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OCBC posts record net profit of $7.02 billion for FY2023, up 27% y-o-y; plans final dividend of 42 cents

This brings the FY2023 dividend to 82 cents per share, up 21% from 68 cents a year ago and represents a payout ratio of 53%.

Oversea-Chinese Banking Corporation (OCBC) has reported record net profit of $7.02 billion for FY2023 ended Dec 31, 2023, up 27% y-o-y and crossing $7 billion for the first time.

Net profit from banking operations rose 27% y-o-y to $6.39 billion.

For 4QFY2023, OCBC’s Group net profit rose 12% y-o-y to $1.62 billion, driven by a 2% increase in operating profit and lower allowances.

Total income for FY2023 rose to a new high of $13.5 billion, with net interest income at a record high of $9.65 billion, up 25% y-o-y; and net interest margin (NIM) rose 37 basis points (bps) to 2.28%.

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Meanwhile, non-interest income rose 7% y-o-y to $3.86 billion. Management attributed this to improved trading income and investment gains.

Operating expenses rose 8% y-o-y to $5.22 billion during the year, while credit costs rose 4bps to 20bps.

OCBC’s FY2023 cost-to-income ratio improved to 38.7% from 42.9% in the prior year, while the non-performing loan (NPL) ratio of 1.0% is 0.2 percentage points lower from the previous year.

Total allowances were $733 million, up 25% from $584 million in the previous year.

Customer loans rose 2% in constant currency terms to $297 billion, while customer deposits rose 4% to $364 billion over the year.

Loan-related and credit card fees rose, but overall fee income was down as subdued investment sentiments continued to weigh on wealth-related fees, says OCBC on Feb 28. FY2023 net fee income of $1.80 billion is 3% lower y-o-y.

The Group’s return on equity (ROE) for FY2023 improved to 13.7%, from 11.1% a year ago. Earnings per share (EPS) was 27% higher at $1.55, compared to $1.22 in the previous year.

OCBC’s common equity tier-1 (CET-1) capital adequacy ratio (CAR) rose 0.7% ppt y-o-y to 15.9%.

OCBC’s Board has recommended an increase in the final dividend to 42 cents per share from 40 cents a year ago. This brings the FY2023 dividend to 82 cents per share, up 21% from 68 cents a year ago and represents a payout ratio of 53% of the Group’s FY2023 net profit.

Insurance and wealth management

OCBC’s FY2023 insurance income was $808 million as compared to $803 million a year ago.

Great Eastern Holdings (GEH) adopted Singapore Financial Reporting Standards (International) 17, or SFRS(I) 17, on Jan 1, and the Group’s insurance results for FY2023 are prepared based on SFRS(I) 17 and respective comparative periods for FY2022 have been restated.

Total weighted new sales and new business embedded value (NBEV) were $1.66 billion and $762 million respectively, while NBEV margin was higher at 45.9%.

GEH’s embedded value, a measure of the long-term economic value of the existing business of a life insurance company, was $17.3 billion as at Dec 31, 2023.

Meanwhile, the Group’s wealth management income, comprising income from insurance, private banking, premier private client, premier banking, asset management and stockbroking, comprised 32% of the Group’s total income.

Wealth management income for FY2023 rose 26% y-o-y to $4.32 billion. Group wealth management assets under management (AUM) expanded 2% y-o-y to $263 billion.

OCBC’s share of results of associates grew 5% to $953 million, from S$910 million a year ago.

OCBC CEO Heleng Wong says she is “delighted” to report another year of record profit. “Broad-based income growth across business segments drove total income to an all-time high, while expenses were well controlled. Strong credit discipline was reflected by lower NPL ratio and higher allowance coverage.”

She adds: “Looking ahead, we anticipate challenges in the global macro environment, including changes in monetary policies, persistent inflationary pressures, major elections and rising geopolitical tensions. Nonetheless, we believe that Asia holds immense growth potential. We remain steadfast in executing our Asean-Greater China growth strategy to deliver sustainable value for our stakeholders.”

Compared to the NIM target of 2.25% for 2023, Wong slightly lowered her NIM target for 2024 to the range of 2.20% to 2.25%.

Wong targets for the Group to post ROE between 13% and 14%, with low-single-digit loan growth and credit costs between 20 and 25 bps.

OCBC also aims to maintain a 50% dividend payout ratio.

Shares in OCBC closed 2 cents lower, or 0.15% down, at $13.31 on Feb 27.

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