Oversea-Chinese Banking Corporation (OCBC) posted a 9% y-o-y drop in core earnings to $1.13 billion in 4QFY2020 ended December, from $1.24 billion a year ago.

Quarter-on-quarter (q-o-q), this was 10% higher than 3QFY2020’s earnings of $1.03 billion.

The quarter’s earnings was also the highest in four quarters from improved operating conditions.

Earnings for the FY2020 fell 26% y-o-y to $3.59 billion due to the impact of the Covid-19 pandemic, in particular the decline in net interest margin (NIM) as a result of lower market interest rates.

Net interest income (NII) for 4QFY2020 grew 1% q-o-q to $1.44 billion, underpinned by a 2 basis point improvement in net interest margin (NIM) from funding costs management.

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Y-o-y, NII for the 4QFY2020 fell 11%, as NIM fell 21 basis points.

SEE: OCBC expected to rebound in 2Q20 despite challenges in loan yields and fees: UOB Kay Hian

NII for the FY2020 fell 6% y-o-y to $6.0 billion due to a 16 basis points drop in NIM in a lower interest rate environment and a lower loans-to-deposits (LDR) ratio driven by strong deposits growth of 83.7% compared to 86.5% the year before.

4QFY2020 non-interest income fell 6% q-o-q and 20% y-o-y to $1.05 billion, which included a provision for higher expected insurance claims at Great Eastern Holdings (GEH).

FY2020 non-interest income fell 8% y-o-y to $4.17 billion.

Net fees and commissions for the 4QFY2020 grew 3% q-o-q to $517 million, led by higher income from investment banking, credit cards and fund management activities.

Net fees and commissions fell 6% y-o-y in FY2020 to $2.00 billion.

Net trading income for the FY2020 fell 12% y-o-y to $863 million due mainly to lower mark-to-market gains in GEH’s investment portfolio. Treasury income from customer flows grew 12% y-o-y to a new high of $668 million.

FY2020 net gains from the sale of investment securities grew 21% y-o-y to $208 million.

Income from life and general insurance for the FY2020 fell 8% y-o-y to $899 million due to higher insurance contract liabilities resulting from lower discount rate that was used to value these liabilities and in line with the fall in market interest rates.

The group’s wealth management income for the FY2020, which comprises income from insurance, private banking, asset management, stockbroking and other wealth management products, stood at $3.37 billion, and 1% y-o-y below the record $3.40 billion in FY2019.

Bank of Singapore’s assets under management (AUM) grew 4% q-o-q and 3% y-o-y to a record US$121 billion ($160 billion) driven by continued inflow of net new money and improved market valuations.

FY2020 trading income increased 4% y-o-y to $264 million, from higher investment gains and sustained customer flow income.

The group’s cost-to-income ratio stood higher at 43.8% in FY2020, compared to FY2019’s 42.7%.

Net allowances for loans and other assets were higher at $2.04 billion, as compared to S$890 million a year ago.

The group’s non-performing loans (NPL) ratio was 1.5% as at Dec 31, 2020.

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As at end-December, the group’s Common Equity Tier-1 capital adequacy ratio (CET-1 CAR) was 15.2%, compared to 14.9% a year ago.

Return on equity for FY2020 was 7.6% compared to FY2019’s 11.4%.

FY2020 earnings per share (EPS) was 80 cents, down from FY2019’s $1.14.

A final dividend of 15.9 cents per share has been proposed, bringing the total dividend for the year to 31.8 cents, representing a 39% payout of FY2020’s net profit.

“Despite experiencing one of the most difficult economic crises in recent times, we concluded 2020 with a resilient performance. This is a testament to our solid fundamentals, dedicated employees and the balanced strength of our diversified franchise in banking, wealth management and insurance,” says CEO Samuel Tsien, who will be retiring on April 15.

“While economic conditions have started to show signs of stabilisation and we are seeing increased activities in some pockets of the economy, the recovery is not yet broad-based. The uncertainty of COVID-19 containment globally continued to weigh on business confidence and consumer sentiments. We will remain watchful of the headwinds, but we are also looking for opportunities to capitalise on signs of sectorial recovery,” he adds.

“When the markets turn, our strong capitalisation, funding and liquidity will provide us with ample capacity to invest and to grow, and we look forward to putting them to work.”

Shares in OCBC closed flat at $10.63 on Feb 23.