Oversea-Chinese Banking Corporation (OCBC) reported net profit of SGD 3.70 billion ($2.74 billion) for the first half of 2025, 6% below the record SGD 3.93 billion ($2.91 billion) in the first half of 2024.

OCBC’s total income was little changed, as a decline in net interest income from the peak level a year ago was mostly compensated by robust fee and trading income growth. Cost-to-income ratio was maintained below 40%, and higher credit allowances were set aside in view of the current uncertain operating environment. Asset quality remained benign with non-performing loan (NPL) ratio at 0.9%, while allowance coverage for total non-performing assets (NPAs) stood at 156%. The group maintained its solid financial position, and an interim ordinary dividend of 41 cents ($0.3) was declared, representing a payout ratio of 50% of first half 2025 group net profit.

The group remains committed to the previously announced SGD 2.5 billion ($1.85 billion) capital return, which includes a special dividend amounting to 10% of full year 2025 group net profit and share buybacks over two years, to be completed in 2026. Together with OCBC’s target 50% ordinary dividend payout ratio, this represents a total dividend payout ratio of 60% for full year 2025.

First half 2025 performance

Group net profit was SGD 3.70 billion ($2.74 billion), 6% lower than SGD 3.93 billion ($2.91 billion) a year ago. Amid a softening interest rate environment, net interest income fell 5% to SGD 4.63 billion ($3.43 billion), as a compression in net interest margin (NIM) more than offset an 8% rise in average asset volume. Average asset growth was driven by an increase in loans and other interest-earning high-quality assets, which were lower yielding. NIM declined by 25 basis points to 1.98%, as the drop in asset yields outpaced the decrease in funding costs.

Non-interest income grew 8% to SGD 2.57 billion ($1.90 billion), buoyed by a rise in fee and trading income.

Net fee income of SGD 1.13 billion ($0.83 billion) was 19% higher from broad-based growth, underpinned by increased customer activities. In particular, wealth management fees, which made up nearly half of net fee income, surged by 25%, with growth across all wealth product channels.

Net trading income was SGD 771 million ($0.57 billion), 6% above the previous year. Customer flow treasury income was up 10%, driven by both wealth and corporate segments, with higher treasury sales across the group’s key markets.

Insurance income from Great Eastern Holdings (GEH) declined by 9% to SGD 532 million ($0.39 billion), largely attributable to the mark-to-market impact of the decline in interest rates on the valuation of insurance contract liabilities, as well as lower valuation of private equity holdings from its insurance funds. New business embedded value increased by 16% to SGD 317 million ($0.23 billion) and embedded value margin rose to 44.7% from 28.0% a year ago, driven by improved insurance product mix.

The group’s wealth management income, comprising income from private banking, premier private client, premier banking, insurance, asset management and stockbroking, increased 4% to SGD 2.66 billion ($1.97 billion). Group wealth management income accounted for 37% of total income, higher than 35% in the first half of 2024. Banking wealth management AUM expanded by 11% to an all-time high of SGD 310 billion ($229.4 billion), driven by both net new money inflows and positive market valuation.

Operating expenses were SGD 2.80 billion ($2.07 billion), up 3% from the previous year. Staff costs were 4% higher, attributable to annual salary increments and increased variable compensation linked to higher business activities. Technology-related expenses were up as the group continued to invest in common platforms and upgrade capabilities across markets. Cost-to-income ratio was 38.9%, compared to 37.5% a year ago.

Total allowances rose by 4% to SGD 326 million ($0.24 billion), mainly due to an increase in allowances for non-impaired assets. Share of results of associates was SGD 537 million ($0.40 billion), up 8% from SGD 498 million a year ago. The group’s annualised return on equity was 12.6%, lower than 14.5% in the preceding year, while annualised earnings per share was SGD 1.64 ($1.21), 6% below the first half of 2024.

Second quarter 2025 quarter-on-quarter performance

Group net profit was SGD 1.82 billion ($1.35 billion), 4% below the prior quarter.

Net interest income moderated by 3% from the previous quarter to SGD 2.28 billion ($1.69 billion), as a 2% increase in average assets was more than offset by a 12 basis-point contraction in NIM to 1.92%. The NIM decline was largely associated with the downward repricing of SGD and HKD denominated loans, as a result of the significant drop in benchmark rates this year, which outpaced the reduction in deposit costs. The strategic deployment of liquidity into income-accretive high-quality assets in the first quarter also weighed on NIM.

Non-interest income decreased 4% to SGD 1.26 billion ($0.93 billion), largely driven by lower insurance and trading income, which were partly compensated by higher fee income and net realised gains from the sale of investment securities.

The group continued to maintain cost discipline, and operating expenses declined 2% to SGD 1.39 billion ($1.03 billion).

Total allowances were SGD 114 million ($84 million), down 46% quarter-on-quarter from a decline in allowances for both impaired and non-impaired assets. Credit costs were an annualised 12 basis points, lower than 24 basis points in the first quarter.

Share of results of associates was 4% lower at SGD 263 million ($0.19 billion).

Second quarter 2025 year-on-year performance

Group net profit decreased 7% from a year ago to SGD 1.82 billion ($1.35 billion).

Net interest income was 6% lower from the previous year, as NIM narrowed by 28 basis points in a declining interest rate environment, partly cushioned by a 7% growth in average assets.

Non-interest income was up 5% from the prior year, lifted by a 24% rise in fee income and 6% increase in trading income, which more than offset lower insurance income.

Operating expenses were 1% above the second quarter of 2024, and cost-to-income ratio was 39.1%, compared to 37.8% a year ago. Total allowances of SGD 114 million ($84 million) was lower compared to SGD 144 million a year ago, from a decrease in allowances for impaired assets.

Share of results of associates increased by 8% to SGD 263 million ($0.19 billion).

Non-performing assets (NPAs)

Total NPAs as at 30 June 2025 were SGD 3.01 billion ($2.23 billion), up 4% from a year ago. Against the previous quarter, NPAs were 3% higher, mainly due to new NPA formation, which was partly compensated by net recoveries and upgrades, write-offs and the effect of foreign currency translation.

NPL ratio was stable at 0.9%, and total NPA coverage was 156%.

Allowances

For the first half of 2025, total allowances were 4% higher at SGD 326 million ($0.24 billion), comprising allowances for non-impaired assets of SGD 167 million ($0.12 billion), which included additional allowances set aside to cater for increased macroeconomic uncertainties; and allowances for impaired assets of SGD 159 million ($0.12 billion), which were lower than SGD 334 million a year ago.

Second quarter total allowances were SGD 114 million ($84 million), below the previous quarter and the prior year.

First half 2025 credit costs were an annualised 18 basis points.

Interim dividend

An interim dividend of 41 cents ($0.3) per share has been declared. The interim dividend payout will amount to SGD 1.84 billion ($1.36 billion), representing a payout ratio of 50%. The scrip dividend scheme will not be applicable to the interim dividend.

Group chief executive, Helen Wong said, “Our first half 2025 results reflected resilient performance across our diversified business franchise. We expanded our loan book and maintained sound asset quality, and delivered broad-based fee income growth. Underpinned by our strong balance sheet and capital position, we are firmly committed to our comprehensive capital return plan"

"Over the past year, we have met our objectives of increasing our economic interests in GEH and have also assisted GEH in managing the trading suspension of its shares. As we move forward, we will continue to derive more synergies within the group, and are confident that this will further our drive to be a leading wealth management player in the region."

"The outlook ahead remains challenging. Evolving trade and monetary policies, and persistent geopolitical tensions are expected to weigh on growth prospects. Despite the uncertainties, OCBC has a strong and resilient franchise. As I prepare to hand over the reins of group chief executive to Teck Long’s capable hands on 1 January 2026, I do so with full confidence. OCBC is well placed for the future with a clear ambition, and we are focused on supporting our customers and capturing growth opportunities across the region to drive long-term value for our stakeholders.”

Redisseminated by The Asian Banker