OCBC raises dividend; Q4 net profit up 34% on wealth management, insurance gains


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OCBC Bank on Friday upped its dividend payout as it turned in stronger profits for its fourth quarter, but flagged a weaker-than-expected outlook for the global economy ahead.

Singapore’s second largest lender proposed a dividend of S$0.28 per share, up from S$0.23 a year ago. Together with the interim dividend of S$0.25 per share, the total dividend for FY2019 amounts to S$0.53 per share, up 23 per cent from S$0.43 in the previous year.

The dividend payout ratio now stands at 47 per cent, up from 40 per cent in FY2018.

The bank's net profit grew 34 per cent to S$1.24 billion for its fourth quarter, from S$926 million a year ago, driven mainly by wealth management, higher income from trading, sale of investment securities and properties, and its insurance franchise.

Annualised earnings per share stood at S$1.11 for the quarter, up from S$0.85 a year ago.

Against the backdrop of its full-year results for 2019, OCBC chief executive officer Samuel Tsien also flagged that the global economic outlook is “weaker than originally expected”.

“We are watchful of the impact to our business and customers from the continuing trade tensions, heightened geo-political risks and the Covid-19 outbreak, and will extend support to customers to help them overcome the market challenges,” he said in a media statement.

In Q4, net interest income grew 6 per cent on the year to S$1.61 billion, on the back of loan growth and improved margins. Average customer loans increased 3 per cent from a year ago, mainly from lending to corporate customers.

Net interest margin (NIM) rose 5 basis points to 1.77 per cent largely due to the management of funding costs, up from 1.72 per cent a year ago.

NIMs are a key gauge of profitability for banks, measuring the difference between income earned from loans and the interest paid to depositors.

Non-interest income climbed 58 per cent to S$1.31 billion for the quarter, from S$830 million in the previous year.

Net fees and commissions grew 17 per cent to a quarterly high of S$556 million, led by higher fees from wealth management, credit card, loan and transaction banking activities.

Net trading income increased to S$316 million from S$9 million a year ago, driven by higher gains from treasury activities, a rise in customer flow income, and mark-to-market gains. Net gains from the sale of investment securities were also higher at S$35 million, up from S$2 million a year ago.

Income from life and general insurance grew 25 per cent to S$308 million from S$247 million in the previous year, as a result of improved investment performance, and higher year-on-year sales, new business embedded value (NBEV) and margins.

The bank’s non-performing loans (NPL) ratio remained at 1.5 per cent as at Dec 31, 2019, from a year ago.

For the full year, OCBC’s net profit was 8 per cent higher at S$4.87 billion, led by sustained earnings growth across the group’s banking, wealth management and insurance franchise.

Earnings per share for FY2019 was S$1.14, up from S$1.06 a year ago.

Net interest income increased 7 per cent to a new high of S$6.33 billion from S$5.89 billion in the previous year, underpinned by asset growth and a rise in NIM.

Full-year NIM expanded 7 basis points to 1.77 per cent, mainly in Singapore and Greater China, as higher asset yields outpaced the rise in funding costs.

Non-interest income rose by 19 per cent to S$4.54 billion in FY2019, from S$3.81 billion a year ago, driven by broad-based income growth.

Net fees and commissions rose 5 per cent to hit a record S$2.12 billion last year, led by higher wealth management and credit card fees, as well as increased fees from loan, trade and investment banking activities.

In FY2019, net trading income grew substantially to S$977 million from S$508 million a year ago, mostly attributable to an 18 per cent increase in customer flow income and mark-to-market gains in Great Eastern Holdings’ investment portfolio.

Net gains from the sale of investment securities were higher at S$171 million as compared to S$16 million in the previous year, while income from life and general insurance rose 7 per cent to S$976 million.