual salary adjustments. Other expenses including business promotion were also higher, in line with a rise in business volumes. The Group's cost-to- income ratio ("CIR") improved from 47.1% in the previous year to 37.8% in 1H23.
- Share of results of associates was S$510 million, up 2% from S$499 million a year ago.
- Net allowances were S$362 million as compared to S$116 million in the previous year. The Group took a prudent approach to raise allowances for non-impaired assets, which rose from S$79 million in the previous year to S$254 million in 1H23.
- Annualised ROE for 1H23 improved to 14.3%, from 10.4% in the preceding year. Earnings per share was S$1.60, up 39% from S$1.15 in 1H22.
Second Quarter 2023 Performance
S$ million | 2Q23 | 2Q22 | YoY (%) | 1Q23 | QoQ (%) | |
Net interest income | 2,389 | 1,700 | +40 | 2,338 | +2 | |
Non-interest income | 1,066 | 964 | +11 | 1,012 | +5 | |
of which: Fees and commissions | 430 | 477 | -10 | 453 | -5 | |
Trading income | 262 | 267 | -2 | 251 | +5 | |
Profit from insurance | 262 | 208 | +26 | 238 | +9 | |
Total income | 3,455 | 2,664 | +30 | 3,350 | +3 | |
Operating expenses | (1,329) | (1,304) | +2 | (1,244) | +7 | |
Associates | 250 | 245 | +2 | 260 | -4 | |
Operating profit before allowances | 2,376 | 1,605 | +48 | 2,366 | - | |
Allowances | (252) | (72) | +248 | (110) | +128 | |
Amortisation, tax and NCI | (414) | (252) | +64 | (377) | +9 | |
Group net profit | 1,710 | 1,281 | +34 | 1,879 | -9 | |
Group ROE - annualised | 13.5% | 10.3% | +3.2ppt | 14.7% | -1.2ppt | |
Note: The Group's insurance results are prepared under SFRS(I) 17 basis and comparatives have been restated.
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2Q23 Year-on-Year Performance
- Group net profit was 34% higher than 2Q22 at S$1.71 billion, driven by strong income growth, partly offset by higher allowances.
- Net interest income rose 40% to S$2.39 billion, underpinned by asset growth and a 55-basis point increase in NIM to 2.26% on the back of the rapid rise in market interest rates.
- Non-interestincome grew 11% to S$1.07 billion, mainly from net gains from the sale of investment securities and higher profit from insurance, partly offset by lower fee and trading income.
- Operating expenses of S$1.33 billion were 2% above 2Q22, led by an increase in staff costs. CIR was lower at 38.5% compared to 49.0% last year.
- Share of results of associates rose 2% to S$250 million in 2Q23.
- Total allowances were higher at S$252 million, compared to S$72 million a year ago, largely driven by increased allowances for non-impaired assets.
2Q23 Quarter-on-Quarter Performance
- Group net profit was 9% lower than 1Q23, as a 1% increase in operating profit was more than offset by higher allowances.
- Net interest income rose 2%, supported by 3% asset growth, partly offset by a 4-basis point drop in NIM as higher funding costs outpaced the increase in loan yields.
- Non-interestincome was 5% higher than the previous quarter, supported by improved trading income and higher profit from insurance.
- Expenses increased 7%, led by a rise in staff costs mainly from annual salary adjustments that took effect in the second quarter and an increase in headcount.
- Share of results of associates was 4% lower than a quarter ago.
- Total allowances were above 1Q23 from a rise in allowances for non-impaired assets.
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Asset Quality and Allowances
S$ million | Jun 2023 | Jun 2022 | Mar 2023 | YoY | QoQ | ||
Non-performing assets (NPAs) | 3,275 | 3,969 | 3,329 | -17% | -2% | ||
Non-performing loan (NPL) ratio | 1.1% | 1.3% | 1.1% | -0.2ppt | - | ||
Total NPA coverage | 131% | 99% | 121% | +32ppt | +10ppt | ||
Allowances (S$ million) | 1H23 | 1H22 | 2Q23 | 2Q22 | 1Q23 | ||
Allowances for loans and other assets | 362 | 116 | 252 | 72 | 110 | ||
of which: Impaired | 108 | 37 | 52 | 6 | 56 | ||
Non-impaired | 254 | 79 | 200 | 66 | 54 | ||
Credit costs (bps) 1/ | 1H23 | 1H22 | 2Q23 | 2Q22 | 1Q23 | ||
Total loans | 21 | 7 | 31 | 8 | 12 | ||
of which: Impaired loans | 6 | 2 | 6 | 0 | 5 | ||
1/ Credit costs refer to allowances for loans as a percentage of average loans, on annualised basis.
Asset Quality
- Total NPAs declined 17% from the previous year and 2% from a quarter ago to S$3.27 billion as at 30 June 2023. NPAs declined from the previous quarter as higher recoveries, upgrades and write-offs more than offset new NPA formation during the quarter. The higher recoveries and upgrades were mainly from Singapore, Malaysia and Indonesia.
- NPL ratio was stable quarter-on-quarter at 1.1% and down from 1.3% a year ago. Allowance coverage against total NPAs further improved to 131% from 99% in the previous year.
Allowances
- 1H23 total allowances were higher at S$362 million, compared to S$116 million in the previous year. This was largely driven by a substantial increase in allowances for non-impaired assets, particularly in 2Q23.
- Total allowances for 2Q23 were S$252 million, up from S$110 million in 1Q23. Compared to the previous quarter, allowances for impaired assets were 7% lower at S$52 million, while allowances for non-impaired assets climbed from S$54 million to S$200 million. The increase in allowances for non- impaired assets reflected:
- Changes in risk profiles in the loan portfolio;
- Updates of macro-economic variables in the Expected Credit Loss ("ECL") model; and
- Management overlays for specific risk segments, including the commercial real estate sector in developed markets.
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OCBC - Oversea-Chinese Banking Corporation Ltd. published this content on 03 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 August 2023 23:16:32 UTC.
