OCBC Achieves Historic Earnings in 2023 While Eyeing Future with Prudence: 8 Key Insights for Investors

February 29, 2024

OCBC bank shares

In the ever-evolving landscape of the financial sector, Oversea-Chinese Banking Corp (SGX: O39), or simply known as OCBC, has reported a record net profit in 2023.

Just like United Overseas Bank Ltd (SGX: U11) and DBS Group (SGX: D05), OCBC’s earnings did not disappoint as the banking giant benefits from the higher interest rate environment.

Here are 8 key highlights that investors should focus on.

  1. Record-High Net Profit: OCBC achieved a milestone net profit of S$7 billion in 2023, marking a 27% year-on-year (yoy) increase. This growth was propelled by a 25% rise in net interest income (NII) to S$9.6 billion, benefiting from higher interest rates that enhanced the banks’ net interest margin (NIM).
  2. Strong Growth in NIM: The bank’s NIM improved significantly, reaching 2.28% in 2023, up from 1.91% the previous year. This increase was consistent across all markets, with the fourth quarter of 2023 seeing an NIM of 2.29%.
  3. Increase in Non-interest Income: Non-interest income rose by 7% yoy to S$3.9 billion in 2023, driven by higher trading and investment income. The wealth management division also saw a notable increase in total income by 26% to S$4.3 billion.
  4. Effective Cost Management and Lower NPL Ratio: OCBC maintained a well-controlled cost-to-income ratio, improving to 38.7% in 2023 from 42.9% in 2022. The bank also reported a reduced non-performing loan (NPL) ratio of 1% in 2023, down from 1.2% in the previous year.
  5. Increased Dividends: Reflecting the strong financial performance, OCBC increased its total dividend by 21% yoy to S$0.82 for 2023, maintaining a payout ratio of 53%.
  6. Cautious Outlook for 2024: Despite the robust results, CEO Helen Wong expressed a cautious outlook for 2024, anticipating challenges from geopolitical tensions, inflationary pressures, and changes in monetary policy. The bank expects a NIM of between 2.2% to 2.25% for 2024, with single-digit percentage loan growth.
  7. Strategic Focus and Capital Management: OCBC plans to focus on acquiring corporate working capital accounts to manage funding costs and margin compression. The bank is committed to a c.50% dividend payout ratio for FY24F and highlighted its strategic acquisitions aimed at growth, while maintaining strong capital adequacy with a CET1 ratio of 15.9% as of 4Q23.
  8. Asset Quality and Provisions: The bank’s overall asset quality remained solid, with a 1% NPA ratio by the end of December 2023. Additional general provisions were made in 4Q23 as a preemptive measure against potential weaknesses in the property sector.

OCBC offers good value to investors

OCBC’s stellar performance in 2023 showcases its smart planning, strong operations, and commitment to rewarding its shareholders. Despite achieving record profits and a higher dividend payout, the bank remains cautious about the future due to global economic challenges. Looking ahead, OCBC is well-prepared to face any hurdles and continue growing, proving it’s a major force in Singapore’s banking scene and beyond. We invite our readers to keep an eye on OCBC as it moves forward, making it an interesting option for investors, customers, and anyone interested in the finance industry.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of the company mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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