Oversea-Chinese Banking Corporation (OCBC) has reported earnings of $1.43 billion for 1H2020 ended June, 42% lower y-o-y, after it set aside significantly higher allowances against expected credit losses due to the impact of Covid-19. 

Net profit for 2Q20 fell 40% y-o-y to $730 million, although the figure represented a 5% increase from its 1Q20 earnings.

Annualised earnings per share nearly halved y-o-y, with $0.64 in 1H2020 compared to $1.15 this time last year. 

In line with calls made by the Monetary Authority of Singapore (MAS), OCBC has lowered its dividend to 15.9 cents per share with a record date of 5pm on August 24. As recommended by MAS, the scrip dividend scheme will be applicable to the interim dividend, giving shareholders the option to receive the dividend in the form of shares, with the issue price of the shares set at a 10% discount on the average price between August 21 and 24.

The interim dividend for 1H2020 represents half of the maximum 31.8 cents dividend per share that can be paid out in FY2020. The estimated interim dividend payout will amount to some $700 million, representing 49% of the bank’s 1H2020 net profit. 

“Earnings in the first two months of 2020 were strong, but these were impacted from March onwards by increased business disruptions and slowdown in customer activities as countries implemented various measures to limit movements and interactions to curb virus transmissions. 

The half-year period also saw a severe contraction in the global economy, significant financial market volatility and aggressive policy support measures, including sizeable cuts in global interest rates and sharp increases in fiscal spending to drive growth and demand,” says OCBC. 

Total income rose 5% y-o-y to $2.63 billion. Net interest income was stable at $3.11 billion, while non-interest income fell 8% y-o-y to $2.01 billion. 

Net fees and commissions declined 3% y-o-y to $986 million. Net trading income of $343 million was lower than the $478 million a year ago, while net gains from the sale of investment securities of $160 million were up from $82 million in 1H2019. 

Income from life and general insurance was 5% lower y-o-y at $439 million, while the bank’s share of profits of associates rose 4% y-o-y to $328 million.

Operating expenses dipped 1% y-o-y to $2.22 billion. As OCBC shores up its provisions, net allowances for loans and other assets climbed to $1.41 billion, compared to $360 million this time last year.

The Group’s non-performing loans (NPL) ratio was 1.6% as at June 30, a slight increase from 1.5% in the previous year. 

In terms of cash and cash equivalents, OCBC posted $15.2 million as at June 30, up from $13.4 million this time last year. Assets under management at OCBC’s private banking subsidiary Bank of Singapore grew 8% q-o-q and 1% y-o-y to US$113 billion ($157 billion) as at June 30.

The Group posted a Common Equity Tier-1 capital adequacy ratio (CAR) of 14.2%, and Tier 1 and Total CAR of 14.9% and 16.4% respectively. These ratios were well above the regulatory minimum figures of 6.5%, 8% and 10%, respectively for 2020. 

“Despite the turmoil since the start of the COVID-19 pandemic, we have stayed focused on our corporate strategy to drive long-term sustainable value. We must also look beyond this pandemic to capture opportunities presented by prevailing economic trends to emerge stronger and relevant in a post-pandemic world,” says Group CEO Samuel Tsien.

Shares in OCBC closed 16 cents higher, or 1.85% up, at $8.80 on Aug 6.