Overseas-Chinese Banking Corporation Limited (SGX:O39), or OCBC Bank as we are more familiar with, held its 84th annual general meeting (AGM) yesterday afternoon (29 April 2021) for the financial year ended 31 December 2020 (i.e. FY2020).
This AGM is Ms Helen Wong’s first as the new Chief Executive Officer for the Singapore bank, replacing Mr Samuel N Tsien, who has retired with effect from 15 April 2021. As a shareholder, I have attended its virtual meeting (no physical attendance was allowed due to the current safe distancing measures in place) to seek the latest updates from the bank’s management.
For the benefit of those who did not manage to attend the meeting, in this post, you will find a summary of the bank’s Chairman Ooi Sang Kuang’s, as well as CEO Helen Wong’s presentation, responses by the bank’s management to questions submitted by fellow attendees during the meeting, and finally, results of the resolutions put to vote during the meeting.
Let’s get started…
Chairman Ooi Sang Kuang’s Presentation
- The Covid-19 pandemic severely impacted global supply chain, with the magnitude of decline not seen since the Great Depression of 1929 – 1932. Only China managed to record a positive GDP growth at the end of the year (at +2.3%).
- Mr Ooi updated that the core markets which the bank had businesses in saw their GDPs for the year 2020 severely impacted. In particular, Singapore’s GDP declined 5.4%, Malaysia’s GDP declined 5.6%, Indonesia’s GDP declined 2.1%, and Hong Kong’s GDP declined 6.1%.
- However, signs have emerged to indicate a strong recovery in global output and trade, led by a sharp revival of economic activities in US (where growth will be lifted by the unprecedented expansion in monetary stimulus and massive fiscal spending) and China (from the strong domestic demand and exports.) However, he warned that the eventual recovery will be an uneven one, as many countries are still battling with multiple waves of outbreak with the emergence of new variants, coupled with the slow roll-out of vaccination.
- Despite that, Mr Ooi shared that in terms of GDP growth, the global economy may still record a 6.0% growth in 2021, followed by a 4.4% growth in 2022. He also expressed his optimism in terms of the GDP growth in Singapore (by 6.0% in 2021 and 3.3% in 2022), contributed by global economic and trade activities.
- Finally, Mr Ooi is cautiously optimistic that the worst is beyond us, but a return to ‘normal’ would likely take longer (rather than sooner.)
CEO Helen Wong’s Presentation
- Ms Wong shared that the bank acted swiftly to provide support for its:
- Colleagues, where the bank facilitated a smooth transition for its staffs to work from home, along with up-skilling them to be future-relevant
- Customers, through loan relief programmes, where Ms Wong shared that from 10% of the Group loan in July 2020, it has since declined to just 2% of the Group loan in January 2021, with most indicating they do not require further assistance beyond these programmes. This was on top of the bank advancing its pace of digital innovation to help its customers achieve their financial goals for individuals, as well as launching several first-to-market solutions (including offering SMEs a view of historical cash flows and expenses categories to manage working capital, send sales invoices electronically and collecting payments digitally through QR and UEN) for their corporate customers
- Community, where the bank created more than 3,500 new job opportunities in Singapore amid Covid-19, along with their colleagues volunteering their time to help those in need
2020 Financial Performance:
- On the bank’s 26% drop in the bank’s net profit (compared to the previous year), Ms Wong explained that this was due to:
- The negative impact caused by the compressed net interest margin, which resulted in its net interest income registering a 6% year-on-year decline. In the year ahead, Ms Wong expects interest rates to continue to remain low, and the bank will continue to optimise its funding base to manage its margins
- An increase in allowances (for both impaired and non-impaired assets) to buffer against credit losses, to which Ms Wong reassured shareholders that the bank will continue to remain vigilant on their loan portfolio
- While the bank’s non-interest income saw improvements in the second half of FY2020, where its wealth management fee income went up to a record high of S$250m, it still fell by 8% compared to last year.
Competitive Strengths of OCBC:
- Ms Wong explained that OCBC’s franchise is well-anchored on 3 main business pillars:
- Banking, where its operating profit before allowances in FY2020 was the second highest on record, which exhibited the bank’s resilience
- Wealth management, particularly with Bank of Singapore’s asset under management of S$121b in FY2020 is a new high
- Insurance, where the fundamentals of Great Eastern continues to remain strong. She highlighted that the insurance company’s embedded value of S$17.4b in FY2020 is a new record
Positioning for the Future:
- Ms Wong touched on the 4 areas which the bank will be focusing on to capture global and regional structural trends accelerated by the pandemic, and they are:
- Capitalising on the ASEAN-Greater China flows, where Ms Wong shared that there are more opportunities for further growth in the ASEAN economy (particularly in Vietnam and Thailand), and that the bank will continue to deepen its penetration. As for Greater China, Ms Wong said that there are lots of potential in the Greater Bay Area on all fronts, including manufacturing, export, trading, technology, wealth and banking, to which OCBC is well-placed to leverage on the opportunities
- Growing leading wealth management franchise through digitalisation, with the integration of capabilities and wealth platforms across the Group. Ms Wong also added that the bank intends to expand its family business unit to capture the onshore wealth management growth across Asia
- Accelerating digitalisation, where the bank will continue to invest heavily on areas such as artificial intelligence, machine learning, big data analytics, etc., to help its customers manage their financial goals. Another area which the bank will further strengthen is in the area of cybersecurity, to protect its customers’ data
- Building a more sustainable future, where Ms Wong shared that the bank will continue to expand its sustainable financing portfolio. She added that the bank had an initial target of providing S$10b in sustainable finance commitments by 2022, and the target had been attained in Q1 FY2020. As such, the bank had revised their target to S$25b by 2025
Questions and Answers
- One shareholder asked if the bank’s dividend payouts were affected by the ongoing Covid-19 pandemic, to which Mr Ooi responded that the bank’s dividend payout has been significantly affected by a decline in its net profit (by 26%) in FY2020, along with MAS’ guidance on the payout of dividends for FY2020 (at 60% of the amount paid out in FY2019.) Moving forward, Mr Ooi said the bank said its dividend payout policy will continue to be a sustainable and progressive one, in-line with its long-term growth.
- Still on the subject of dividends, another shareholder sought the bank’s advice on when it will go back to pre-Covid amount. Mr Ooi said that the bank will review and consider the normalisation of dividend payouts when its earnings normalise and restore to a sustainable level.
- There was also a question by a shareholder on whether OCBC intends to hop on to the cryptocurrency bandwagon. Mr Ooi’s response was that the bank is closely monitoring on the developments in the cryptocurrency space. He further shared that the bank is continuing to evaluate the value proposition of cryptocurrency, including the tokenisation of financial and real assets, and will assess the suitability of such products for customers making the decision on the adoption of digital currencies.
- Pertaining to a question on competitions expected from the new fintech companies, Ms Wong sees lots of opportunities for the bank to work together with the fintech companies and digital banks as a partner.
- There was another question submitted which asked about the bank’s optimal capital levels for the bank. Mr Ooi explained that the bank looks at capital from a number of angles – the first being CET-1, which is within its risk-appetite statement of around 11-12%. He added that the bank’s current CET-1 ratio of 15.2% is the highest among the 3 local banks. Also, the composition of capital mix will depend on OCBC’s demand for business expansion and the cost structure in terms of composition of the different capital instruments.
- Finally, a shareholder asked if there are any plans for the bank to trim its physical office spaces moving forward, considering a number of banks are doing so. Mr Ooi confirmed that the bank will be conducting a review on office space requirements, along with the number of bank branches, as it moves towards a hybrid working environment where employees only work in the office on certain days.
Results of Resolutions Put to Vote during the AGM
- Resolution 1, which is on the adoption of Directors’ statement and audited financial statements for the financial year ended 31 December 2020 and Auditors’ report, was passed with 99.93% (or 2,358,930,127) of the votes for, and 0.07% (or 1,655,709) of the votes against.
- Resolution 2(a), which is on the re-election of Mr Chua Kim Chiu, was passed with 99.77% (or 2,356,023,985) of the votes for, and 0.23% (or 5,541,141) of the votes against.
- Resolution 2(b), which is on the re-election of Mr Pramukti Surjaudaja, was passed with 74.47% (or 1,726,515,416) of the votes for, and 25.53% (or 591,772,002) of the votes against.
- Resolution 2(c), which is on the re-election of Mr Tan Ngiap Joo, was passed with 79.49% (or 1,842,874,574) of the votes for, and 20.51% (or 475,413,002) of the votes against.
- Resolution 3, which is on the re-election of Dr Andrew Khoo Cheng Hoe, was passed with 99.98% (or 2,360,242,038) of the votes for, and 0.02% (or 493,332) of the votes against.
- Resolution 4, which is on the approval of final one-tier tax exempt dividend, was passed with 99.69% (or 2,354,305,333) of the votes for, and 0.31% (or 7,245,656) of the votes against.
- Resolution 5(a), which is on the approval of amount proposed as Directors’ remuneration, was passed with 96.85% (or 2,287,072,035) of the votes for, and 3.15% (or 74,492,975) of the votes against.
- Resolution 5(b), which is on the approval of allotment and issue of ordinary shares to the non-executive Directors, was passed with 98.90% (or 1,860,722,841) of the votes for, and 1.10% (or 20,706,393) of the votes against.
- Resolution 6, which is on the re-appointment of Auditors and authorisation for Directors to fix their remuneration, was passed with 99.20% (or 2,342,526,451) of the votes for, and 0.80% (or 18,977,335) of the votes against.
- Resolution 7, which is on the authority to issue ordinary shares, and make or grant instruments convertible into ordinary shares, was passed with 93.26% (or 2,202,348,498) of the votes for, and 6.74% (or 159,204,491) of the votes against.
- Resolution 8, which is on the authority to (I) allot and issue ordinary shares under the OCBC Share Option Scheme 2001; and/or (II) grant rights to acquire and/or allot and issue ordinary shares under the OCBC Employee Share Purchase Plan, was passed with 81.18% (or 1,882,005,759) of the votes for, and 18.82% (or 436,284,217) of the votes against.
- Resolution 9, which is on the authority to allot and issue ordinary shares pursuant to the OCBC Scrip Dividend Scheme, was passed with 99.88% (or 2,358,616,200) of the votes for, and 0.12% (or 2,949,126) of the votes against.
- Resolution 10, which is on the approval of renewal of the Share Purchase Mandate, was passed with 99.80% (or 2,356,552,293) of the votes for, and 0.20% (or 4,667,469) of the votes against.
- Resolution 11, which is on the adoption of the OCBC Deferred Share Plan 2021, was passed with 80.99% (or 1,875,270,755) of the votes for, and 19.01% (or 440,225,758) of the votes against.
- Questions Submitted by Shareholders, along with Responses by the Management
- Chairman and CEO’s Presentation Slides
- Results of AGM
Disclaimer: At the time of writing, I am a shareholder of Overseas-Chinese Banking Corporation Limited.
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