OCBC’s Q2 profit tops expectations, says on track to meet 2024 targets

By Yantoultra Ngui

SINGAPORE (Reuters) -Singapore’s second-largest bank Oversea-Chinese Banking Corp (OCBC) reported on Friday a stronger-than-expected 14% year-on-year jump in second quarter net profit and said it was firmly on track to meet its 2024 targets.

“As we look ahead, we are alert to the heightened level of geopolitical uncertainties,” OCBC’s Group CEO Helen Wong said in a statement.

“With our strong capital position, diversified earnings base and prudent approach towards risk management, we are well positioned to navigate the challenging macroeconomic landscape,” she added.

OCBC, which is also Southeast Asia’s second-largest lender by assets, said its April-June net profit rose to S$1.94 billion ($1.45 billion) from S$1.71 billion a year earlier, driven mainly by income growth and a decline in allowances.

This was above the mean estimate of S$1.82 billion or expectations for a 6.4% on-year rise from five analysts polled by LSEG.

OCBC maintained its 2024 earnings guidance of net interest margin in the range of 2.20% to 2.25%, low single-digit loan growth, credit costs between 20 to 25 basis points and 50% dividend payout, Wong’s presentation showed.

The bank’s earnings followed that of smaller peer United Overseas Bank (OTC:) (UOB), which on Thursday reported a 1% on-year rise in second quarter net profit to S$1.43 billion, in line with estimates. The results from UOB and OCBC this week kick start the current earnings season for Singaporean banks, which have benefited from strong inflows of wealth into Asia thanks to its political stability, low taxes, and policies favourable towards family offices and trusts. OCBC’s second quarter result showed a 17% on-year jump in wealth management fees to S$212 million, while asset under management rose 2% to record level of S$279 billion.

UOB’s wealth assets under management climbed 10% on-year to S$182 billion, its results posted on Thursday showed. Larger peers DBS is due to announce its results on Aug. 7.

OCBC, which counts Singapore, greater China, Indonesia and Malaysia among its key markets, declared an interim dividend of 44 Singapore cents a share, up 10% from a year ago.

Return on equity climbed to 14.2% in the second quarter from 13.5% in the same period of 2023.

Net interest margin, a key profitability gauge, declined to 2.20% during the quarter from 2.26% a year earlier.

($1 = 1.3362 Singapore dollars)