Overseas-Chinese Banking Corporation, or OCBC (SGX:O39) is the Singapore-listed bank to release its financial results for the fourth quarter and for the full-year 2020 ended 31 December 2020 early this morning (24 February 2021.)

As a shareholder of the bank, I have studied its latest results release and in this post, you will find some of the key financial results and statistics to take note of, as well as information regarding its upcoming dividend payout. I have also included my personal thoughts about the Singapore bank’s latest set of results to share.

Let’s get started…

Key Financial Results (Q4 FY2019 vs. Q4 FY2020, and FY2019 vs. FY2020)

First, let us take a look at the bank’s latest set of financial results – both on a quarter-on-quarter (q-o-q), as well as on a year-on-year (y-o-y) basis:

Q4 FY2019 vs. Q4 FY2020:

Q4 FY2019Q4 FY2020% Variation
– Net Interest
Income (S$’mil)
$1,610m$1,436m-10.8%
– Non-Interest
Income (S$’mil)
$1,312m$1,049m-20.0%
Total Income
(S$’mil)
$2,922m$2,485m-15.0%
Total Expenses
(S$’mil)
$1,266m$1,125m-11.1%
Net Profit
Attributable to
Shareholders ($’mil)
$1,243m$1,131m-9.0%

Compared to the same quarter last year (i.e. Q4 FY2019), OCBC’s top- and bottom-line results were weaker, which was within my expectations due to the massive headwinds (especially with the drop in net interest margins amid a low interest rate environment) posed by the ongoing Covid-19 pandemic.

Before I move on, I’d like to elaborate a bit more about the bank’s non-interest income, consisting of (i) fee and commissions, which fell 7.0% from S$556m in Q4 FY2019 to S$517m in Q4 FY2020, (ii) trading income, which declined 16.5% from S$316m in Q4 FY2019 to S$264m in Q4 FY2020, and (iii) profit from life insurance, which plummeted 39.4% from S$254m in Q4 FY2019 to S$145m in Q4 FY2020 due to provisions for higher expected insurance claims made by their subsidiary Great Eastern Holdings.

FY2019 vs. FY2020:

FY2019FY2020% Variation
– Net Interest
Income (S$’mil)
$6,331m$5,966m-5.8%
– Non-Interest
Income (S$’mil)
$4,540m$4,173m-8.1%
Total Income
(S$’mil)
$10,871m$10,139m-6.7%
Total Expenses
(S$’mil)
$4,644m$4,439m-4.4%
Net Profit
Attributable to
Shareholders ($’mil)
$4,869m$3,586m-26.4%

OCBC’s latest set of results on a y-o-y basis was also a weaker one – the 5.8% dip in its net interest income can be attributed to a 16 basis points drop in its net interest margin; its non-interest income also fell by 8.1% as a result of a 5.7% decline in its fee and commissions income (from S$2,123m in FY2019 to S$2,003m in FY2020, led by a fall in loan-related fees and credit card fees on the back of lower transaction volumes), a 11.7% drop in its trading income (from S$977m in FY2019 to S$867m FY2020, due to lower mark-to-market gains in Great Eastern Holdings’ portfolio), as well as a 10.4% fall in its profit from life insurance (from S$779m in FY2019 to S$698m in FY2020, due to higher insurance contract liabilities resulting from a lower discount rate used to value those liabilities, in-line with lower market interest rates.)

Finally, as a result of higher total allowances (which skyrocketed from S$890m in FY2019 to S$2.04b in FY2020), its net profit attributable to shareholders fell by 26.4%.

My Thoughts: Given the headwinds faced by the bank in light of the ongoing Covid-19 pandemic, the latest set of financial results (both on a q-o-q as well as on a y-o-y basis) were within my expectations, considering the fact that the financial figures reported in FY2019 was before the pandemic.

Key Financial Ratios (Q3 FY2020 vs. Q4 FY2020, and FY2019 vs. FY2020)

In this section, let us take a look at some of the key financial ratios – where we compare the ratios recorded in the fourth quarter ended 31 December 2020 (i.e. Q4 FY2020) against that recorded three months ago (i.e. Q3 FY2020 ended 30 September 2020), as well as ratios recorded for FY2020 compared against ratios recorded a year ago (i.e. FY2019), to find out if they have improved or deteriorated:

Q3 FY2020 vs. Q4 FY2020:

Q3 FY2020Q4 FY2020Difference (in
Percentage Points)
Net Interest
Margin (%)
1.63%1.56%-0.07pp
Return on
Assets (%)
0.78%1.07%+0.29pp
Return on
Equity (%)
6.97%9.3%+2.33pp
Non-Performing
Loans Ratio (%)
1.5%1.5%

My Thoughts: Compared to the statistics recorded 3 months ago, I’m happy to note the improvements recorded in its return on equity, as well as in its return on assets. Also, its non-performing loans ratio have continued to remain at 1.5% – another plus as far as I’m concerned.

FY2019 vs. FY2020:

FY2019FY2020Difference (in
Percentage Points)
Net Interest
Margin (%)
1.77%1.61%-0.16pp
Return on
Assets (%)
1.26%0.85%-0.41pp
Return on
Equity (%)
11.4%7.6%-3.8pp
Non-Performing
Loans Ratio (%)
1.5%1.5%

My Thoughts: While the bank’s key financial ratios on a y-o-y basis saw declines, but I’m happy to note that despite the headwinds, its non-performing loans ratio continued to stay consistent at 1.5%.

Dividend Payout to Shareholders

A final dividend of 15.9 cents/share was declared for the current quarter under review. Together with the interim dividend payout of 15.9 cents/share (declared when the bank released its second quarter and half-year results for FY2020), its total dividend payout for FY2020 is 31.8 cents/share – which is 60.0% of 53.0 cents/share paid out in FY2019, as advised by the Monetary Authority of Singapore (MAS.)

Shareholders are also given the option of receiving their dividends in a form of shares of the bank – the price will be the average of the daily volume weighted average prices of the shares for each of the market days during the market determination period between 12 May 2021 (ex-dividend date), and 14 May 2021 (record date.)

For shareholders who choose to receive their dividends in cash, it will be in on 29 June 2021; for those who choose to receive their payout in a form of shares of the bank, it will be credited on 30 June 2021.

In Conclusion

The weaker set of financial results reported by the bank was within my expectations. Looking at the key financial statistics reported for Q4 FY2020 compared against that recorded 3 months ago (i.e. Q3 FY2020), there are some optimism in terms of further recovery in the quarters ahead.

Finally, as far as whether or not the bank’s dividend payouts will recover in FY2021, we can only wait for MAS’ directions. Personally, I am of the opinion that it will likely be capped between 70% and 90% of the payout in FY2019.

With that, I have come to the end of my review of OCBC’s latest results update. Do note that everything you have just read about above is purely for educational purposes only, and they do not represent any buy or sell recommendations for the bank’s shares. As always, you are highly encouraged to do your own due diligence before you make any investment decisions.

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Disclaimer: At the time of writing, I am a shareholder of Overseas-Chinese Banking Corporation Limited.

 

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