Singapore’s longest-established bank, Oversea-Chinese Banking Corporation (SGX:O39), or OCBC for short, made available its financial results for the fourth quarter, and for the financial year 2021 ended 31 December 2021.
Just like how I have reviewed the results of DBS (you can read it here) and UOB (you can read it here) when they were released on last Monday (14 February) and Wednesday (16 February) respectively, in today’s post, you’ll find a summary, along with my thoughts as a shareholder of the most important pointers to take note of about OCBC’s most recent set of financial results and ratios, along with its dividend payout to shareholders:
Financial Results (Q4 FY2020 vs. Q4 FY2021, and FY2020 vs. FY2021)
In this section, you’ll find the bank’s results on a quarter-on-quarter (q-o-q) basis (i.e. Q4 FY2020 vs. Q4 FY2021), and also on a year-on-year (y-o-y) basis (i.e. FY2020 vs. FY2021):
Q4 FY2020 vs. Q4 FY2021:
| Q4 FY2020 | Q4 FY2021 | % Variance | |
| – Net Interest Income (S$’mil) | $1,436m | $1,492m | +3.9% |
| – Net Fee & Commission Income (S$’mil) | $517m | $528m | +2.1% |
| – Other Non- Interest Income (S$’mil) | $532m | $530m | -0.4% |
| Total Income (S$’mil) | $2,485m | $2,550m | +2.6% |
| Total Expenses (S$’mil) | $1,125m | $1,289m | +14.6% |
| Net Profit (S$’mil) | $1,131m | $973m | -14.0% |
Compared to the bank’s financial performances recorded in the same time period last year (i.e. Q4 FY2020), the results was a mixed bag in my opinion – its total income, comprising of the sum of its net interest income, net fee and commission income, as well as its other non-interest income, saw a low single-digit percentage growth, which can be attributed to slight improvements in its net interest income (due to a 6% asset growth), as well as in its net fee and commission income, offset by a slight dip in its other non-interest income (due to a fall in trading income, but cushioned by a higher profit from life insurance.)
Together with a higher total expenses (which saw a 14.6% q-o-q rise due to an increase in staff costs linked to strategic expansion and business activity growth, and the absence of government job support grants in the current quarter under review), and also an 11.2% q-o-q increase in total allowances (from $285m in Q4 FY2020 to $317m in Q4 FY2021), its net profit saw a 14.0% decline to $973m.
FY2020 vs. FY2021:
| FY2020 | FY2021 | % Variance | |
| – Net Interest Income (S$’mil) | $5,966m | $5,855m | -1.9% |
| – Net Fee & Commission Income (S$’mil) | $2,003m | $2,245m | +12.1% |
| – Other Non- Interest Income (S$’mil) | $2,170m | $2,496m | +15.0% |
| Total Income (S$’mil) | $10,139m | $10,596m | +4.5% |
| Total Expenses (S$’mil) | $4,439m | $4,764m | +5.3% |
| Net Profit (S$’mil) | $3,586m | $4,858m | +3.5% |
Unlike its q-o-q results (which was a bit of a mixed bag), the Singapore bank’s results for the full-year of 2021 was an improved one compared to last year – apart from a 1.9% decline in its net interest income (due to a 7 basis point fall in its net interest margin, despite a 3% increase in average asset balances), its net fee and commission income, as well as its other non-interest income both saw double-digit percentage improvements (in fact, its net fee and commission income, at $2,245m for FY2021, was a new high for the bank, which can be attributed to a broad-based fee growth on the back of higher transaction volumes and customer activities; wealth management fees also surpassed the S$1 billion mark for the first time.)
Along with a 57.3% drop in its total allowances (from S$2,043m in FY2020 to just $873m in FY2021 – comprising of allowances for impaired assets of $855m and allowances for non-impaired assets of $18m), its net profit saw a 3.5% climb to $4,858m (compared to $3,586m in FY2020.)
Financial Ratios (Q3 FY2021 vs. Q4 FY2021, and FY2020 vs. FY2021)
Next, let us take a look at some of the key financial ratios I always focus my attention on whenever I study about a bank’s results, where I will first look at the ratios recorded for the quarter ended 31 December 2021 (i.e. Q4 FY2021) compared against that recorded in the previous quarter ended 30 September 2021 (i.e. Q3 FY2021), followed by a comparison of the ratios recorded for the current financial year under review (i.e. FY2021) against the previous year (i.e. FY2020) to find out whether they have improved, or deteriorated:
Q3 FY2021 vs. Q4 FY2021:
| Q3 FY2021 | Q4 FY2021 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 1.52% | 1.52% | +0.0pp |
| Return on Assets (%) | 1.13% | 0.88% | -0.25pp |
| Return on Equity (%) | 9.5% | 7.5% | -2.0pp |
| Non-Performing Loans Ratio (%) | 1.5% | 1.5% | +0.0pp |
My Observations: While its good to note that both the bank’s net interest margin, as well as its non-performing loans ratio have remained stable, but on the other hand, its return on assets, as well as its return on equity, have declined compared to the previous quarter.
FY2020 vs. FY2021:
| FY2020 | FY2021 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 1.61% | 1.54% | -0.07pp |
| Return on Assets (%) | 0.85% | 1.13% | +0.28pp |
| Return on Equity (%) | 7.6% | 9.6% | +2.0pp |
| Non-Performing Loans Ratio (%) | 1.5% | 1.5% | +0.0pp |
My Observations: Apart from its net interest margin declining by 0.07pp compared to the previous financial year, its return on assets and return on equity have recorded a pretty decent improvement (in my opinion.) Also, its non-performing loans ratio have remained stable at 1.5%.
Dividend Payout to Shareholders
Similar to UOB, OCBC also declares a dividend payout to its shareholders on a half-yearly basis – once when it releases its results for the first half of the year (known as interim dividend), and once when it releases its results for the second half of the year (known as final dividend.) Only DBS declares a dividend payout to its shareholders on a quarterly basis.
For the second half of the financial year 2021 (period between 01 July and 31 December 2021), the management of OCBC have declared a dividend payout of 28.0 cents/share – this is a 76.1% jump from the 15.9 cents/share declared for the same time period last year (do take note that the bank’s dividend payout for FY2020 had been disrupted as they were advised by the Monetary Authority of Singapore (MAS) to pay out 60.0% of the amount declared in FY2019 for prudence due to headwinds posed by the Covid-19 pandemic.) Also, the payout this time round will only be in cash.
Together with its interim dividend payout of 25.0 cents/share, the bank’s total dividend payout for the current financial year under review is 53.0 cent/share. Compared against its dividend payout of 31.8 cents/share in FY2020, this is a 66.7% improvement (again, do bear in mind that the bank’s dividend payout for FY2020 was capped at 60.0% of what was paid out in FY2019, under the advise of the MAS.) However, if you were to compare the bank’s dividend payout for the current financial year against that declared in FY2019 (which was before the pandemic), it remains the same.
Finally, the scrip dividend scheme will not be applied to the final dividend – this means that all shareholders will be receiving their dividend payout in cash.
If you are a shareholder of the Singapore bank, do take note of the following dates regarding its dividend payout:
Ex-Date: 06 May 2022
Record Date: 09 May 2022
Payout Date: 20 May 2022
Closing Thoughts
No surprises there that the bank’s financial performance, along with its financial ratios, is a better one compared to last year – this is largely attributed to the gradual resumption of business and economic activities once again after vaccination targets are hit.
Looking ahead, with the Federal Reserve hiking interest rates in the coming months of the year (they have indicated a total of 3 hikes in 2022, and another 3 in 2023 – with the first one coming up in March 2022), the bank’s net interest margin should gradually improve in the coming quarters ahead, and this should see its net interest income starting to record growths once again. Barring any unforeseen circumstances (particularly the escalation of geopolitical tensions between Russia and Ukraine, and that between the United States and China), I am confident of the bank recording a better set of results for the coming financial year ahead.
With that, I have come to the end of my review of OCBC’s latest fourth quarter and full-year results. Do note that everything you’ve just read above is purely for educational purposes only. They do not imply any buy or sell calls for the bank’s shares. As always, you’re strongly advised 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 Oversea-Chinese Banking Corporation Limited.
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