Oversea-Chinese Banking Corporation (OCBC) has reported earnings of $1.48 billion in the 2QFY2022 ended June, 28% higher than earnings of $1.16 billion in the same period the year before.
This brings the bank’s earnings for the 1HFY2022 to $2.84 billion, up 7% y-o-y, and said to be a new high for the bank.
The higher earnings for the 2QFY2022 were underpinned by the robust performance across the group’s banking, wealth management and insurance business, while the higher earnings for the 1HFY2022 were mainly due to the higher net interest income (NII) and lower allowances.
Earnings per share (EPS) for the 1HFY2022 stood at 63 cents on a fully diluted basis, up from the 59 cents in the same period the year before.
During the 2QFY2022, OCBC’s NII increased by 16% y-o-y to a new high of $1.7 billion, which was due mainly to asset growth and margin expansion.
Net interest margin (NIM) for the period rose 13 basis points y-o-y and 16 basis points q-o-q to 1.71% as asset yields outpaced higher funding costs amid a rapidly rising interest rate environment.
Non-interest income for the 2QFY2022 rose 6% y-o-y to $1.18 billion mainly from higher trading income and life insurance profit.
During the quarter, net fee income fell by 15% y-o-y to $477 million, mainly due to the lower wealth management, brokerage and investment banking fees on the back of the global weaker investing sentiment. Net fee income was offset by loan and trade-related fees due to higher lending and trade volumes. Credit card fees were also higher during the quarter as economies reopened and activities resumed.
The group’s wealth management income grew 8% y-o-y to $1.03 billion, which made up 36% of its total income in the 2QFY2022. Wealth management income includes income from insurance, private banking, premier private client, premier banking, asset management and stockbroking.
Wealth management assets under management (AUM) stood at $250 billion as at June 30, down 1.57% y-o-y.
Net trading income grew by 26% y-o-y to $267 million higher customer and non-customer flow treasury income.
During the 2QFY2022, the group posted net realised losses of $51 million from the sale of investment securities and others, compared to a net gain of $35 million in the same period the year before.
Total income rose 12% y-o-y to $2.88 billion in the 2QFY2022.
Share of results of associates rose 15% y-o-y to $245 million.
In the 1HFY2022, total income inched up by 1% y-o-y to $5.52 billion, lifted by a 10% y-o-y increase in NII of $3.20 billion and offset by the 10% y-o-y decline in non-interest income of $2.32 billion.
OCBC’s higher NII for the 1HFY2022 was mainly due to a 6% growth in average asset balances and a 6 basis point rise in NIM to 1.63%.
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The lower non-interest income was mainly due to lower fee, investment and trading income.
Total allowances were lower at $116 million from the $393 million in the year before.
Share of results of associates for the 1HFY2022 increased by 18% y-o-y to $499 million.
As at June 30, customer loans grew by 8% y-o-y to $298 billion. This was driven by loan growth in Singapore, Indonesia, greater China, US and the UK by geography, and by the building and construction and general commerce sectors by industry. Consumer lending including mortgages also contributed to the loan growth.
In the same period, OCBC committed $36.9 billion in sustainable financing, up 41% y-o-y.
During the half-year period, customer deposits rose 0.2% y-o-y to $349 billion.
Current accounts saving accounts (CASA) deposits ratio fell 1.6 percentage points y-o-y and 1.8 percentage points q-o-q to 60.9% as customers shifted to higher-yielding fixed deposits in a rising interest rate environment.
OCBC’s non-performing loans (NPL) ratio fell by 0.2 percentage points to 1.3% as at June 30.
Non-performing assets fell 2.77% y-o-y to $3.97 billion as at June 30.
Loan-to-deposits ratio was 84.4%, down 1.2 percentage points y-o-y.
As at end-June, the group’s Common Equity Tier-1 capital adequacy ratio (CET-1) fell by 1.2 percentage points y-o-y to 14.9%.
Its leverage ratio stood at 7.1%, down 0.1 percentage points y-o-y.
An interim dividend of 28 cents per share has been proposed for the period, 3 cents higher than the previous interim dividend of 25 cents.
The bank’s return on equity (ROE) increased 0.2 percentage points y-o-y to 11.0% as at June 30.
Cash and cash equivalents as at June 30 stood at $28.21 billion.
“Our resilient performance for the first half of 2022 demonstrated the strength of our diversified franchise. Net interest income reached a new high from loan growth and our well-positioned balance sheet benefitted from rising interest rates,” says group CEO Helen Wong.
“Despite heightened market volatilities, we are pleased to see net new money inflows in our wealth management business, as well as healthy new insurance sales. We continued to invest in talent and digital capabilities to support future growth. The quality of our loan portfolio remained healthy and we are staying vigilant and proactively monitoring our books for any signs of weakness,” she adds.
Looking ahead, Wong says she expects the overall economic growth in OCBC’s key markets to remain positive in the FY2022 albeit at a slower pace on the back of the “heightened headwinds” in the operating environment.
“Our diversified earnings base and strong capital, funding and liquidity positions will allow us to have the flexibility to navigate uncertainties and pursue our strategic growth objectives,” she continues.
Shares in OCBC closed 8 cents higher or 0.68% up at $11.82 on Aug 2.