Oversea-Chinese Banking Corporation (OCBC) has reported a net profit of $1.81 billion for the 3QFY2023 ended Sept 30, 21% higher y-o-y and 6% up q-o-q. This brings the bank’s net profit for the 9MFY2023 to a record $5.4 billion, 32% higher y-o-y.
The group’s 3QY2023 net profit was attributed to the growth in total income, which grew by 13% y-o-y to $3.43 billion. The growth was attributed to the record net interest income (NII) and growth in non-interest income.
During the three-month period, OCBC’s NII rose by 17% y-o-y and 3% q-o-q to $2.46 billion due to asset growth and an uplift in net interest margin (NIM), which stood at 2.27%, 21 basis points (bps) up y-o-y.
Non-interest income grew by 4% y-o-y but fell by 9% q-o-q to $0.97 billion. The y-o-y growth was supported by a rise in net fee income, which grew by 2% y-o-y to $461 million. Fee income for the bank stood at its highest levels in the past four quarters.
The higher fee income was mainly due to higher wealth management fees from increased customer activities and from higher credit card fees. Wealth management income for the 3QFY2023 rose by 16% y-o-y to $1.12 billion, which made up 33% of the group’s income for the 3QFY2023.
OCBC’s wealth management assets under management (AUM) rose by 8% y-o-y to $270 billion as at Sept 30 driven by net new money inflows.
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Net trading income, which mainly comprises customer flow treasury income, dipped by 0.5% y-o-y to $216 million.
Insurance profit from Great Eastern Holdings G07 (GEH) of $220 million was down 12% y-o-y mainly due to an increase in medical claims and offset by improved investment performance.
During the quarter, GEH’s total weighted new sales (TWNS) rose by 5% y-o-y to $419 million driven by higher sales in Singapore while new business embedded value (NBEV) stood at $184 million.
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Operating expenses for the quarter rose by 5% y-o-y to $1.34 billion from continued investments in the group’s franchise across people and technology. Cost-to-income (CIR) ratio improved to 39.1% from 42.2%.
Share of results of associates dipped by 0.8% y-o-y to $254 million.
Total allowances rose by 20% y-o-y to $184 million mainly from higher allowances for impaired assets. Credit costs for the quarter were an annualised 17 bps.
Annualised return on equity (ROE) for the 3QFY2023 rose to 14.0%, from 11.9% in the year before. Annualised earnings per share (EPS) stood at $1.58.
During the 9MFY2023, the group’s total income rose by 24% y-o-y to a record $10.23 billion. NII rose by 35% y-o-y to $7.18 billion thanks to the 6% growth seen in average growth and a 50 bps NIM expansion of 2.28%.
Non-interest income for the period rose by 3% y-o-y to $3.05 billion due to an increase in trading income, net investment gains from sale of investment securities and higher insurance income, which more than offset the softer fee income.
Operating expenses rose by 5% y-o-y to $3.91 billion mainly from higher staff costs and IT-related expenditure. CIR stood at 38.2%, down from 45.3% in the year before.
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Share of results of associates was up by 1% y-o-y to $764 million.
Total allowances nearly doubled to $546 million from $270 million in the year before.
Annualised ROE for the 9MFY2023 improved to 14.2% from 10.9% in the year before.
Annualised 9MFY2023 EPS stood at $1.59.
As at Sept 30, OCBC’s non-performing loan (NPL) ratio fell by 2 bps y-o-y to 1.0%. The bank’s non-performing assets (NPA) stood at $3.10 billion, down from $3.69 billion the year before.
NPA coverage ratio stood at 139%, 31 percentage points higher y-o-y.
Group loan-to-deposit (LDR) ratio stood at 79.7% as at Sept 30, down from 85.0% the year before.
Liquidity coverage ratio (LCR) for the 3QFY2023 and 9MFY2023 stood at 159% and 158% respectively.
Net stable funding ratio (NSFR) stood at 116% as at Sept 30.
Current accounts savings accounts (CASA) ratio stood at 46.3% as at Sept 30 while common equity tier 1 (CET-1) ratio stood at 14.8%.
“We are pleased to achieve a solid set of results for the nine months of 2023, backed by strong operating performance across the group’s diversified franchise. Our total income for the nine-month period surpassed the $10 billion mark for the first time, lifting net profit to a record high. We continued to sustain loan growth while maintaining sound asset quality, and actively managed our balance sheet which helped to drive improvements in net interest margin. Our expenses were well controlled while we stayed focused on investing in our franchise,” says OCBC CEO Helen Wong.
“Looking ahead, macroeconomic conditions are expected to be clouded by growing uncertainties from inflationary risks, tightening monetary policies and heightened geopolitical risks. Nonetheless, with our robust funding, liquidity and capital positions, we are confident of the group’s ability to deliver sustainable value to our stakeholders,” she adds.
In the bank's CEO presentation, OCBC has raised its NIM target to 2.25%, up from its previous target of 2.2% announced in its 1HFY2023 results.
Shares in OCBC closed flat at $13.06 on Nov 9.
