Oversea-Chinese Banking Corporation (OCBC) O39 has posted net profit of $1.97 billion for 3QFY2024 ended Sept 30, up 9% y-o-y and 2% q-o-q. The earnings beat consensus estimates of around $1.9 billion.
OCBC’s 9M2024 net profit was 9% higher y-o-y, at $5.90 billion, announced the bank on Nov 8.
OCBC says its strong y-o-y performance in the latest quarter 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.”
Net interest income for 3QFY2024 was $2.43 billion, 1% lower y-o-y. Average assets grew 3% while net interest margin (NIM) compressed by 9 basis points (bps) y-o-y and 2bps q-o-q to 2.18%, as the rise in funding costs more than offset the higher asset yields.
Non-interest income for 3QFY2024 grew 41% y-o-y to $1.37 billion from broad-based growth, says OCBC.
Net fee income rose 10% y-o-y to $508 million, underpinned by higher wealth management, investment banking and loan-related fees. In particular, wealth management fees climbed 25% from a year ago.
See also: OCBC posts record 1HFY2024 net profit of $3.93 bil, up 9% y-o-y; 2QFY2024 net profit falls 2% q-o-q
Net trading income more than doubled to a new quarterly high of $508 million. Customer flow treasury income rose to a record $306 million, driven by both corporate and wealth segments.
Improved investment performance across the Global Markets division and Great Eastern Holdings G07 (GEH) lifted non-customer flow treasury income. Insurance income from GEH increased 6% y-o-y to $233 million, supported by robust underlying business performance.
In total, the group’s wealth management income, comprising income from private banking, premier private client, premier banking, insurance, asset management and stockbroking, was $1.29 billion, 15% higher than the previous year, and contributed 34% to the group’s total income.
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Group wealth management assets under management (AUM) was $284 billion, up 5% from $270 billion a year ago from both net new money inflows and improved market valuation.
Operating expenses for the quarter were $1.46 billion, up 9% y-o-y. 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, OCBC recorded $15 million of costs relating to the integration of PT Bank Commonwealth (PTBC) in Indonesia.
In 3QFY2024, cost-to-income ratio (CIR) improved from 39.1% this time last year to 38.5% on positive operating jaws. That said, this is up from 37.5% in 1HFY2024.
During 3QFY2024, customer loans grew 4% y-o-y and 2% q-o-q on a constant-currency basis to some $305 billion. Customer deposits were unchanged y-o-y and down 0.1% q-o-q to some $369 billion.
The current account and savings account (Casa) ratio rose 2.1 percentage points (ppt) y-o-y and 0.5ppt q-o-q to 48.4% in 3QFY2024.
OCBC says asset quality remained “resilient” with non-performing loan (NPL) ratio declining to 0.9% from 1.0% this time last year. The NPL ratio is unchanged q-o-q.
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As at Sept 30, total non-performing assets (NPA) fell 10% y-o-y and 4% during the quarter to some $2.797 billion. OCBC says the q-o-q drop in NPAs was driven by higher recoveries/upgrades and write-offs, which more than compensated for a rise in new corporate NPAs.
The allowance coverage for total NPAs was 164%, as compared to 139% this time last year.
Total allowances for 3QFY2024 were $169 million, which comprised allowances for impaired assets of $37 million and allowances for non-impaired assets of $132 million.
On an annualised basis, total credit costs for 9M2024 were 17bps, lower as compared to 20bps in 9M2023.
On an annualised basis, return on equity (ROE) rose 0.1ppt y-o-y and 1ppt q-o-q to 14.1%. Earnings per share increased 9% y-o-y and 1% q-o-q to $1.73.
The common equity tier-1 (CET-1) capital adequacy ratio, after fully phased-in final Basel III reforms, rose 0.8ppt y-o-y and 0.1ppt q-o-q to 15.6%.
OCBC’s liquidity coverage ratio (LCR) fell 18ppt y-o-y and rose 3ppt q-o-q to 141% for the quarter ended Sept 30.
OCBC’s leverage ratio rose 0.7ppt y-o-y and 0.3ppt q-o-q to 7.5% over the same period. This was computed based on the final Basel III reform rules with effect from July 1.
OCBC group CEO Helen Wong says OCBC’s shareholding in GEH is 93.72% after the expiry of GEH minority shareholders’ right under Section 215(3) of the Companies Act on Oct 23. “I am pleased that we have also completed the merger between OCBC Indonesia and PT Bank Commonwealth in September.”
Wong says the bank is “firmly placed” to deliver FY2024 targets of full-year NIM around 2.20%, low-single-digit loan growth, full-year credit costs in the range of 20bps and ROE above 14%.
She adds: “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.”
Shares in OCBC closed 58 cents higher, or 3.80% up, at $15.88 on Nov 7.
