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OCBC’s Latest Results: Challenging Times Ahead

The Singapore banks are having a challenging time amid Covid-19 outbreak. Here’s how OCBC performed in its first-half earnings. – Singapore Temasek investing in China

Oversea-Chinese Banking Corp Limited (SGX: O39), also known as OCBC, is one of the three main local banks listed in Singapore.

The other two are United Overseas Bank Ltd (SGX: U11), or UOB, and DBS Group Holdings Ltd (SGX: D05), better known as just DBS.

OCBC recently announced its 2020 first-half earnings. Here are five things that I think investors should know about its results. But first, let’s run through the company’s numbers.

The results

Here’s a quick summary of some key financial metrics from the earnings update.

OCBC results

Source: OCBC’s Results Presentation

Overall, we can see that all metrics declined on a year-on-year basis amid the Covid-19 outbreak. Here are the five points worth mentioning.

First of all, total income declined by 3% year-on-year mainly due to lower investment income and unrealised losses from its insurance business.

Net interest income (NII) came in flat year-on-year thanks to higher loan assets offset by a lower net interest margin (NIM).

Secondly, net profit plunged by 42% amid higher impairments and provisions. The former was up by 145% while the latter rose by about 18-fold.

Though the number is not pretty, I am quite happy to see that net profit still came in positive for the first half of 2020.

Thirdly, OCBC reported stronger performance in the second quarter as compared to the first quarter of 2020, with total income, operating profit, and net profit coming in higher by 5%, 9%, and 5%, respectively.

This indicates that the bank’s business is still holding up well despite the continued impacts from the Covid-19 outbreak.

Fourth, OCBC declared an interim dividend per share of 15.9 Singapore cents, down from 25 Singapore cents as compared to the same period last year.

Last but not least, OCBC maintained an extremely sound capital position as of 30 June 2020.

Its Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR, and Total CAR as at 30 June 2020, were 14.2%, 14.9% and 16.4% respectively.

These ratios were well above the respective regulatory requirements of 6.5%, 8%, and 10%, indicating that it is well-positioned to weather through the recent challenges.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.

The Motley Fool Hong Kong Limited(www.fool.hk) 2020

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