Formed in 1932 from the merger of 3 local banks, the oldest of which founded in 1912, Oversea-Chinese Banking Corporation Limited (SGX:O39), or OCBC for short, is now the second largest financial services group in Southeast Asia by assets, and one of the world’s most highly-rated banks, with Aa1 by Moody’s and AA- by both Fitch and S&P.

The bank’s key markets are Singapore, Malaysia, Indonesia, as well as in Greater China, with more than 420 branches and representative offices in 19 countries and regions (including over 190 branches and office in Indonesia under subsidiary Bank OCBC NISP, and over 60 banks and offices in Mainland China, Hong Kong and Macau under OCBC Wing Hang.)

Following the end of the financial year ended 31 December 2022 (you can read my summary of the bank’s fourth quarter and FY2022 results here), the bank have published its annual report this morning (31 March 2023), to which you can find my summary to (I’ve compiled it for the benefit of those who do not have the time to go through the entire report), along with details of its upcoming annual general meeting (AGM):

Summary of OCBC’s Annual Report

Record Financial Performance:

  • OCBC’s net profit rose 18% to $5.75 billion (FY2021: $4.86 billion), its best ever despite considerable global headwinds. Return on Equity of 11.1% was also 1.5 percentage points above 2021, which is at 9.6%.
  • Total income increased 10% to $11.7 billion (FY2021: $10.6 billion), largely driven by higher net interest income, which, at $7.7 billion, surpassed $7 billion for the first time, on the back of asset growth and net interest margin (which expanded 37-basis points to 1.91% – the highest level in over 10 years) improvement.
  • Operating expenses rose less than income growth, as the bank maintained cost discipline and paced its ongoing investments to drive franchise growth, raise productivity, and deliver operational efficiencies.
  • With the bank’s proactive monitoring and stress testing of its loan book, its portfolio quality remained resilient with non-performing loans ratio declining to 1.2% (FY2021: 1.5%) , and their non-performing assets coverage ratio at 114%.
  • The bank also maintained its strong funding, liquidity, and capital position, with CET1 ratio at 15.2%, providing it with continued flexibility to pursue growth opportunities and buffer for uncertainties.

Dividend Payout:

  • Together with a final dividend of 40.0 cents/share, its full year dividend amounts to 68.0 cents/share (which represents a payout ratio of 53%), a 28% increase from 53.0 cents/share (a payout ratio of 49%) in FY2021.
  • Barring unforeseen circumstances, the bank’s management aim to deliver a dividend payout ratio of 50.0%.

Making Giant Leaps in its Sustainability Journey:

  • A Board Sustainability Committee was established to give the bank a greater focus on its sustainability agenda.
  • In 2022, it achieved carbon neutrality for its banking operational emissions.
  • OCBC is also one of only 4 banks in ASEAN to pledge its commitment towards achieving net-zero in its lending and investments business by 2050, and they have begun developing a systematic plan to achieve this goal and aim to unveil its sectoral financed emission targets by the first half of 2023
  • Total sustainable financing commitments grew $44 billion in 2022, which is well on-track towards its stated target of $50 billion by 2025, where they funded green buildings and projects that generate clean energy such as wind and solar farms.
  • The bank’s SME sustainable financing commitments grew more than 50% to over $3 billion. Its SME Sustainable Finance Framework, first launched in Singapore in 2020, was expanded to Malaysia, Indonesia, and Hong Kong.
  • OCBC’s ‘Eco-Care’ car, home, renovation, and solar panel loans encourage retail customers to go green through incentives like promotional interest rates.
  • It has also listed the Lion-OCBC Securities Singapore Low Carbon ETF – Singapore’s first ETF that focuses on the top 50 Singapore companies with a lower carbon footprint.

Executing Well into its Strategic Priorities:

  • One of the key strategic priorities is to support growing ASEAN-Greater China trade and investment flows along the regional corridor, and this includes:
    • Boosting onshore-offshore connectivity between the bank’s Singapore-ASEAN-Greater China network – to be the bank of choice for both China and Hong Kong corporates venturing into ASEAN, and for its network customers expanding into Greater China;
    • Expanding Greater China Business Office coverage beyond Singapore, Malaysia, Thailand, to include Indonesia;
    • Strengthening the bank’s product and transaction banking capabilities in Hong Kong to deepen its position as a regional hub.
  • New partnerships in areas such as digital trade finance, mobility, environment, and food and agriculture were formed, which set the foundations for the bank to unlock long-term value from these emerging sectors.
  • To help build a deeper and broader value equation for its customers across its wealth management business, it have:
    • Raised its private banking presence in the region (such as setting up BOS Wealth Management Malaysia, and onshore private banking services in China through OCBC Wing Hang) to serve ultra-high and high net worth customers;
    • Expanded its suite of products and services on its core Group Wealth Platform (GWP), which was first launched in Bank of Singapore, and then later to OCBC’s PPC (Premier Private Client) and Premier Banking customers in Singapore and Malaysia in 2022, allowing them to deliver superior offerings and advisory services with unified investment views on one platform;
    • Customers can now open premier banking accounts in Singapore and Hong Kong together in one application, providing seamless regional onboarding experience;
    • OCBC Wing Hang launched the Northbound Wealth Management Connect Service to provide new investment channels and broad asset allocation options for its customers.
  • The bank also forged a ‘One Group’ integrated approach to work seamlessly and propel group-wide collaboration across its highly-interconnected business franchise – particularly, the bank has augmented its organisational structure in 2022 by strengthening and expanding the scope of its Group Customer Experience Office and establishing the Global Wholesale Bank Sustainability Office, on top of changes made last year where they implemented a tighter group-wide matrix reporting structure, appointed a Group Chief Operating Officer, and established a Group Data Office.

Fostering a High Performance Workforce:

  • OCBC is intensifying its efforts in talent growth and development, upskilling its workforce, as well as enhancing the overall employee experience.
  • In 2022, the bank made a number of key management appointments as part of its succession planning and ongoing commitment to groom the next generation of leaders for OCBC, they include:
    • Group Chief Financial Officer
    • Group Chief Risk Officer
    • Head of Global Wholesale Banking
    • Head of Global Consumer Financial Services
    • Head of Group Human Resources
    • CEO of OCBC Bank Malaysia

Outlook Ahead:

  • Global economy is expected to face continued challenges in the year ahead as the near-term outlook remains uncertain.
  • Despite of that, there is cautious optimism on the resiliency of the bank’s key markets in Asia, which are mostly expected to outpace the global average GDP growth in 2023.
  • The bank’s management enters the new year with confidence as they excel for sustainable growth and deliver enduring value to its stakeholders.

Upfront with CEO Ms Helen Wong:

Following the Unveiling of the Corporate Strategy to Excel for Sustainable Growth in 2022, Which Areas of the Strategy has Seen the Most Progress?

  • The bank have made some structural changes to its franchise in Hong Kong, where they have integrated the platform of Hong Kong branch and OCBC Wing Hang, allowing them to use its talent, capital, liquidity, and other resources more efficiency and effectively, as well as scoping business opportunities better and supporting a full spectrum of customers with the strength of one consolidated Hong Kong team.
  • Together with Singapore as the nexus of ASEAN, and Hong Kong as the gateway to greater China, the bank have successfully captured the increasing ASEAN-Greater China trade and investment flows (from the China Plus One strategy adopted by corporates including China State-Owned Enterprises and companies, where they want to establish an additional manufacturing base in ASEAN to complement their China operations and build resilience, especially in the wake of supply chain disruptions – and to better further facilitate the capture of this flows, the bank have also expanded its Greater China Business Office network last year to include Indonesia to its existing offices in Thailand, Malaysia, and Singapore.)
  • OCBC have continued to improve on its Group Wealth Platform – a collaboration between OCBC Bank and Bank of Singapore – for its high network and ultra-high net worth customers to provide superior advisory and unified investment views on one platform.
  • Efforts in digitalisation have also shown good results in Singapore, with 98% of SME accounts, and practically all of its consumer accounts opened digitally. In terms of consumer and business financial transactions done digitally, they are at 96% and 90% respectively.

Optimisms & Concerns for 2023:

  • Trade and investment flows between Greater China and ASEAN expected to pick up with China’s faster-than-expected reopening and policy stimulus, leading to wealth flows to increase as well – the groundwork that the bank have been working on puts it in a good position to seize these opportunities.
  • While the volatility in 2022 has carried on into 2023, creating headwinds for the Wealth Management, but the CEO is cautiously optimistic that it will ease in the second half of the year.
  • The series of rate hikes by the Fed in 2022 has seen increases in the bank’s net interest income and net interest margins. But she cautioned in 2023, the bank must be prepared for interest rates coming down.

OCBC’s Sustainability Agenda in 2023:

  • Having becoming the second Singapore bank to join the United Nations-convened, industry-led Net Zero Banking Alliance, the next step would be to unveil the bank’s sectorial financed emission targets by the first half of 2023 – that said, it is already supporting its customers in their transitions to net-zero with utmost urgency (where they will likely reach their $50 billion target of sustainable finance commitments [currently at $44 billion] ahead of their 2025 schedule.)
  • Last year, the OCBC Sustainability Innovation Challenge was launched with its inaugural partner being SATS, where they work together to conduct a worldwide search for solutions to waste management and reduction challenges. The bank will continue the challenge with other likeminded customers from key industries and also find other partnership opportunities.
  • OCBC have also institutionalised the steward leadership for sustainability regionally with an enhanced reporting structure at the end of 2021, and continued to build on it in 2022 (with new teams like Group Data Office and Global Wholesale Banking Sustainability Office formed as part of an organisation refresh.) With retirement with some of the bank’s senior leaders, there have been new members joining its senior leadership team (coming from both the bank’s internal talent base and external hires) – together, the bank have the right mix of experience and perspectives in the senior leadership team to be able to deliver on the its Corporate Strategy and drive sustainable growth.

Details of OCBC’s 86th Annual General Meeting

When? Tuesday, 25 April 2023
Time? 2.00pm
Venue? Sands Expo & Convention Centre, Level 4, Roselle and Simper Ballrooms – 10 Bayfront Avenue, Singapore 018956

For shareholders who are keen, they can also attend a presentation by the management which will be held from 1.00pm – 1.45pm on the very same day.

If your shareholdings are held in CDP, CPF, or SRS account, there is no need for you to pre-register – just turn up with your NRIC and your shareholdings will be verified on the spot; however, if your shareholdings are in a custodian account, you will need to submit a request to your brokerage to appoint you to attend the meeting as a proxy.

Finally, the meeting will be held in-person only. There are no options for shareholders to attend it virtually.

Related Documents

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

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