Early this morning (04 November 2022), Overseas-Chinese Banking Corporation Limited (SGX:O39), or OCBC for short, is the last of the 3 Singapore-listed bank to release its business update for the third quarter of FY2022 ended 30 September 2022 (you can check out my review of UOB’s Q3 FY2022 business update here, and DBS’ Q3 FY2022 business update here.)

Just to recap – in the previous quarter (i.e. Q2 and 1H FY2022), the performance of its non-performing loans ratio (where it saw a 0.1 percentage point, or pp for short, decline to 1.3%, despite the economic headwinds) stood out. Also, the 12.0% increase in its interim dividend payout to 28.0 cents/share was also a pleasant surprise (do note that for the current quarter under review, there are no dividend payouts declared as the bank pays out dividends on a half-yearly basis.)

Will its results this time round spring up any more pleasant surprises? Let us find out in this post, where you’ll read about my review of the Singapore-listed bank’s latest Q3 and 9M business update (as the bank have also changed to reporting its full financial statements on a half-yearly basis, it only provided a snippet of its financial performances this time round) in terms of its key financial performances and ratios:

Key Financial Performances (Q3 FY2021 vs. Q3 FY2022, and 9M FY2021 vs. 9M FY2022)

In this section, let us take a look at the Singapore bank’s key financial figures reported on a quarter-on-quarter (i.e. Q3 FY2021 vs. Q3 FY2022), and also on a year-on-year (i.e. 9M FY2021 vs. 9M FY2022) basis:

Q3 FY2021 vs. Q3 FY2022:

Q3 FY2021Q3 FY2022% Variance
– Net Interest
Income (S$’mil)
$1,461m$2,099m+43.7%
– Net Fee & Commission
Income (S$’mil)
$569m$453m-20.4%
– Other Non-Interest
Income (S$’mil)
$530m$600m+13.2%
Total Income
(S$’mil)
$2,560m$3,152m+23.1%
Total Expenses
(S$’mil)
$1,188m$1,269m+6.8%
Net Profit
(S$’mil)
$1,224m$1,605m+31.1%

My Observations: With the exception of its net fee and commission income (which fell by 20.4%, primarily due to a decline in wealth management fees as customer activities were subdued due to risk-off investment sentiments globally, partly offset by growth in credit card, loans and trade-related income), I’m sure you’ll agree with me that OCBC’s latest quarter-on-quarter (q-o-q) results is an impressive one.

The standout among its results is the net interest income, which soared by 43.7% to a high of $2,099m on the back of a 6% growth in average asset balances, and a 54 basis points expansion in net interest margin (up from 1.52% in Q3 FY2021 to a high of 2.06% in Q3 FY2022.)

The 13.2% improvement in its other non-interest income was due to an increase in net trading income (up from $83m in Q3 FY2021 to $194m in Q3 FY2022), as well as in its life insurance, Great Eastern Holdings (which was up by 21% to $318m, mostly attributable to the net mark-to-market impact of higher interest rates on the valuation of assets and liabilities in its insurance funds.)

Total expenses increased by 6.8%, led by a rise in staff costs associated with headcount growth to support business expansion, as well as from annual salary increments.

Finally, the 31.1% jump in net profit to $1,605m was also a record for the Singapore-listed bank.

9M FY2021 vs. 9M FY2022:

9M FY20219M FY2022% Variance
– Net Interest
Income (S$’mil)
$4,363m$5,302m+21.5%
– Net Fee & Commission
Income (S$’mil)
$1,718m$1,453m-15.4%
– Other Non-Interest
Income (S$’mil)
$1,965m$1,919m-2.3%
Total Income
(S$’mil)
$8,046m$8,674m+7.8%
Total Expenses
(S$’mil)
$3,476m$3,727m+7.3%
Net Profit
(S$’mil)
$3,885m$4,442m+14.3%

My Observations: On a year-on-year (y-o-y) basis, the standout was the 21.5% growth in net interest income – which can be attributed to a 23 basis point growth in its net interest margin (from 1.55% in 9M FY2021 to 1.78% in 9M FY2022), along with asset growth.

However, this was offset by declines in its net fee and commission income, as well as in its other non-interest income – leading to its total income growth at a high single digit percentage of 7.8% (to $8,674m.)

Along with a decline in allowances (by 51% from $555m in 9M FY2021 to $270m in 9M FY2022), its net profit climbed by 14.3% to $4,442m – again this is a record for the bank.

Key Financial Ratios (Q2 FY2022 vs. Q3 FY2022)

In the table below, you’ll find a comparison of the key financial ratios (whenever I study a bank’s financial ratios, my focus is always on these 4 – Net Interest Margin, Return on Assets, Return on Equity, as well as Non-Performing Loans Ratio) reported for the current quarter under review (i.e. Q3 FY2022 ended 30 September 2022) against that reported in the previous quarter 3 months ago (i.e. Q2 FY2022 ended 30 June 2022):

Q2 FY2022Q3 FY2022Difference (in
Percentage Points – pp)
Net Interest
Margin (%)
1.71%2.06%+0.35pp
Return on
Assets (%)
1.31%1.37%+0.06pp
Return on
Equity (%)
11.5%12.4%+0.9pp
Non-Performing
Loans Ratio (%)
1.3%1.2%-0.1pp

My Observations: Equally impressive (in my personal opinion) is the improvements recorded in the key financial ratios for the current quarter under review (compared against the previous quarter 3 months ago.)

Once again, the standout here is its net interest margin – which spiked by 0.35pp to 2.06% – in fact, OCBC’s net interest margin is the highest among the 3 banks as at 30 September 2022 (with DBS’ net interest margin for the period at 1.90%, and UOB’s net interest margin for the period at 1.95%.)

Another ratio which stood out for me was its non-performing loans ratio, which further improved by another 0.1pp to 1.2%, due to higher recoveries and upgrades from both corporate and consumer segments in Malaysia and Indonesia.

CEO Ms Helen Wong’s Comments (from the Bank’s Results Press Release)

“We are pleased to have delivered a strong set of quarterly results. Net interest income grew on higher net interest margin and loan growth was sustained. While subdued customer investment activity impacted wealth fees, we continued to attract net new money inflows into our wealth management franchise. Our portfolio quality remained resilient; and our investments to drive franchise growth, raise productivity and deliver operational efficiencies continue to yield positive results.

Looking ahead, the global economic outlook is expected to be increasingly challenging. Backed by our strong balance sheet, we are well-positioned to support our customers and capture opportunities as they arise.”

Closing Thoughts

In my opinion, OCBC’s latest business update for the third quarter, as well as for the first 9 months of the financial year 2022 was a very impressive one – where it set new highs in its net profit (both on a q-o-q, as well as on a y-o-y) basis, contributed by huge jumps in the net interest margins for both periods.

Looking ahead, with the Federal Reserve (or Fed for short) having raised interest rates by 0.75% a couple of days ago (this is the fourth consecutive time the Fed have increased interest rates by 0.75%), coupled with interest rates likely to remain high at least over the next year or two, OCBC (as well as DBS and UOB) are poised to benefit from this.

On the other hand, the contraction of economy (with businesses and individuals taking on lesser loans), and possible defaults (leading to climbs in non-performing loans ratio) are possible downsides for the bank (in fact, its not just for OCBC, but for the other 2 Singapore banks in DBS and UOB as well.)

With that, I have come to the end of my review of OCBC’s latest business update. As always, do note that all the opinions above are purely mine for educational purposes only. They do not represent any buy or sell calls for the bank’s shares. Please 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.