Most of you may not be aware of this, but Oversea-Chinese Banking Corporation Limited (SGX: O39), or OCBC for short, is not only Singapore's oldest bank (where it was formed as a result of a merger of 3 banks back in 1932), it is also the second largest bank in Southeast Asia by assets.
Together with UOB (you can read my review of its Q3 and 9M FY2024 business update here), OCBC also released its business update for the 3rd quarter, as well as for the first 9 months of the financial year ended 30 September early this morning (08 November). In case you're wondering, DBS published its business update yesterday morning and you can check out my review of it here in case you're missed it.
In this post, you will find my review of the Singapore-listed bank's latest key financial figures and ratios:
Key Financial Figures (Q3 FY2023 vs. Q3 FY2024, and 9M FY2023 vs. 9M FY2024)
In this section, you will find a comparison of OCBC's key financial figures reported for the 3rd quarter, followed by for the first 9 months of the year, compared to a year ago:
Q3 FY2023 vs. Q3 FY2024:
Q3 FY2023 | Q3 FY2024 | % Variance | |
– Net Interest Income (S$’mil) | $2,456m | $2,433m | -0.9% |
– Net Fee & Commission Income (S$’mil) | $461m | $508m | +10.2% |
– Other Non-Interest Income (S$’mil) | $512m | $861m | +68.2% |
Total Income (S$’mil) | $3,429m | $3,802m | +10.9% |
Total Expenses (S$’mil) | $1,340m | $1,463m | +9.2% |
Net Profit Attributable to Shareholders (S$’mil) | $1,810m | $1,974m | +9.1% |
My Observations: Apart from a slight 0.9% year-on-year dip in its net interest income to S$2,433 million, due to a 0.09 percentage point (pp) decline in its net interest margin to 2.18% (from 2.27% last year), its net fee and commission income, as well as its other non-interest income saw a good growth.
Net fee & commission income climbed by 10.2% year on year to S$508 million from higher wealth management (which saw a 25% year-on-year increase, as a result of an increase in customer activities across all of its wealth product channels), investment banking, and loan-related fees.
Other non-interest income leaped by 68.2% year on year to S$861 million, as the bank's net trading income more than doubled to a new quarterly high of S$508 million. Customer flow treasury income also rose to a record of S$306 million, driven by both corporate and wealth segments. The business segment also benefitted from an improvement in contribution from its life and general insurance segment, which was up by 6% year on year to S$233 million.
Total expenses went up by 9.2% year on year to S$1,463 million due to higher expenses associated with increased business volumes, as well as IT-related expenses as the bank continued to drive its digitalisation initiatives. Additionally, it also recorded S$15 million of costs related to the integration of PT Bank Commonwealth in Indonesia.
9M FY2023 vs. 9M FY2024:
9M FY2023 | 9M FY2024 | % Variance | |
– Net Interest Income (S$’mil) | $7,183m | $7,300m | +1.6% |
– Net Fee & Commission Income (S$’mil) | $1,344m | $1,454m | +8.2% |
– Other Non-Interest Income (S$’mil) | $1,707m | $2,304m | +35.0% |
Total Income (S$’mil) | $10,234m | $11,058m | +8.1% |
Total Expenses (S$’mil) | $3,913m | $4,182m | +6.9% |
Net Profit Attributable to Shareholders (S$’mil) | $5,399m | $5,900m | +9.3% |
My Observations: Net profit attributable to shareholders, at S$5.9 billion for 9M FY2024, surpassed the previous high of S$5.4 billion recorded a year ago – this can be attributed to improvements made in all of its 3 main business segments.
Net interest income saw a 1.6% year-on-year improvement to a record high of S$7,300 million despite a 0.06pp dip in its net interest margin (from 2.28% in 9M FY2023 to 2.22% in 9M FY2024), from growth in customer loans, and deployment of liquidity into high-quality assets which were income-accretive but lower yielding.
Net fee and commission income improved by 8.2% year on year to S$1,454 million, largely due to a 21% jump in wealth management fees.
Other non-interest income leaped by 35.0% year on year to S$2,304 million, due to a 58% increase in its net trading income at S$1.23 billion, driven by both customer and non-customer flow income. This is in addition to a 13% improvement in contribution from its life and general insurance segment to S$815 million.
Total expenses saw a 6.9% year on year increase to S$4,182 million, as a result of increased staff costs and IT-related expenditure to support the bank's business expansion, along with integration costs of S$27 million for PT Bank Commonwealth in Indonesia.
Key Financial Ratios (Q2 FY2024 vs. Q3 FY2024)
Moving on, let us take a look at the 3 key financial ratios I always look at whenever I review a bank's performance – these 3 ratios are net interest margin, return on equity, and non-performing loans ratio.
However, unlike how I have reviewed its key financial figures in the previous section, I will be reviewing its key financial ratios by comparing the current quarter (Q3 FY2024 ended 30 September) with the previous quarter (Q2 FY2024 ended 30 June) to find out if they have remained resilient:
Q2 FY2024 | Q3 FY2024 | Difference (in Percentage Points – pp) | |
Net Interest Margin (%) | 2.20% | 2.18% | -0.02pp |
Return on Equity (%) | 14.2% | 14.1% | -0.1pp |
Non-Performing Loans Ratio (%) | 0.9% | 0.9% | – |
My Observations: Compared to the previous quarter, the 3 key financial ratios continue to remain stable.
CEO Ms Helen Wong's Comments & Outlook (from the Bank's Press Release)
"Our record earnings for the first nine months of 2024 underscored the robust performance across the Group's diversified franchise. Loan growth momentum was sustained as we supported customers across our markets, while portfolio quality remained sound. The strong improvement in our wealth management business and trading income reflected the progress we have made in advancing our corporate strategy. We also saw solid profit contribution from Great Eastern Holdings (GEH), and we look forward to driving further collaboration and synergies with GEH.
Our shareholding in GEH is 93.72% after the expiry of GEH minority shareholders' right under Section 215(3) of the Companies Act on 23 October 2024. I am pleased that we have also completed the merger between OCBC Indonesia and PT Bank Commonwealth in September 2024.
Looking ahead, we will continue to proactively manage our balance sheet to prepare for a lower interest rate environment. We are closely monitoring potential volatilities arising from uncertain geopolitical conditions. We remain confident in the resilience and long-term prospects of our key markets in Asia. With our well established franchise and strong financial position, we are well-placed to drive value for all stakeholders."
Closing Thoughts
It was another record breaking performance by Singapore's longest established bank – with its net trading income and customer flow treasury income hitting new highs for the 3rd quarter (and this contributed to the bank's other non-interest income to jump by more than 68% year on year), along with its net interest income (at S$7.3 billion) and net profit attributable to shareholders (at S$5.9 billion) recording new highs for the first 9 months of FY2024.
The 3 key financial ratios that I look at whenever I review a bank's results are also stable – with net interest margin at 2.18%, return on equity at 14.1%, and non-performing loans ratio at a low of 0.9% for Q3 FY2024.
Finally, just like UOB, OCBC also declares a dividend payout to their shareholders on a half-yearly basis (once when it releases its results for the first half of the year, and another when it releases its results for the second half of the year). Hence, for the current quarter under review, no dividend payouts are declared.
With that, I have come to the end of my review of OCBC's latest business update for the 3rd quarter, as well as for the first 9 months of the financial year 2024 ended 30 September.
I hope you have found the review useful. At the same time, do note that all the opinions expressed within are purely for educational purposes only, and they do not represent any buy or sell calls for the bank's shares. You are strongly encouraged to do your own due diligence before you make any investment decisions.
Related Documents
Disclaimer: At the time of writing, I am a shareholder of Oversea-Chinese Banking Corporation Limited.
The post What You Need to Know about OCBC's Q3 and 9M FY2024 Business Update first appeared on The Singaporean Investor.
Created by ljunyuan | Nov 18, 2024
Created by ljunyuan | Nov 11, 2024
Created by ljunyuan | Nov 05, 2024