Yesterday afternoon (25 April 2023), Oversea-Chinese Banking Corporation Limited (SGX:O39), or OCBC for short, held its annual general meeting (AGM) for the financial year ended 31 December 2022, which I’ve attended as a shareholder in-person (as this was the only option available.) Apart from the attending the meeting, I also had the opportunity to meet up with some retail investors in-person, and engaging in networking and discussions with some after the meeting (and its something I really appreciate.)

OCBC's AGM for FY2022 Held on Tuesday, 25 April 2023

OCBC’s AGM for FY2022 Held on Tuesday, 25 April 2023

Compared to the other 2 Singapore-listed banks (you can read my summary of DBS’ AGM on 31 Mar here, and my summary of UOB’s AGM on 21 Apr here), OCBC’s AGM was held a little differently – in that there was a management session earlier (between 1.00pm and 1.45pm) where both the CEO Ms Helen Wong, and CFO Ms Goh Chin Yee, gave a presentation on the bank’s FY2022 results, its corporate strategy to excel for growth, sustainability agenda, digital transformation, and outlook ahead, followed by a short questions & answer session; thereafter, in the AGM from 2.00pm, the bank’s management went straight into the questions & answer session where they took more questions from AGM attendees, followed by the voting of resolutions.

For those of you who have missed the management meeting (and the presentation by the CEO and CFO), or are unable to attend the meeting totally, in this post, you can read about my summary of the presentation, responses to questions raised by fellow AGM attendees in both sessions, along with results of the resolutions put to vote during the meeting.

Let’s begin:

Presentation by CEO Ms Helen Wong, and CFO Ms Goh Chin Yee

Financial Performance Highlights:

  • Net profit, along with net profit from banking operations were both at record highs – with the former up 18% to S$5.75bn, and the latter up 30% to S$5.10bn.
  • Net interest income also surpassed the $7bn mark for the first time (at S$7.7bn), contributed by a 37-basis point increase in net interest margin, along with loan growth.
  • However, non-interest income was down due to a decline in wealth management fee (from reduced customer investment activities), investment losses from bond portfolio refinancing, along with a fall in income from subsidiary Great Eastern Holdings, due to unrealised losses as a result of weak market conditions.
  • Full-year dividend payout, at 68 cents/share (and a payout ratio of 53%), was a 15% increase compared to last year – supported by sustained earnings growth, along with the bank’s strong capital position. The bank aims to deliver a 50% payout ratio in the financial year ahead.

Strong Momentum in 3 Key Business Pillars – Banking, Wealth Management, and Insurance:

  • Banking: A record performance, with total income up by 15% due to a record net interest income
  • Wealth Management: This business pillar contributed one-third towards the bank’s total income, and income from banking operations went up by 8% to a new high, along with its total assets under management (AUM) up to S$258bn. Moving forward, income from this business pillar will continue to grow as market condition improves.
  • Insurance: From subsidiary Great Eastern Holdings, where its new business embedded value and margin continue to record improvements on favourable product mix.

Loans Portfolio:

  • Grew 4.5% in constant currency terms, driven by Singapore, Australia, United States, as well as the United Kingdom.
  • Moving forward, the bank will continue to exercise prudence, and concentrate on loan quality.

Non-Performing Assets:

  • Down 20% for the year, led by ASEAN.
  • However, its non-performing loans in Greater China went up due to the downgrade of 2 corporate relationship accounts.

Balance Sheet Position:

  • Continues to remain in a solid position to drive growth.
  • LCR (Liquidity Coverage Ratio) at 152%, along with CET-1 (Common Equity Tier 1) at 15.2% – both well-above regulatory requirements, which provides a significant buffer for the bank to navigate challenges.

Execution of Strategic Priorities:

  • OCBC emerged stronger from Covid-19 pandemic, where all of the bank’s FY2022 targets (in terms of net interest margin, loan growth, and control of credit costs) were met – which can be attributed to its well-diversified business franchise, along with its refreshed corporate strategies (focusing on its mid- to long-term growth.)
  • On the expansion of its wealth management franchise, the bank continues to expand in key markets, as well as improve and increase the number of wealth products offered to the consumer business segment, on top of High Net Worth Individuals.
  • Continuing to serve companies in the ‘China Plus One’ industries with the strengthening of transaction banking facilities in Singapore, as well as in Hong Kong.
  • As part of the bank’s succession planning strategy to groom the next generation of leaders, they have made a number of new appointments, including Group Chief Financial Office, Group Chief Risk Officer, Head of Global Wholesale Banking, Head of Global Consumer Financial Services, Head of Group Human Resources, along with CEO of OCBC Bank Malaysia. Also, its workforce is now more diversified with 2 out of 5 are females. Moving forward, OCBC will continue to retain and develop talents.

Sustainability Agenda:

  • OCBC is one of the few ASEAN banks to join the Net Zero Alliance.
  • To date, the bank have invested more than S$25m to reduce carbon footprints across key markets.
  • Last year, the bank’s sustainable financing grew by 30% to S$44bn, and are likely to reach their S$50bn ahead of their 2025 schedule.
  • OCBC have also built up its SME framework across its key markets to provide support for its SME customers on financing for the sustainability front.
  • On creating a positive impact to the society, OCBC have set a target to support 1 million vulnerable individuals between 2017 and 2023 through #OCBCCares programme. The bank have also sponsored 2 large-scale mangrove restoration projects in Singapore and Malaysia.

Digital Transformation:

  • Significant progress have been made on this front, where 96% of the financial transactions are now done digitally in Singapore. Also, CASA (Current Account Savings Account) opening in Singapore done digitally was also up by 37% compared to last year.
  • On managing digital risks, the bank have also formed a new risk management team to look at cyber risks, and they have also been rolling up its cyber smart learning programme for all of its staffs.

Outlook Ahead:

  • While confident on the resilient of the key markets (which the banks is focused on), but it is also mindful of the headwinds relating to high interest rates, and inflationary pressures lingering.
  • The bank will continue to remain vigilant on recessionary risks, market disruption, and geopolitical tensions.
  • Finally, its 2023 targets include net interest margin in the region of 2.1% (which will help to build on its net interest margin), credit costs of between 15bps and 20bps, a single-digit loan growth, along with a 50% dividend payout ratio.

Responses to Questions Raised by AGM Attendees

  • A shareholder noted that OCBC has a representative branch in Myanmar, and wanted to know of their impact to the bank, given the political situation in the country. CEO Ms Helen Wong explained that the bank’s presence in Myanmar was set up 8 years ago with a focus on supporting Singapore companies investing in the country, and that its exposure to the country is insignificant. She added the bank will continue to look after its business clients (where she saw signs of businesses adapting to the instability) there, but at the same time, remaining vigilant on the possible risks.
  • On a question about the bank’s long-term business plan, Ms Wong said while she was unable to share the forward looking statements in terms of its financial figures target, but she was optimistic about the opportunities available in Asia itself, and OCBC, with its deepening presence in the region, can capture this. Additionally, the bank has a target of becoming one of the leading financial institutions in Asia.
  • Another shareholder sought clarification on the bank’s share buyback, to which CFO Ms Goh Chin Yee explained it was mainly to meet obligation for the bank employees’ deferred share plan, as well as for its employee share purchase plan. Ms Wong added that the rationale of the bank for buying from the open market was so that it will not result in dilution to existing shareholders.
  • Responding to a question on whether the bank is continuing to deepen its presence through acquisitions in Indonesia, Ms Wong shared that OCBC is currently one of the top 5 foreign banks in the country. Also, as the economy in the country is growing, there is room for the bank to grow. On acquisitions, it will depend on the opportunities available, and the bank’s Board will carefully evaluate them before making any moves.
  • With OCBC’s CET-1 ratio the highest among the 3 Singapore-listed banks at 15.2% (compared to 14.6% for DBS, and 13.3% for UOB), a shareholder wanted to know how Basel IV (the latest set of capital requirements for banks globally) will impact this particular ratio. The bank’s Chairman, Mr Andrew Lee, said that the bank have no intentions of eroding this, given the uncertainties (contributed by geopolitical stresses with the United States and some parts of the world with China, along with the war in Ukraine, upsurge of inflation where interest rates spiked from 1% to 5% in 1 year – the fastest pace in the last 3 decades, stresses seen in the US banks, and Credit Suisse being taken over), coupled with no clear signs that these issues can be resolved in the near-term. He added that this capital will be the currency for the bank should a recession breaks out. At the same time, the high capital puts the bank in a good position to exploit potential opportunities as and when they become available.
  • On concerns relating to the Treasury Bonds held by the bank, along with their average maturity, Ms Wong gave her reassurance that its government and debt securities are of a very high quality, as well as within the bank’s risk appetite. On the average maturity of the bonds, its at 2 years.
  • Addressing some of the shareholders’ concerns about OCBC’s subsidiary, Great Eastern Holdings, Mr Lee explained that OCBC is currently the largest shareholder of Great Eastern Holdings, at 88%, and with the company in pole position in the insurance industry in Singapore and Malaysia due to its strong fundamentals, he sees it as a capability to the bank, for benefits will have a positive impact on OCBC’s financial performance, and also in its dividend payout. On top of that, being a shareholder themselves, OCBC’s objectives is aligned with all minority shareholders – which is the sustainability of its growth, and also in its dividend payout. The bank will continue to engage with its newly elected Chairman, Mr Soon Tit Koon (who succeeds Mr Koh Being Seng with effect from 22 April 2023) on the insurance company’s long-term strategy to achieve a greater and more sustainable growth, as well as how the bank can have more directorship (by another 1 or 2 more representatives) on the Great Eastern Holdings’ Board as a major shareholder.
  • A shareholder noted a number of changes to the bank’s key management positions, and wanted to know of the reasons for this. Mr Lee explained that changes were made in-line with the bank’s refreshed corporate strategy under its new CEO, Ms Helen Wong, where 2022 was her first full-year in this position. On top of that, a number of them have expressed their desire to step-down (and have an early retirement) after the Covid-19 pandemic was over.
  • Responding to a question on whether the bank’s IT are being subcontracted, Ms Wong said while some of them are supplied by third-party vendors with a very good reputation and experience in handling large-scaled IT systems, but most of them are done in-house, as it provides for more agility.
  • Finally, on whether the bank’s new dividend policy can be of a fixed numerical value (in terms of its payout) instead of a percentage of its earnings, Mr Lee asked for some flexibility, given the current economic situation.

Results of Resolutions Put to Vote during the AGM

  • Resolution 1, on the adoption of Directors’ statement and audited financial statements for the financial year ended 31 December 2022 and Auditor’s report, was passed with 99.98% of the votes for, and 0.02% of the votes against.
  • Resolution 2(a), on the re-election of Mr Chua Kim Chiu, was passed with 98.75% of the votes for, and 1.25% of the votes against.
  • Resolution 2(b), on the re-election of Dr Lee Tih Shih, was passed with 97.65% of the votes for, and 2.35% of the votes against.
  • Resolution 2(c), on the re-election of Ms Tan Yen Yen, was passed with 92.49% of the votes for, and 7.51% of the votes against.
  • Resolution 3, on the re-election of Ms Helen Wong Pik Kuen, was passed with 98.56% of the votes for, and 1.44% of the votes against.
  • Resolution 4, one the approval of final one-tier tax exempt dividend, was passed with 99.98% of the votes for, and 0.02% of the votes against.
  • Resolution 5(a), on the approval of amount proposed as Directors’ renumeration, was passed with 99.71% of the votes for, and 0.29% of the votes against.
  • Resolution 5(b), on the approval of allotment and issue of ordinary shares to the non-executive Director, was passed with 99.14% of the votes for, and 0.86% of the votes against.
  • Resolution 6, on the re-appointment of Auditor and authorisation for Directors to fix its renumeration, was passed with 98.25% of the votes for, and 1.75% of the votes against.
  • Resolution 7, on the authority to issue ordinary shares, and make or grant instruments convertible into ordinary shares, was passed with 91.91% of the votes for, and 8.09% of the votes against.
  • Resolution 8, on the authority to (i) allot and issue ordinary shares under the OCBC Share Option Scheme 2001; (ii) grant rights to acquire and allot and issue ordinary shares under the OCBC Employee Share Purchase Plan; and/or (iii) grant awards and allot and issue ordinary shares under the OCBC Deferred Share Plan 2021, was passed with 78.98% of the votes for, and 21.02% of the votes against.
  • Resolution 9, on the authority to allot and issue ordinary shares pursuant to the OCBC Scrip Dividend Scheme, was passed with 98.81% of the votes for, and 1.19% of the votes against.
  • Resolution 10, on the approval of renewal of the Share Purchase Mandate, was approved with 99.88% of the votes for, and 0.12% of the votes against.
  • Resolution 11, on the approval of extension of, and alterations to, the OCBC Employee Share Purchase Plan and authority to grant rights to acquire and allot and issue ordinary shares under the OCBC Employee Share Purchase Plan (as altered), was passed with 99.75% of the votes for, and 0.25% of the votes against.

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

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