Oversea-Chinese Banking Corporation (OCBC) O39 has reported record net profit (or earnings) of $1.88 billion for the 1QFY2023 ended March 31, 39% higher y-o-y and 44% higher q-o-q.
Earnings per share (EPS) rose by 38.8% y-o-y to $1.68 on a fully diluted basis.
The quarterly performance was supported by OCBC’s diversified income streams across banking, wealth management and insurance.
That said, the bank has also set aside total allowances of $110 million during the quarter, which is 150% up from the $44 million that was set aside in the 1QFY2022. The surge was mainly due to the higher allowances set aside for non-impaired assets. On a q-o-q basis, total allowances fell by 65%.
In the 1QFY2023, net interest income (NII) rose by 56% y-o-y to $2.34 billion. This was due to the 75 basis point (bps) increase in the bank’s net interest margin (NIM) of 2.30% on a y-o-y basis from the rising interest rates in 2022. The higher NII was also underpinned by the 5% growth in average asset balances. On a q-o-q basis, NII fell by 2% mainly due to a shorter quarter. On a like-for-like basis, NII stood largely stable q-o-q.
NIM, however, dipped 1 bps q-o-q as the rise in asset yields was offset by higher funding costs and lower loan-to-deposit ratio (LDR).
Non-interest income fell by 11% y-o-y but rose by 65% q-o-q to $1.01 billion. The y-o-y drop was due to lower wealth management fees that was mitigated by higher trading income and net realised gains from the sale of investment securities. On a q-o-q basis, however, the figure stood higher from higher wealth management fees, net trading income and profit from insurance.
Net new money inflows were sustained with OCBC’s wealth management assets under management (AUM) growing by 4.7% q-o-q to $270 billion.
Fees and commissions fell by 13% y-o-y but was up by 14% q-o-q to $453 million.
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Trading income for the quarter rose by 12% y-o-y and 69% q-o-q to $251 million.
Profit from insurance fell by 28% y-o-y but surged 257% q-o-q to $238 million.
As a result, 1QFY2023 total income increased by 27% y-o-y and 12% q-o-q to $3.35 billion.
Share of results of associates increased by 2% higher y-o-y and 17% q-o-q to $260 million.
As at March 31, OCBC’s cost-to-income ratio fell by 8.5 percentage points y-o-y and 6.2 percentage points q-o-q to 37.1% as the growth in income outpaced the increase in total operating expenses.
Deposits grew by 5% y-o-y and q-o-q. Group LDR stood at 79.2%, down by 4.1% y-o-y and q-o-q. OCBC’s current account, savings account (CASA) ratio stood at 47.1%, down by 15.6 percentage points y-o-y and 4.7 percentage points q-o-q.
During the 1QFY2023, the bank’s credit costs stood at an annualised 12 bps. Its non-performing loan (NPL) ratio dipped by 0.3 percentage points y-o-y and 0.1 percentage points q-o-q to 1.1% as at March 31.
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Group return on equity (ROE) stood at 14.7% on an annualised basis, up 4.1 percentage points y-o-y and 4.7 percentage points q-o-q.
OCBC’s common equity tier 1 (CET1) ratio stood at 15.9%, up 0.7 percentage points y-o-y and q-o-q. On a pro forma basis, the bank’s CET1 ratio will fall by 0.8 percentage points to 15.1% after it pays its final dividend for the FY2022 on May 19.
In FY2023, the bank has guided for its FY2023 NIM to be around the region of 2.2%, 0.1 percentage point above its previous NIM guidance of 2.1% in the 4QFY2022. The bank also guided for credit costs of 15 bps to 20 bps and low- to mid- single-digit loan growth.
“We are pleased to achieve a record quarter on the back of a strong operating performance. Total income reached a new high and expenses were well controlled, while we maintained prudent levels of allowances. Our loan portfolio was resilient and our wealth management business continued to attract net new money inflows. These reflected the strength of our diversified franchise and contributed to a strong uplift in our return on equity,” says OCBC’s group CEO Helen Wong.
“Looking ahead, we are watchful of tighter financial conditions which may slow global economic growth and elevate overall risks,” she adds. “We remain confident of the long-term prospects of our key markets in Asia. Our capital position is strong and our liquidity positions are healthy. These provide ample buffer for uncertainties and allows us to pursue growth opportunities as they arise.”
Shares in OCBC closed flat at $12.25 on May 9.
