OCBC Profits Surge from Reduced Allowance
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OCBC’s net profit for the second quarter surged due to an economic recovery that enabled substantially reduced allowances.
OCBC’s posted a net profit of S$1.16 billion ($860 million) in the second quarter, according to its latest results, marking a 59 percent surge from S$730 million in the same period last year.
The bank’s quarterly performance was in line with the S$1.14 billion consensus forecast from a Bloomberg survey of five analysts.
OCBC registered S$2.66 billion of net profit in the first half, up 86 percent year-on-year.
Like many other peers in the banking industry, OCBC has benefitted from an economic recovery that has enabled a reduction of reserves linked to bad assets.
It posted S$393 million in total allowances compared to S$1.41 billion last year.
The reduction was driven in no small part by lower allowances for impaired assets (from S$793 million to S$283 million) driven last year largely by exposures to «a number of corporate customers in the oil trading and offshore support vessels sectors».
In addition to reduced allowances, the bank also benefitted from strong wealth management income which grew 25 percent in the first half to S$2.14 billion which represents 39 perfect of OCBC Group’s total income.
OCBC’s private banking arm, Bank of Singapore, saw assets under management grow 11 percent to S$169 billion, driven by continued net new money inflows and positive market valuations.
OCBC also declared a dividend of 25 Singapore cents per share compared to 15.9 Singapore cents a year ago.
At a ratio of 42 percent, this marks the first dividend payout since the Monetary Authority of Singapore lifted its cap on locally incorporated banks and financial firms in the city-state, originally set at 50 percent of 2019’s dividends per share.
While the long-term trajectory of global economic recovery is positive, we remain watchful on the current operating environment in view of the recent virus resurgence and heightened safety measures in our key markets,» said OCBC group chief executive Helen Wong. We stay firmly committed to supporting our customers during this difficult period.
Questions & Answers
Q.What was the main factor contributing to OCBC's surge in net profit during the second quarter?
What was the main factor contributing to OCBC's surge in net profit during the second quarter?
The primary reason for the profit surge was an economic recovery. This allowed OCBC to substantially reduce the allowances it set aside for potential losses from bad assets, significantly boosting its reported earnings.
Q.Which specific sectors previously led to higher allowances for impaired assets for OCBC?
Which specific sectors previously led to higher allowances for impaired assets for OCBC?
Last year's higher allowances for impaired assets were largely driven by OCBC's exposure to certain corporate customers. These were primarily in the oil trading and offshore support vessels sectors.
Q.How did OCBC's wealth management income contribute to its financial performance?
How did OCBC's wealth management income contribute to its financial performance?
Wealth management income grew by 25 percent in the first half of the year, reaching S$2.14 billion. This represented 39 percent of the OCBC Group's total income, making a significant contribution to its financial results.
Q.What was the reason behind the increase in OCBC's declared dividend per share?
What was the reason behind the increase in OCBC's declared dividend per share?
The increased dividend payout was possible because the Monetary Authority of Singapore lifted its cap on dividends for locally incorporated banks. This cap had previously limited payouts to 50 percent of 2019's dividends per share.
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