SINGAPORE (Feb 22): Oversea-Chinese Banking Corporation (OCBC Bank) reported earnings of $4.49 billion for the FY18 ended Dec, up 11% from $4.05 billion a year ago.
This was driven by record earnings from the group’s banking operations which rose 22% year-on-year, led by income growth, disciplined cost control and lower allowances. The group’s FY18 return on equity increased to 11.5% from 11.0% a year ago.
For 4Q18, the group posted 11% lower earnings of $926 million from 4Q17 due to a decline in earnings contribution from Great Eastern Holdings (GEH) although net profit after tax from banking operations grew 22% to $817 million.
Net interest income rose 7% to $1.52 billion from $1.42 billion in 4Q17. This was driven by loan growth and a 5 basis points rise in NIM to 1.72%.
Non-interest income fell 32% to $830 million, led by a drop in investment and insurance income from GEH. Net fees and commissions also declined 4% from a year ago to $474 million.
OCBC said higher credit card, loan and trade-related fees were more than offset by a fall in wealth management fees attributable to subdued investment sentiments in the current market environment.
Nonetheless, Bank of Singapore continued to report strong net new money inflows, which increased private banking assets under management (AUM) to US$102 billion ($139 billion) as at Dec 31 2018, up 3% from a year ago.
4Q18 net trading income was lower at $9 million as compared to $99 million a year ago, largely attributable to unrealised mark-to-market losses in GEH’s investment portfolio as a result of unfavourable market conditions. Excluding GEH, trading income from banking operations was 5% higher year-on-year.
Operating expenses for 4Q18 of $1.08 billion were unchanged from the previous year, as costs were tightly-controlled. Allowances of $205 million for the quarter were 14% higher than $178 million in 4Q17.
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Customer loans grew 9% year-on-year to $258 billion while customer deposits were up 4% at $295 billion, with current account and savings (CASA) deposits representing 46.4% of total non-bank deposits. The group’s loans-to-deposits ratio was 86.4% as compared to 82.5% a year ago.
The average Singapore dollar and all-currency liquidity coverage ratios for the group in 4Q18 were 265% and 156% respectively, while the net stable funding ratio was 109%.
The group’s Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR and Total CAR as at Dec 31 2018 were 14.0%, 14.8% and 16.4% respectively. The group’s leverage ratio was 7.2% as at Dec 31 2018.
OCBC has proposed a final tax-exempt dividend of 23 cents per share. Together with the interim dividend of 20 cents, this will bring the FY18 total dividend to 43 cents, up 16% or 6 cents, from 37 cents in FY17.
CEO Samuel Tsien says, “Looking ahead, global economic growth is expected to slow on concerns of continued trade and geopolitical tensions, subdued market and investment sentiments and rising policy risks in the advanced economies. In spite of the uncertain outlook, we are confident that our focused strategy, strong capital and funding base, and disciplined cost control will allow us to continue to prudently expand our franchise in our key markets and support our customers.”
Shares in OCBC closed at $11.57 on Thursday, down from $13.1o from a year ago.
