Impact of tariffs, trade restrictions not fully played out, but no systemic risk yet: OCBC

[SINGAPORE] OCBC is still monitoring the impact of tariffs and trade restrictions, as it likely has not fully filtered through the economy.

But the bank has been able to navigate the uncertainty “quite well”, and still sees growth in certain sectors, said deputy chief executive Tan Teck Long.

Group CEO Helen Wong added that the lender is comfortable with the quality of its portfolio, given that it has not seen any systemic risks.

“We are closely watching risks arising from trade tariffs, but we’ve talked about it for the last three quarters already,” she added. “There is, of course, potential impact, but we have been tracking (it) well; our customers have been managing quite well (also).”

Tan and Wong were speaking at OCBC’s third-quarter results briefing on Friday (Nov 7).

The lender’s non-performing asset coverage ratio of 160 per cent is “quite satisfactory”, and its allowances for non-impaired loans are at 0.9 per cent, Wong said.

The bank is still “particularly cautious” about the Hong Kong commercial real estate segment, she noted.

Nevertheless, Tan highlighted bright spots in the digital infrastructure sector, and industries that have domestic demand, such as construction.

The bank is also monitoring the impact of interest rates, he said.

While the overall market is still cautious about investing, lower rates benefited the bank as it led more wealth customers and corporates to come on board or evaluate risks in their investments.

Total allowances for the nine-month period ended September were down 4 per cent at S$466 million, due to lower allowances for impaired assets despite higher allowances for non-impaired assets.

The lender set aside pre-emptive allowances for trade tariffs and macro uncertainties, mainly to reflect the weaker economic outlook.

Q3 results

OCBC’s net profit for Q3 was flat at S$1.98 billion, beating the S$1.79 billion consensus forecast in a Bloomberg survey of five analysts.

This was supported by higher non-interest income and lower allowances.

Net interest income for the quarter was down 9 per cent on the year at S$2.23 billion due to a decline in net interest margin (NIM), although this was partly offset by average asset growth.

NIM stood at 1.84 per cent, down eight basis points quarter on quarter, largely due to faster downward repricing of loans – the decline of benchmark rates for the Singapore dollar and other currencies outpaced the decline in deposits costs.

Loans were up 7 per cent at S$327 billion, driven by both consumer and corporate loans.

Deposits rose 11 per cent on the year to S$411 billion, mainly due to an increase in current and savings accounts (Casa).

Meanwhile, non-interest income was up 15 per cent on the year at S$1.57 billion, from broad-based growth in fee, trading and insurance income.

Record wealth-management performance led the 34 per cent rise in fee income to S$683 million.

The lender saw net new money inflow of S$12 billion in Q3, which is higher than the average of S$4 billion to S$5 billion in the past quarters, although Wong flagged that the figure may not be a “new normal” as it depends on market conditions.

The bank’s non-performing loans ratio was 0.9 per cent, unchanged from the same period a year earlier.

Reaches S$3 billion target

Wong also noted that OCBC achieved its goal to add S$3 billion in revenue through its Greater China-Asean strategy as at the end of September, ahead of its target of end-2025.

“Hopefully, we’ll end the three-year plan quite ahead of schedule and also above (what is planned),” she said, in her final media briefing as group CEO of OCBC.

“That means the initiatives we put together and of how we work as one group have borne fruit, and this will shape up well as a firm foundation to capture growth opportunities going ahead.”

Tan will take over the reins of Singapore’s second-largest bank from Wong on Jan 1, 2026.

Shares of OCBC were up 2.7 per cent at S$17.65 as at 3.11 pm on Friday.