Oversea Chinese Banking : First Half 2022 Media Release and Financial Highlights (171KB)

Media Release

OCBC Group First Half 2022 Net Profit

Rose 7% to New High of S$2.84 billion

Second quarter net profit up 28% from a year ago

Interim Dividend of 28 cents per share declared

Singapore, 3 August 2022 - Oversea-Chinese Banking Corporation Limited ("OCBC Bank") reported its financial results for the first half of 2022 ("1H22"). Group net profit for 1H22 rose 7% from a year ago ("1H21") to S$2.84 billion. Net profit for the second quarter ("2Q22") was S$1.48 billion, up 28% compared to a year ago ("2Q21") and 9% from the previous quarter ("1Q22").

First Half 2022 Performance

S$ million	1H22	1H21	YoY (%)
Net interest income	3,203	2,902	10
Non-interest income	2,319	2,584	(10)
of which: Fees and commissions	999	1,148	(13)
Trading income	492	528	(7)
Profit from life insurance	649	627	4
Total income	5,522	5,486	1
Operating expenses	(2,458)	(2,287)	7
Associates	499	422	18
Operating profit before allowances	3,563	3,621	(2)
Allowances	(116)	(393)	(70)
Amortisation, tax and NCI	(610)	(567)	7
Group net profit	2,837	2,661	7
Group ROE - annualised	11.0%	10.8%	+0.2ppt

1H22 Year-on-Year Performance

• Group net profit of S$2.84 billion increased 7% from a year ago, largely driven by higher net interest income and lower allowances.
• Net interest income of S$3.20 billion was 10% above the previous year, mainly attributable to a 6% increase in average asset balances and a 6 basis points rise in net interest margin ("NIM") to 1.63%.
• Non-interestincome of S$2.32 billion was 10% lower against last year, largely due to a drop in fee, investment and trading income.

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• Operating expenses of S$2.46 billion were 7% above last year, largely due to higher staff costs associated with salary increments and headcount growth to support business expansion, increased technology-related costs and business promotion expenses.
• Total allowances were lower at S$116 million as compared to S$393 million in the previous year, mainly due to a decline in allowances for impaired loans.
• The Group's share of results of associates was S$499 million, an increase of 18% from the previous year.
• The Group's annualised ROE was 11.0% for 1H22, higher than the 10.8% in 1H21, while annualised earnings per share increased to S$1.26 from S$1.19 a year ago.

Second Quarter 2022 Performance

	S$ million	2Q22	2Q21	YoY (%)	1Q22	QoQ (%)
	Net interest income	1,700	1,461	16	1,503	13
	Non-interest income	1,179	1,111	6	1,140	3
	of which: Fees and commissions	477	563	(15)	522	(9)
	Trading income	267	212	26	225	19
	Profit from life insurance	372	205	82	277	35
	Total income	2,879	2,572	12	2,643	9
	Operating expenses	(1,253)	(1,138)	10	(1,205)	4
	Associates	245	213	15	254	(4)
	Operating profit before allowances	1,871	1,647	14	1,692	11
	Allowances	(72)	(232)	(69)	(44)	64
	Amortisation, tax and NCI	(318)	(255)	24	(292)	9
	Group net profit	1,481	1,160	28	1,356	9
	Group ROE - annualised	11.5%	9.3%	+2.2ppt	10.6%	+0.9ppt

2Q22 Year-on-Year Performance

• Group net profit rose 28% to S$1.48 billion, underpinned by robust performance across the Group's banking, wealth management and insurance businesses.
• Net interest income grew 16% to a new high of S$1.70 billion. This was largely driven by asset growth and margin expansion. NIM rose 13 basis points to 1.71%, as asset yields outpaced higher funding costs amid a rapidly rising interest rate environment.
• Non-interestincome was S$1.18 billion, up 6% from a year ago mainly from higher trading income and life insurance profit.
• • Net fee income declined 15% to S$477 million, largely due to lower wealth management, brokerage and investment banking fees, in line with weaker investment sentiments globally. Loan and trade-related fees increased on the back of higher lending and trade volumes. Credit card

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fees were also higher during the quarter, in line with the broader reopening of economies and resumption of activities.

• • The Group's wealth management income, comprising income from insurance, private banking, premier private client, premier banking, asset management and stockbroking, grew 8% to S$1.03 billion and made up 36% of the Group's income in 2Q22. As at 30 June 2022, Group wealth management AUM was S$250 billion, down from S$254 billion a year ago as net new money inflows were more than offset by a drop in market valuations.
  • Net trading income of S$267 million was up 26%, from higher customer and non-customer flow treasury income. Net realised losses from the sale of investment securities and others were S$51 million, as compared to a net gain of S$35 million in the previous year, mainly due to sale of fixed income securities.
  • Profit from life insurance from subsidiary Great Eastern Holdings ("GEH") was S$372 million, higher as compared to S$205 million a year ago. This was attributable to an increase in operating profit and mark-to-market gains in its insurance funds from rising interest rates. Total weighted new sales grew 3% to S$551 million, while new business embedded value ("NBEV") increased 5% to S$202 million, with the NBEV margin at 36.7%.
• Operating expenses increased 10% to S$1.25 billion. Staff costs were up 10% against the previous year mainly from annual salary increments and a rise in headcount as the Group grew its talent pool to support growth. Investments in technology capabilities also increased while business promotion expenses rose with higher business volumes. The cost-to-income ratio improved to 43.5%, from 44.3% a year ago, on positive operating jaws.
• The Group's share of results of associates was S$245 million, 15% higher than the previous year.
• Allowances for the quarter were 69% lower than a year ago, from a decline in both impaired and non- impaired assets.

2Q22 Quarter-on-Quarter Performance

• Group net profit of S$1.48 billion increased 9% from S$1.36 billion a quarter ago.
• Net interest income increased 13% to S$1.70 billion, mainly from a 16 basis points expansion in NIM.
• Non-interestincome grew 3% to S$1.18 billion, as higher trading income and profit from life insurance offset a decline in fee and investment income.
• Operating expenses rose 4% while cost-to-income ratio decreased by 2.1 percentage points as the rise in income outpaced the increase in expenses.
• The Group's share of results of associates was 4% lower than the previous quarter.
• Allowances for 2Q22 were up from the previous quarter, as allowances for non-impaired assets of S$66 million were higher compared to S$13 million in the previous quarter.

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Asset Quality and Allowances

S$ million	Jun 2022	Jun 2021	Mar 2022	YoY	QoQ
Non-performing assets (NPAs)		4,082	4,307	-3%	-8%
3,969
Non-performing loan (NPL) ratio	1.3%	1.5%	1.4%	-0.2ppt	-0.1ppt
Allowances (S$ million)	1H22	1H21	2Q22	2Q21	1Q22
Allowances for loans and other assets		393		232
116	72	44
of which: Impaired	37	283	6	131	31
Non-impaired	79	110	66	101	13
Credit costs (bps) 1/	1H22	1H21	2Q22	2Q21	1Q22
Total loans		26		30
7	8	6
of which: Impaired loans	2	19	0	18	4

1/ Credit costs refer to allowances for loans as a percentage of average loans, on annualised basis.

• Total NPAs were S$3.97 billion as at 30 June 2022, down 3% from a year ago and 8% from the previous quarter.
• • NPAs declined against the previous quarter as higher recoveries and upgrades more than offset new NPA formation.
  • New NPA formation for the quarter was S$182 million, below the S$662 million a year ago and S$296 million in the previous quarter.
  • In 2Q22, net recoveries and upgrades were S$419 million, from the corporate and consumer segments. This was higher than the S$252 million in the previous year and the S$240 million last quarter.
  • NPL ratio of 1.3% was lower from a year ago and the previous quarter, and the allowance coverage against total NPAs was 99% as at 30 June 2022.
• Total allowances for loans and other assets in 2Q22 were S$72 million as compared to the S$232 million set aside a year ago and the S$44 million in 1Q22.
• • The allowances set aside in 2Q22 mainly comprised a net charge of S$66 million for non-impaired assets, which largely reflected updates of the macro-economic variables in the Expected Credit Loss model, and this was partially offset by credit upgrades.

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Strong Funding, Liquidity and Capital Position

S$ billion	Jun 2022	Jun 2021	Mar 2022	YoY	QoQ
Loans		275	294	+8%	+1%
298
Deposits	349	317	348	+10%	+0.2%
of which: CASA deposits	212	198	218	+7%	-3%
CASA ratio	60.9%	62.5%	62.7%	-1.6ppt	-1.8ppt
CET1 CAR	14.9%	16.1%	15.2%	-1.2ppt	-0.3ppt
Leverage ratio	7.1%	8.1%	7.2%	-1.0ppt	-0.1ppt

• As at 30 June 2022, customer loans grew 8% from a year ago. By geography, Singapore, Indonesia, Greater China, USA and UK drove loan growth. By industry, the increase was led by loans to the building and construction and general commerce sectors, as well as consumer lending including mortgages.
• The Group committed S$36.9 billion in sustainable financing to customers as at 30 June 2022, up 41% from a year ago and 5% from the previous quarter.
• Customer deposits rose year-on-year and from the previous quarter to S$349 billion. Current account and savings deposits ("CASA") ratio of 60.9% was lower quarter-on-quarter due to shift of CASA balances to higher-yielding fixed deposits in a rising interest rate environment. The Group's funding base continued to be stable with customer deposits comprising around 80% of total funding.
• Loans-to-depositsratio was 84.4%, as compared to the 85.6% in the preceding year and 83.3% last quarter.
• The Group's CET1 CAR was 14.9%, while the leverage ratio was 7.1% as at 30 June 2022.

Dividend

Cents Per Share	2022	2021
Interim dividend		25.0
28.0
Final dividend		28.0

• An interim dividend of 28 cents has been declared, 12% or 3 cents higher than the 25 cents interim dividend declared a year ago.
• The interim dividend payout will amount to approximately S$1.26 billion, representing a payout ratio of 44% against the Group's 1H22 net profit.

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