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OCBC watchful of global headwinds as it beats forecasts with 28% jump in Q2 profit
SINGAPORE - OCBC Bank reported on Wednesday (Aug 3) a better-than-expected increase in second-quarter earnings as it benefited from rising interest rates, but cautioned of global uncertainties that could affect business.
Net profit for Singapore' s second-biggest local bank came in at $1.48 billion for the three months to June, up 28 per cent from $1.16 billion for the same period a year ago.
It also blew past the $1.26 billion forecast by analysts in a Bloomberg poll.
The latest results reversed a 10 per cent decline in first-quarter earnings.
OCBC declared an interim dividend of 28 cents per ordinary share, up from 25 cents last year.
Group chief executive Helen Wong said overall economic growth in the bank' s key markets is expected to remain positive this year but at a slower pace due to heightened headwinds.
&ldquo The Russia-Ukraine war is worsening strains in the global supply chain. This also heats up inflationary pressures, with negative consequences on the overall global economy,&rdquo she told reporters on Wednesday.
The bank cut its forecast for this year&rsquo s loan growth to a mid single digit, down from the mid to high single digit it announced during its first-quarter results.
There are also rising recessionary risks induced by monetary policy tightening in key developed markets, said Ms Wong.
&ldquo A recession, though, is not on the cards for Singapore at this juncture. Rising interest rates and slowing economic growth may put pressure on the debt servicing abilities of businesses and consumers, so we also remain watchful of public health concerns from any new Covid-19 variants,&rdquo she added.
The bank expects its net interest income to continue benefiting from rate hikes and repricing of its loan book.
Higher net interest income will also offset lower fees from weaker capital markets, said Ms Wong.
For the second quarter, net interest income surged 16 per cent to a record $1.7 billion.
Net interest margin - a key gauge of banks&rsquo profitability - rose 13 basis points to 1.71 per cent as asset yields outpaced higher funding costs with rising interest rates.
Non-interest income stood at $1.18 billion, up 6 per cent from a year ago mainly from higher trading income and life insurance profit.
However, net fee income dropped 15 per cent to $477 million, largely due to lower wealth management, brokerage and investment banking fees, amid the global market downturn.
Ms Wong added: " Despite heightened market volatility, we are pleased to see net new money inflows in our wealth management business, as well as healthy new insurance sales.
OCBC' s wealth management income - from areas such as insurance, private banking, asset management and stockbroking - grew 8 per cent to $1.03 billion and made up 36 per cent of the group' s income in the second quarter.
Assets under management in the group' s wealth management business stood at $250 billion as at June 30, down from $254 billion a year ago as net new money inflows were more than offset by a drop in market valuations.
Net trading income came in at $267 million, up 26 per cent from a year ago due to higher flow in treasury income.
OCBC' s life insurance profit from its subsidiary Great Eastern Holdings stood at $372 million, compared with $205 million a year ago, amid an increase in operating profit and mark-to-market gains in its insurance funds from rising interest rates
Operating expenses increased 10 per cent to $1.25 billion amid higher staff costs due to annual salary increments and a growth in headcount.
Allowances set aside for bad loans fell 69 per cent from a year ago.
Asked about OCBC&rsquo s business in China amid the country&rsquo s property debt crisis, Ms Wong said onshore loans there make up 2 per cent of OCBC&rsquo s loan book.
A third of this comes from real estate, and around 90 per cent of the bank&rsquo s corporate clients in the sector are its network customers, she added.
&ldquo We do stress tests on our credit portfolio across a broad variety of macroeconomic factors... We do not see structural concerns so far and we are comfortable with our quality of the book,&rdquo she said.
The bank' s net profit rose 9 per cent from the first quarter. Its earnings for the first half of the year came in at $2.84 billion - a 7 per cent increase from the same period last year.
OCBC shares traded up 19 cents, or 1.6 per cent, to $12.01 at 3.30pm, after the results announcement.
Rivals DBS Bank rose 1.8 per cent to $32.29, while UOB inched up 0.2 per cent to $27.79.
UOB similarly got a boost from rising rates, posting an 11 per cent increase in its second-quarter earnings to $1.11 billion last week.
Media Release
OCBC Group First Half 2022 Net Profit
Rose 7% to New High of S$2.84 billion
Second quarter net profit up 28% from a year ago
Interim Dividend of 28 cents per share declared
Singapore, 3 August 2022 ? Oversea-Chinese Banking Corporation Limited (?OCBC Bank?) reported its
financial results for the first half of 2022 (?1H22?). Group net profit for 1H22 rose 7% from a year ago
(?1H21?) to S$2.84 billion. Net profit for the second quarter (?2Q22?) was S$1.48 billion, up 28% compared
to a year ago (?2Q21?) and 9% from the previous quarter (?1Q22?).....
https://links.sgx.com/1.0.0/corporate-announcements/XMR2AD6YAI39QGES/725947_OCBC_1H22_Media_Release_and_Financial_Highlights.pdf
OCBC Group First Half 2022 Net Profit
Rose 7% to New High of S$2.84 billion
Second quarter net profit up 28% from a year ago
Interim Dividend of 28 cents per share declared
Singapore, 3 August 2022 ? Oversea-Chinese Banking Corporation Limited (?OCBC Bank?) reported its
financial results for the first half of 2022 (?1H22?). Group net profit for 1H22 rose 7% from a year ago
(?1H21?) to S$2.84 billion. Net profit for the second quarter (?2Q22?) was S$1.48 billion, up 28% compared
to a year ago (?2Q21?) and 9% from the previous quarter (?1Q22?).....
https://links.sgx.com/1.0.0/corporate-announcements/XMR2AD6YAI39QGES/725947_OCBC_1H22_Media_Release_and_Financial_Highlights.pdf
Singapore stocks look inexpensive despite inflation concerns, outperformance: OCBC
WHILE the Straits Times Index (STI) has outperformed other markets year to date, valuations in the Singapore market still look inexpensive, OCBC said on Friday (Jul 22).
In its market outlook for the second half of 2022, OCBC said it is positive but recommends investors take a more defensive approach as it expects to see short-term market volatility amid high inflation concerns.
Amid the reopening in South-east Asia, OCBC chief economist Selena Ling expects the transport hubs in the region will benefit. Consistent positive growth in the electronics segment is providing some buffer to weaknesses in the pharmaceutical side, she added.
China is also a focus point for South-east Asia given its trade relations with the region.
&ldquo Our sense is that China is not out of the woods yet, although we do expect some stabilisation for headline growth in the second half,&rdquo Ling said. She expects that China&rsquo s trade surplus with South-east Asia can be an engine of growth at least in the near term.
Carmen Lee, head of OCBC Investment Research, noted that the STI is down 0.2 per cent year to date, outperforming other key indices, including the S& P 500, MSCI China and the Korea Composite Stock Price Index, which have seen declines of more than 15 per cent for the year.
Despite the outperformance, Lee said valuations are inexpensive: the price-to-earnings ratio of the STI is close to 2 standard deviations below its 10-year historical average, while the STI&rsquo s price to book ratio is also below its 10-year historical average.
Lee noted that in the current high interest rate and high input costs environment, a key thing to look at is earnings. She expects companies operating in a more stable business environment will likely fare better due to lower supply disruptions.
&ldquo In an environment like this where we' re still uncertain, you still go for very good name companies,&rdquo Lee said, noting that investors still have a preference for stocks that have good dividend yields.
She is positive on the industrial Reits, and also noted that the average yield on some top Reits has improved to about 5 per cent.
OCBC&rsquo s stock picks include Ascendas Reit, CapitaLand Integrated Commercial Trust, Frasers Centrepoint Trust, Mapletree Industrial Trust, Mapletree Logistics Trust and NetLink NBN Trust.
Lee also noted that Singapore banks are still a good buy, as they are providing dividend yields of almost 5 per cent.
Additionally, Lee said certain property stocks such as UOL Group look attractive as they have not fully priced in their potential. On the broader sector, she noted that the FTSE ST All-Share Real Estate Index has fallen this year, despite the uptrend in the physical property market.
Other stock picks of OCBC include Raffles Medical Group, Sats, SIA Engineering, Singtel, ST Engineering, Thai Beverage and Venture Corp.
Speaking on the impact of a strengthening US Dollar, Lee said companies on the Singapore stock market will see less of an impact to their earnings given the limited exposure.
OCBC&rsquo s Ling also noted that the Singapore dollar has been strengthening.
Digital Banks are attractive with lower operating costs, hopefully they have adequate financial security and backing. Our present locat Banks have cheap source of funds, pay customer 0.25% interest ( below the inflation rate) and loan the monies at 3% to 7 % pa..
all 3 with exposure to north will have some worry.
hk is recovering from covid-19. china is also doing well. but the burst of increased infections happen form places to places. once china can shows that lock down are small scale and does not affect economic growth, things will be better.
plus the digital banks can comming real soon. offer of higher deposit rates, better housing loan, car loan are all possible. competitions will become tougher.
dyodd
hk is recovering from covid-19. china is also doing well. but the burst of increased infections happen form places to places. once china can shows that lock down are small scale and does not affect economic growth, things will be better.
plus the digital banks can comming real soon. offer of higher deposit rates, better housing loan, car loan are all possible. competitions will become tougher.
dyodd
Yes they could merge
Then give DBS a run for the money
Then give DBS a run for the money
Nippon72 ( Date: 21-Jul-2022 20:23) Posted:
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UOB can also merge with OCBC = UOCBC = United Overseas Chinese Banking Corporate.
Boleh?
Boleh?
Adrianinsing ( Date: 21-Jul-2022 18:40) Posted:
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It is obvious that OCBC is being surpress at this stage. Could be very good or bad prior results announcement on 03/8
29/7?
XiaoFeiXia ( Date: 19-Jul-2022 13:12) Posted:
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OCBC or UOB could be
No space in Singapore for 3 local banks
Two is max
No space in Singapore for 3 local banks
Two is max
Richardlai ( Date: 21-Jul-2022 16:31) Posted:
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OCBC is a good target for takeover by a strong foreign Bank, perhaps a Bank from China ! But that is a long way off.
I think more of it dives while the other 2 stagnant
Adrianinsing ( Date: 21-Jul-2022 02:06) Posted:
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Slower OCBC always starts slow - then a few days later it rallies stronger than the other 3 to catch up when the other two banks are more stagnant
UOB is moving prior results 27/07....OCBC will play catch up soon?
OCBC, as intermediary, benefits from fintech and digital banking adoption: CEO Helen Wong
OCBC will continue to have an important role to play as an intermediary, even as new fintech and digital bank challengers emerge. Helen Wong, chief executive of the Singapore-listed bank, said OCBC is already harnessing technology to provide better service for its customers. As the Asian region grows, she sees opportunities for OCBC to grow alongside it.
Speaking with The Business Times (BT) senior correspondent Ben Paul at the first Mark to Market &ldquo Live&rdquo webinar, Wong noted that one of OCBC&rsquo s most important roles is channelling funds on behalf of customers.
Although new technologies disrupt OCBC&rsquo s processes, they do not necessarily disrupt that role. Instead, OCBC can make use of new technologies to improve how it services customers.
It is incorporating blockchain technology and artificial intelligence in its processes, and uses data analytics to study its customers. Owning an insurance arm &ndash Great Eastern &ndash also allows it to share analytics insights within the group.
The bank has a supply chain handling platform that allows it to track payments, which improves productivity. On the consumer end, it also has a travel platform linking customers to hotels located around the world.
&ldquo Technology is very important, actually, for us to provide the best service for our customers,&rdquo said Wong.
While the lender may see some competition from fintechs, she expects OCBC will still have &ldquo quite a big advantage&rdquo given its wider range of products: from insurance and loans, to merger and acquisition financing. The bank also has customers ranging from individuals to small and large corporates.
The new digital challengers could also be potential partners, Wong added. &ldquo A lot of them don&rsquo t want to be a bank,&rdquo she said, noting that bank stocks are valued very differently from tech stocks.
She therefore hopes to find ways for OCBC to work with these newcomers to unearth new opportunities, develop new products and use technology to improve processes and reach customers more effectively.
Wong also talked about growth opportunities for OCBC, particularly within Asia - which she expects will be the fastest-growing region in the world in the foreseeable future.
Wong noted that intra-Asia trade has grown, with Greater China and Asean being each other&rsquo s largest trading partners.
Although there may be short-term disruptions, she expects the flow of investments and wealth between the 2 regions to continue growing in the longer term.
Wong also sees growth opportunities for the lender&rsquo s wealth management business in China.
She noted OCBC&rsquo s partnership with Ping An Bank to sell wealth management products to both north-bound and south-bound customers in China. While the partnership is still in its early days, Wong said it was important to have the channel ready.
On the outlook for 2022 and 2023, Wong remains &ldquo cautiously optimistic&rdquo . She noted headwinds from supply chain disruptions, rising inflation and delays from the pandemic.
Higher interest rates will at first lead to an improvement in net interest margins. But Wong flagged that higher rates, coupled with higher inflation, could also negatively impact businesses and slow the economy later on.
Commenting on OCBC&rsquo s share price performance, Wong said the company&rsquo s value depends, in part, on investors&rsquo belief in the bank&rsquo s strategies and growth.
&ldquo The important thing is to communicate in the best manner and execute our strategy to bring in that growth,&rdquo Wong said.
OCBC prices US$750m in Tier 2 notes at 4.602%
OCBC : O39 -1.26% has priced US$750 million worth of subordinated notes which are expected to qualify as Tier 2 capital of the bank.
The notes, which bear a coupon of 4.602 per cent per annum, will be issued at par on Jun 15, 2022, the bank said in a bourse filing on Thursday (Jun 9).
If they are not redeemed by their call date on Jun 15, 2027, the interest rate will reset to a fixed rate per annum equal to the aggregate of the then-prevailing 5-year US Treasury rate and 1.575 per cent until their maturity date on Jun 15, 2032.
OCBC expects the notes to be rated &ldquo A2&rdquo by Moody&rsquo s Investors Service, &ldquo BBB+&rdquo by Standard & Poor&rsquo s and &ldquo A&rdquo by Fitch Ratings.
Barclays Bank (Singapore branch), Citigroup Global Markets Singapore, JPMorgan and OCBC are the joint lead managers and joint bookrunners for the issue.
Yes. Just realised there a very tall green bar on 31 May representing volume/ strong buy of 36.85M. Could be a good sign for longs,
Richardlai ( Date: 07-Jun-2022 17:45) Posted:
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Guess after the summer holidays it will wake up again.
OCBC has tried in vain to rally
Unsustainable rallies are hallmarks of a bear market
OCBC to drop back to $11.37
Unsustainable rallies are hallmarks of a bear market
OCBC to drop back to $11.37
How about you, did u invest DBS?
RexxarLoh ( Date: 06-Jun-2022 10:52) Posted:
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