OCBC Ltd (SGX: O39) is the last of the three Singapore banks to announce its fiscal 2021 (FY2021) earnings.
And the lender did not disappoint as it revealed stronger numbers for its various divisions.
OCBC’s results came a week after United Overseas Bank Ltd (SGX: U11), or UOB, released a robust set of earnings.
Earlier on, DBS Group (SGX: D05), Singapore’s largest bank, had reported a record net profit for its FY2021 earnings.
Here are five highlights from OCBC’s latest earnings report.
1. A better set of financial numbers
The bank’s net interest income (NII) for FY2021 dipped by 2% year on year to S$5.9 billion amid persistently low interest rates.
However, the weaker performance in NII was offset by a 14% year on year jump in non-interest income to S$4.7 billion.
Of note, profit from its life insurance arm, Great Eastern Holding Limited (SGX: G07), surged by 63% year on year to S$1.1 billion.
As a result, the total income for OCBC rose by 5% year on year to S$10.6 billion.
The bank’s allowances declined substantially to S$873 million from S$2 billion a year ago as economic conditions improved.
As a result, group net profit increased by 35% year on year to S$4.86 billion.
2. Stabilised NIM and healthy loan growth
Similar to both UOB and DBS, OCBC also reported that its net interest margin (NIM) had stabilised.
NIM clocked in at 1.52% for the fourth quarter of 2021 (4Q2021), unchanged from the previous quarter.
For FY2021, NIM dipped from 1.61% to 1.54%.
The bank believes that potential interest rate hikes from the US Federal Reserve should provide an uplift to NIM and NII.
Meanwhile, customer loans grew by 8% year on year to hit S$290 billion, of which the bulk (~S$190 billion) came from Singapore and Greater China.
3. Record-high fee income
OCBC’s bright spot was in non-interest income, which hit a new record-high of S$4.74 billion.
Of this, fee income rose by 12% year on year to a new high of S$2.25 billion, led by higher transaction volumes and increased client activity.
Income from wealth management also saw a healthy 11% year on year increase to S$3.9 billion as assets under management rose to S$258 billion, up 7% from a year ago.
4. Dividends restored
Income-driven investors should be smiling as the lender announced a restoration of its dividends back to pre-pandemic levels.
A final dividend of S$0.28 per share was declared, bringing the FY2021 dividend to S$0.53, similar to what was paid out in FY2019.
The move follows the Monetary Authority of Singapore’s decision that it will not extend dividend restrictions on local banks.
OCBC’s trailing dividend yield stands at 4% based on the last traded share price of S$13.16.
5. Four growth pillars
OCBC has also unveiled four growth priorities to drive sustainable growth for the group.
The first is to enhance its wealth management capabilities to deliver best-in-class offerings to its clients while strengthening hub capabilities and building up regional teams.
The second pillar is to leverage its network strength in Singapore and Hong Kong to capture higher levels of trade and investment flows.
Next, the bank plans to partner with new digital players to develop digital assets and tokenisation capabilities.
OCBC’s fourth priority is to advance its sustainability goals by developing a comprehensive suite of sustainable financing and investment proposals.
The target is to grow its sustainable financing portfolio to S$50 billion by 2025.
Get Smart: A brighter outlook
OCBC sounded an optimistic tone for the rest of this year as it believes the global economic recovery should gain momentum.
In particular, Asia is expected to be the fastest-growing region with projected GDP growth of between 3% to 6%.
Rising vaccination rates should allow economies to slowly reopen, while vaccinated travel lanes and easing of movement restrictions should boost consumer demand and spending.
All these trends bode well for the bank, along with the prospect of higher interest rates that should lift NIMs.
OCBC also achieved a couple of “firsts”.
It became the first bank in Southeast Asia to adopt the Poseidon Principles.
These principles provide a framework for integrating climate considerations to allow for responsible ship financing.
It also published its very first task force on climate-related financial disclosures (TCFD) report which you can find here.
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Disclaimer: Royston Yang owns shares of DBS Group.