• Published on 8 November 2024
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OCBC Group net profit up 9% to $1.4B in Q3 2024

Oversea-Chinese Banking Corporation  (OCBC) reported net profit of SGD 1.97 billion ($1.48 billion) for the third quarter of 2024 (3Q24), 9% higher than SGD 1.81 billion ($1.36 billion) in the previous year (3Q23), and 2% above SGD 1.94 billion ($1.46 billion) a quarter ago (2Q24).

Net profit for the nine months of 2024 (9M24) increased 9% from a year ago (9M23) to SGD 5.90 billion ($4.46 billion).

The group’s strong year-on-year performance for 3Q24 was driven by robust non-interest income growth and lower allowances. Increased wealth management activities lifted fee and trading income, with insurance income higher as well. Cost-to-income ratio (CIR) improved from the previous year to 38.5% on positive operating jaws. Asset quality remained resilient with non-performing loan (NPL) ratio declining to 0.9%. Customer loans grew 4% from a year ago, on a constant-currency basis. On an annualised basis, return on equity rose to 14.1% and earnings per share increased to SGD 1.73 ($1.31).

3Q24 year-on-year performance

Group net profit rose 9% from a year ago to SGD 1.97 billion ($1.48 billion), led by higher non-interest income and lower allowances.

➢ Net interest income was SGD 2.43 billion ($1.83 billion), 1% lower than 3Q23. Average assets grew 3% while net interest margin (NIM) compressed by nine basis points to 2.18%, as the rise in funding costs more than offset the higher asset yields.

➢ Non-interest income grew 41% to SGD 1.37 billion ($1.03 billion) from broad-based growth.

• Net fee income rose 10% to SGD 508 million ($384 million), underpinned by higher wealth management, investment banking and loan-related fees. In particular, wealth management fees climbed 25% from a year ago, reflecting increased customer activities across all wealth product channels.

• Net trading income more than doubled to a new quarterly high of SGD 508 million ($384 million). Customer flow treasury income rose to a record SGD 306 million ($231 million), driven by both corporate and wealth segments. Improved investment performance across Global Markets and Great Eastern Holdings (GEH) lifted non-customer flow treasury income.

• Insurance income from GEH increased 6% to SGD 233 million ($176 million), supported by robust underlying business performance.

➢ The group’s wealth management income, comprising income from private banking, premier private client, premier banking, insurance, asset management and stockbroking, was SGD 1.29 billion ($975 million), 15% higher than the previous year, and contributed 34% to the group’s total income. Group wealth management AUM was SGD 284 billion ($214 billion), up 5% from SGD 270 billion ($204 billion) a year ago from both net new money inflows and improved market valuation.

➢ Operating expenses were SGD 1.46 billion ($1.10 billion), up 9% year-on-year. This was underpinned by higher expenses associated with increased business volumes, as well as IT-related expenses as the group continued to drive its digitalisation initiatives. During the quarter, SGD 15 million ($11 million) of costs relating to the integration of PT Bank Commonwealth (PTBC) in Indonesia were also recorded. As income growth outpaced the increase in expenses, CIR improved to 38.5%.

➢ Total allowances dropped 8% from a year ago to SGD 169 million ($127 million).

➢ Share of results of associates was SGD 251 million ($189 million), 1% below 3Q23.

3Q24 quarter-on-quarter performance

Group net profit of SGD 1.97 billion ($1.49 billion) was 2% higher than the previous quarter.

➢ Net interest income of SGD 2.43 billion ($1.83 billion) held steady from a quarter ago. The effect of a comparatively longer quarter compensated for the impact of a two-basis point narrowing of NIM.

➢ Non-interest income grew 14% to SGD 1.37 billion ($1.03 billion) from the prior quarter, driven by stronger fee and trading income. Net fee income was up 9%, largely attributable to a 16% increase in wealth management fees, and higher investment banking and loan-related fees. Net trading income rose by 43% from 2Q24.

➢ Operating expenses were 7% above 2Q24, led by a rise in variable staff compensation linked to higher business volumes.

➢ Total allowances of SGD 169 million ($127 million) were higher as compared to SGD 144 million ($108 million) in the previous quarter, largely from higher allowances for non-impaired assets.

➢ Share of results of associates rose 4% from 2Q24 to SGD 251 million ($189 million).

9M24 year-on-year performance

Group net profit increased 9% to SGD 5.90 billion ($4.4 billion), surpassing the previous nine-month high reported a year ago. This was driven by broad-based income growth and lower allowances.

➢ Net interest income grew 2% to a record SGD 7.30 billion ($5.52 billion), backed by a 4% rise in average assets from growth in customer loans and the deployment of liquidity into high-quality assets which were income accretive but lower-yielding. NIM contracted six basis points to 2.22%, mainly due to increased funding costs which outpaced the rise in asset yields.

➢ Non-interest income rose 23% to a new high of SGD 3.76 billion ($2.84 billion). Net fee income grew 8% to SGD 1.45 billion ($1.09 billion), largely attributable to a 21% increase in wealth management fees. Net trading income was 58% higher at SGD 1.23 billion ($930 million), driven by both customer and non-customer flow income. Insurance income improved by 13% to SGD 815 million ($616 million).

➢ Operating expenses were SGD 4.18 billion ($3.16 billion), 7% higher as compared to 9M23, largely due to increased staff costs and IT-related expenditure to support the group’s business expansion. Integration costs of SGD 27 million ($20 million) for PTBC were also included in 9M24. CIR improved to 37.8% from 38.2% a year ago, as the 8% rise in total income exceeded expense growth.

➢ Share of results of associates was SGD 749 million ($566 million), 2% lower than a year ago.

➢ Total allowances were SGD 483 million ($365 million), 12% below SGD 546 million ($413 million) in 9M23, mainly due to a decline in allowances for non-impaired assets.

➢ On an annualised basis, ROE rose to 14.4% from 14.2% in the previous year, and earnings per share grew 9% to SGD 1.74 ($1.32).

➢ Total NPAs as at 30 September 2024 were SGD 2.80 billion ($2.11 billion), 10% below the previous year and down 4% from the last quarter. The quarter-on-quarter drop in NPAs was driven by higher recoveries/upgrades and write-offs, which more than compensated for a rise in new corporate NPAs.

➢ NPL ratio was 0.9%, lower than a year ago and unchanged from the prior quarter. The allowance coverage for total NPAs was 164%, as compared to 139% in the previous year.

➢ Total allowances for 3Q24 were SGD 169 million ($127 million), which comprised allowances for impaired assets of SGD 37 million ($27 million) and allowances for non-impaired assets of SGD 132 million ($99 million).

➢ On an annualised basis, total credit costs for 9M24 were 17 basis points, lower as compared to 20 basis points in 9M23.

➢ Customer loans grew 4% from a year ago and 2% from the previous quarter in constant currency terms, to SGD 305 billion ($230 billion) as at 30 September 2024.

• The year-on-year loan growth was led by an increase in corporate loans and mortgages. By geography, loan growth was largely driven by Singapore, Malaysia, and the group’s international markets including the United Kingdom and Australia.

• Sustainable financing loans rose 31% from year ago to SGD 47.1 billion ($35 billion), and comprised 15% of total customer loans. The total sustainable financing loan commitments stood at SGD 64.7 billion ($48.9 billion) as at 30 September 2024.

➢ Customer deposits of SGD 369 billion ($279 billion) were lower than a quarter ago, mainly driven by a SGD 3 billion ($2.2 billion) drop in higher-cost fixed deposits. CASA deposits increased to SGD 179 billion ($135 billion) and CASA ratio rose to 48.4%.

➢ Loans-to-deposits ratio was 81.6%, higher as compared to 79.7% in the previous year and 81.1% in the prior quarter.

➢ The group is subject to MAS’ final Basel III reforms requirements which came into effect on 1 July 2024, and are being progressively phased in between 1 July 2024 and 1 January 2029. Group CET 1 CAR as at 30 September 2024 was 17.2%, and was 15.6% on a fully phased-in basis.

Helen Wong, group CEO of OCBC, said: “Our record earnings for the first nine months of 2024 underscored the robust performance across the group’s diversified franchise. Loan growth momentum was sustained as we supported customers across our markets, while portfolio quality remained sound. The strong improvement in our wealth management business and trading income reflected the progress we have made in advancing our corporate strategy. We also saw solid profit contribution from Great Eastern Holdings (GEH), and we look forward to driving further collaboration and synergies with GEH.

Our shareholding in GEH is 93.72% after the expiry of GEH minority shareholders’ right under Section 215(3) of the Companies Act on 23 October 2024. I am pleased that we have also completed the merger between OCBC Indonesia and PT Bank Commonwealth in September 2024.

Looking ahead, we will continue to proactively manage our balance sheet to prepare for a lower interest rate environment. We are closely monitoring potential volatilities arising from uncertain geopolitical conditions. We remain confident in the resilience and long-term prospects of our key markets in Asia. With our well-established franchise and strong financial position, we are well-placed to drive value for all stakeholders."

Re-disseminated by The Asian Banker