OCBC (SGX: O39) is the last of Singapore’s three big banks to report its first quarter 2024 (1Q 2024) earnings.
And the bank did not disappoint.
OCBC saw its total income rise to a new quarterly high while net profit hit a record of S$1.98 billion for 1Q 2024.
Here are three highlights from the bank’s latest earnings report that investors should know about.
1. Net profit rises to a record high
OCBC’s net interest income (NII) rose 4% year on year in 1Q 2024 to S$2.4 billion, led by a 5% growth in the bank’s average asset base.
Funding costs also rose, resulting in a slight year-on-year decline in the lender’s net interest margin (NIM).
Non-interest income climbed 17% year on year to S$1.2 billion.
Because of these increases, OCBC’s total income increased by 8% year on year to a new quarterly high of S$3.6 billion.
Growth in operating expenses kept pace with total income, resulting in profit before allowances improving by 8% year on year to S$2.3 billion.
Net profit came in at S$1.98 billion, a new record.
Annualised group return on equity stayed constant year on year at 14.7% but was higher than the previous quarter’s 12.4%.
2. Sharply higher non-interest income
Non-interest income rebounded strongly, rising by 47% quarter-on-quarter to hit S$1.2 billion.
Growth was driven by broad-based increases in fees and commissions, trading income, and substantially higher contributions from Great Eastern Holdings (SGX: G07), or GEH.
Note: On Friday morning, OCBC has announced a voluntary unconditional general offer for the remaining shares of GEH that it does not own.
Non-interest income made up 32.8% of OCBC’s group income for 1Q 2024, up from 30.2% in the prior year.
Trading income rose to S$370 million, up 45% year on year, because of record customer inflows and better non-customer flow income.
Fee income increased by around 6% year on year to S$479 million, the highest level in the last four quarters.
The bulk (~48%) was made up of wealth management fees which jumped 20% year on year to S$228 million.
Overall wealth management income (banking and insurance) for OCBC came in at S$1.3 billion, up 19% year on year.
The lender’s wealth management assets under management also rose 1% year on year to S$273 billion.
Income from life and general insurance also rose 21% year on year to S$289 million, helping to contribute to the overall rise in fees.
3. Slightly lower NIM offset by loan growth
OCBC’s NIM for 1Q 2024 stood at 2.27%, slightly lower than the prior year’s 2.3%.
It was also a 0.02 percentage point decline from the fourth quarter of 2023’s (4Q 2023) 2.29%.
The bank attributed this to a rise in funding costs (i.e. higher rates offered on savings accounts and fixed deposits) that offset higher interest rates on its loans.
Because 1Q 2024 had fewer days than 4Q 2023, NII was comparable to the previous quarter’s record level.
OCBC’s loan book increased slightly by 2% year on year to S$296.9 billion.
Notably, sustainable financing loans shot up 34% year on year.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
