Thursday, 23 May 2024

OCBC net profit surged to $1.4B in Q1 2024

5 min read

Oversea-Chinese Banking Corporation (OCBC) reported net profit of SGD1.98 billion ($1.4 billion) for the first quarter of 2024 (1Q24), 22% higher than SGD1.62 billion ($1.1 billion) in the previous quarter (4Q23), and 5% above SGD1.88 billion ($1.3 billion) a year ago (1Q23).

The group’s resilient quarter-on-quarter performance was driven by total income rising to a new quarterly high, strict cost discipline and lower allowances. Income growth outpaced the increase in operating expenses, which drove an improvement in cost-to-income ratio (CIR) to 37.1%, while credit costs decreased to 16 basis points. Loans grew 1% and asset quality was sound with non-performing loan (NPL) ratio steady at 1.0%. The group’s capital, funding and liquidity positions remained robust, providing flexibility to support business growth and handle uncertainties. Return on equity climbed to 14.7% and earnings per share was higher at SGD1.76 ($1.3), on an annualised basis.

1Q24 Quarter-on-Quarter Performance

Group net profit rose 22% to SGD1.98 billion ($1.4 billion), underpinned by record total income, well-controlled costs and lower allowances.

➢ Net interest income was SGD2.44 billion ($1.8 billion), 1% below 4Q23’s record level, largely due to the effect of a comparatively shorter quarter. On a day-adjusted basis, net interest income was steady against the preceding quarter. Average assets grew by 1%, which largely compensated for a 2 basis-point moderation in net interest margin (NIM) to 2.27% as a rise in asset yields was outpaced by higher funding costs.

➢ Non-interest income rebounded by 47% to SGD1.19 billion ($879 million).

• Net fee income was SGD479 million ($354 million), 4% above the prior quarter. This was largely driven by an increase in wealth management, brokerage and fund management fees on the back of a rise in customer activities, as well as higher investment banking fees.

• Net trading income surged 67% to a new high, underpinned by record customer flow treasury income as well as improved non-customer flow treasury income.

• Insurance income was SGD289 million ($213 million), significantly higher as compared to SGD88 million ($65 million) in 4Q23, supported by better investment performance and improvement in claims experience. Total weighted new sales grew 2% quarter-on-quarter to SGD524 million ($387 million), driven by higher single premium sales in Singapore, while new business embedded value (NBEV) was SGD163 million ($120 million).

➢ The group’s wealth management income, comprising income from insurance, private banking, premier private client, premier banking, asset management and stockbroking, was a record SGD1.29 billion ($953 million), 33% above the previous quarter and contributed 36% to the group’s total income. Group wealth management AUM was SGD273 billion ($201 billion), up 4% from SGD263 billion ($194 billion) in the previous quarter.

➢ Operating expenses were SGD1.35 billion ($997 million), up 3% from a quarter ago, driven by higher staff costs from increase in variable compensation associated with income growth. The rise in expenses was outpaced by an 11% growth in total income, which drove CIR lower to 37.1%.

➢ Total allowances declined 9% from the prior quarter to SGD169 million ($124 million).

➢ Share of results of associates rose 35% to SGD255 million ($188 million), from SGD189 million ($139 million) in 4Q23.

1Q24 year-on-year performance

Group net profit increased 5% from a year ago, driven by an 8% rise in operating profit.

➢ Net interest income rose 4% from the previous year, led by a 5% growth in average assets, which more than compensated for a 3 basis-point decline in NIM, as rising funding costs offset the higher asset yields.

➢ Non-interest income was SGD1.19 billion ($879 million), 17% above the previous year, underpinned by improvement in fee, trading and insurance income.

➢ Operating expenses grew 8% from 1Q23 to SGD1.35 billion ($997 million), as the group continued to invest in its franchise and people to support business expansion.

➢ Total allowances were SGD169 million ($124 million), higher as compared to SGD110 million ($81 million) a year ago, mainly due to increased allowances for impaired assets.

➢ Share of results of associates of SGD255 million ($188 million) was 2% below 1Q23.

Re-disseminated by The Asian Banker

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