Singapore’s longest established bank in Oversea-Chinese Banking Corporation (SGX:O39), or OCBC for short, was the last of the trio of Singapore-listed banks to release its business updates for the first quarter of the current financial year ended 31 March 2023 (i.e. Q1 FY2023) early this morning (10 May 2023) – in case you’ve missed, you can check out my review of DBS’ Q1 FY2023 business update here, and UOB’s Q1 FY2023 business update here.
At the time of writing, OCBC have a business presence in 19 countries and regions, where it has over 420 branches and representative offices (including over 190 branches and offices in Indonesia under the subsidiary bank OCBC NISP, and over 60 branches and offices in Mainland China, Hong Kong, and Macau under OCBC Wing Hang.) The Singapore-listed bank’s key markets are in Singapore, Malaysia, Indonesia, and Greater China (covering Mainland China, Hong Kong, Macau, and Taiwan.)
Just like the other 2 Singapore-listed banks, OCBC have also shifted to half-yearly reporting of its full financial results – meaning for the current quarter under review, it only released a snippet of the key financial figures, which we will be looking at in today’s post, along with some of the bank’s key financial ratios:
Key Financial Figures (Q1 FY2022 vs. Q1 FY2023)
In the table below, you’ll find a comparison of OCBC’s key financial figures reported for the current quarter under review (i.e. Q1 FY2023) against that reported in the same time period last year (i.e. Q1 FY2022):
| Q1 FY2022 | Q1 FY2023 | % Variance | |
| – Net Interest Income (S$’mil) | $1,503m | $2,338m | +55.6% |
| – Net Fee & Commission Income (S$’mil) | $522m | $453m | -13.2% |
| – Other Non-Interest Income (S$’mil) | $502m | $559m | +9.5% |
| Total Income (S$’mil) | $2,643m | $3,350m | +26.7% |
| Net Profit (S$’mil) | $1,356m | $1,879m | +38.6% |
My Observations: OCBC also reported a sparkling set of results – where its total income and its net profit hit new highs.
The 26.7% jump in its total income was largely attributed to a huge 55.6% spike in its net interest income (which was contributed by a 75 basis point increase in net interest margin [from 1.55% in Q1 FY2022 to 2.30% in Q1 FY2023], on the back of a rapid rise in interest rates in 2022; also, its net interest income recorded for Q1 FY2023 was the 2nd highest on record for the bank.) Its other non-interest income also climbed by 9.5% to S$559m (due to a higher trading income, along with net realised gains from the sale of investment securities, offset by a decline in profit from insurance.) However, this was offset by a 13.2% decline in its net fee and commission income (as a result of a decline in wealth management fees.)
Despite higher total allowances (S$110m in Q1 FY2023 compared to just S$44m in Q1 FY2022, mainly due to higher allowances set aside for non-impaired assets), its net profit still saw a 26.7% growth to S$1,879m.
Key Financial Ratios (Q4 FY2022 vs. Q1 FY2023)
When it comes to reviewing a bank’s financial ratios, I always focus my attention on these 4 – net interest margin, return on assets, return on equity, as well as non-performing loans ratio.
In the table below, you’ll find statistics for these 4 financial ratios reported for the current quarter under review (i.e. Q1 FY2023 ended 31 March 2023) compared against that reported in the previous quarter 3 months ago (i.e. Q4 FY2022 ended 31 December 2022) to find out whether they have continued to remain resilient:
| Q4 FY2022 | Q1 FY2023 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 2.31% | 2.30% | -0.01pp |
| Return on Assets (%) | 1.11% | 1.63% | +0.52pp |
| Return on Equity (%) | 10.5% | 14.7% | +4.2pp |
| Non-Performing Loans Ratio (%) | 1.2% | 1.1% | -0.1pp |
My Observations: Just like its financial performances in the previous section, its key financial ratios reported for the current quarter under review compared to the previous quarter is equally impressive (in my opinion.)
2 things that stood out – a 0.52pp jump in its return on assets, along with its non-performing loans ratio continue to improve further to 1.1% (as non-performing assets continued to decline across the bank’s key markets.)
Finally, the bank’s guidance for net interest margin in FY2023 is around the region of 2.2%.
CEO Helen Wong’s Comments & Outlook (taken from the Bank’s Media Release)
“We are pleased to achieve a record quarter on the back of a strong operating performance. Total income reached a new high and expenses were well controlled, while we maintained prudent levels of allowances. Our loan portfolio was resilient and our wealth management business continued to attract net new money inflows. These reflected the strength of our diversified franchise and contributed to a strong uplift in our return on equity.
Looking ahead, we are watchful of tighter financial conditions which may slow global economic growth and elevate overall risks. We remain confident of the long-term prospects of our key markets in Asia. Our capital position is strong and our liquidity positions are healthy. These provide ample buffer for uncertainties and allows us to pursue growth opportunities as they arise.”
Closing Thoughts
OCBC’s latest Q1 business update as far as its financial performance and ratios are concerned are both impressive – where its total income and net profit are at record highs, contributed by a huge jump in net interest income (as a result of a 75 basis point hike in its net interest margin.)
Another positive to note the continued decline in its non-performing loans ratio (to 1.1% in Q1 FY2023), due to non-performing assets continuing to decline in the bank’s key markets.
With that, I have come to the end of OCBC’s business update for the first quarter. As always, I hope you’ve found the contents presented in this post useful, and do take note that all the opinions you’ve read above are purely my own for educational purposes only, and do not represent any buy or sell calls for the bank’s shares. You’re strongly advised to do your own due diligence before making 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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