OCBC Bank Q4 Profit Rises, Eyes Asia Growth & AI Amid Rate Pressures | Singapore News
Singapore’s Oversea-Chinese Banking Corp (OCBC) reported a 3% increase in fourth-quarter profit to , reaching $1.74 billion, exceeding analysts’ expectations of $1.72 billion according to a Bloomberg poll. The bank also announced a final ordinary dividend of 42 cents per share, alongside a special dividend of 16 cents per share, as part of a previously announced $2.5 billion capital return plan.
The total dividend payout for amounts to 99 cents per share, slightly down from the 101 cents distributed in . OCBC intends to continue its 50% ordinary dividend payout policy in and complete the capital return plan by year-end, according to Group CEO Tan Teck Long, in his first earnings briefing since assuming the role in January.
Looking ahead, OCBC anticipates stable to growing total income, but forecasts a slight to moderate decline in net interest income. The bank expects credit costs to remain in the range of 20 to 25 basis points and projects mid-single digit loan growth. Mr. Tan attributed this cautious outlook to uncertain market conditions and ongoing pressure from softening interest rates.
“Currently, the bank’s still digesting the effect of NIM (net interest margin) compression, so that is a big uncertainty,” Mr. Tan explained. “So that’s why we are a little bit cautious.” He added that the 50% payout policy could translate to a higher dividend if revenue and profit growth materialize.
The results, as stated by Mr. Tan, reflect the bank’s strong fundamentals and disciplined execution within a challenging operating environment. OCBC has also launched a new corporate strategy, following the completion of its previous three-year plan focused on brand unification and synergy realization across its core markets.
The new strategy centers around four key pillars: capturing rising Asian financial flows, strengthening its core market franchise, advancing technology-led and customer-centric capabilities through artificial intelligence, digital solutions and data analytics, and supporting the green transition. This strategy is expected to drive stable to improving return on equity, with a stronger emphasis on higher-returning businesses.
OCBC aims to maintain cost discipline, targeting a cost-to-income ratio of low- to mid-40%, a key metric for banking efficiency. “We are forging ahead to our new frontier growth strategy. We are going to focus quite a lot on higher-returning businesses,” Mr. Tan stated.
A key component of this strategy involves capitalizing on rising Asian wealth flows through a “Singapore-Hong Kong twin wealth hubs” approach, and leveraging its regional network to facilitate flows between ASEAN countries and Greater China. The bank is also focused on integrating its banking, wealth management, and insurance services, through its subsidiaries Bank of Singapore and Great Eastern.
“Under the whole wealth initiative, we want to have a much more integrated and coordinated effort in delivering our services to the whole wealth continuum,” Mr. Tan said. Opportunities include expanding its affluent segment in Hong Kong, collaborating with Great Eastern Malaysia, and enabling wealth customers in Indonesia to access higher-end wealth management services.
Mr. Tan also highlighted the growing demand for succession planning and wealth transfer services among high-net-worth families, driven by concerns about wealth preservation and intergenerational transfer.
In the fourth quarter, OCBC’s net interest income decreased by 6% to $2.3 billion, as net interest margin (NIM) fell to 1.86% from 2.15% a year prior. However, non-interest income rose significantly, increasing by 37% to $1.32 billion, driven by strong growth across fees, trading, and insurance income.
Net fee income grew 16% to $602 million, fueled by a 26% increase in wealth management fees, alongside higher loan-related, brokerage, fund management, and credit card fees. Net trading income increased by 30% to $395 million, boosted by increased customer flow income from both wealth and corporate segments.
Insurance income from Great Eastern more than doubled to $226 million, up from $101 million a year ago, driven by improved insurance and investment performance, and partially offset by adjustments related to changes in the medical insurance environment reported in the previous year.
Total allowances for the quarter were $200 million, a 4% decrease from $208 million a year earlier, with credit costs at 20 basis points of loans, compared to 21 basis points in the prior year. For the full year , net profit was 2% lower at $7.42 billion, despite a 27% increase in tax expenses.
Net interest income for fell 6% to $9.15 billion as asset yields declined faster than funding costs due to falling benchmark interest rates. NIM for the year decreased to 1.91% from 2.2% in . Non-interest income rose 16% to $5.46 billion, driven by double-digit growth across fees, trading, and insurance income.
Total allowances for declined 4% to $665 million, primarily due to lower allowances for non-impaired assets. Credit costs were also lower, at 17 basis points of loans, compared to 19 basis points a year earlier. Total non-performing assets as of the end of were $3.24 billion, a 13% increase year-over-year.
OCBC is the last of Singapore’s three major banks to report its fourth-quarter and full-year earnings. DBS Bank and UOB both reported declines in profits as lower interest rates impacted margins. OCBC shares closed 0.14% lower at $21.40 on . DBS dipped 0.29% to $57.69, while UOB declined 0.59% to $36.98.