OCBC misses estimates with Q4 earnings of S$1.69 billion; unveils S$2.5 billion capital return plan
The lender has proposed a slightly lower final dividend of S$0.41 per share for H2, as well as a special dividend of S$0.16 per share
OCBC on Wednesday (Feb 26) posted a net profit of S$1.69 billion for the fourth quarter ended December, up 4 per cent from S$1.62 billion in the previous corresponding period.
The earnings fell short of the S$1.78 billion consensus forecast in a Bloomberg survey of five analysts.
OCBC also announced plans to return S$2.5 billion of capital to shareholders over two years via special dividends and share buybacks. This comes on the back of the bank’s “sustained earnings growth and strong capital position”.
The capital return comprises special dividends amounting to 10 per cent of the group’s net profit for FY2024 and FY2025, with the balance via share buybacks over two years.
The lender has proposed a slightly lower final dividend of S$0.41 per share, from S$0.42 the year before.
A special dividend of S$0.16 per share has also been recommended.
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The final and special dividends will be paid on May 9, following the record date of Apr 28.
Including the special dividend, this brings the full-year dividend to S$1.01 per share, an increase from S$0.82 per share the prior year, representing a payout ratio of about 60 per cent of the group’s net profit after tax.
Net interest margin for Q4 stood at 2.15 per cent, down from 2.29 per cent in the same period a year ago. This was a result of loan yields tightening at a faster pace than the fall in deposit costs, which were associated with the Federal Reserve’s rate cuts in the second half of 2024.
Net interest income for the quarter was stable at S$2.46 billion, as a 6 per cent increase in average assets mitigated the contraction in net interest margin.
Meanwhile, non-interest income rose 18 per cent year on year to S$961 million from S$811 million, boosted by improved fee, trading and insurance income.
The bank’s non-performing loan ratio as at end-December was 0.9 per cent, down 0.1 percentage point from the prior year.
For the full year, net profit rose 8 per cent to a record S$7.59 billion, from S$7.02 billion in FY2023.
This translated to earnings per share of S$1.67 for the full year, up 8 per cent from S$1.55 in the prior year.
Net interest margin for the full year stood at 2.2 per cent, down from 2.28 per cent in the prior year. This was due to a rise in funding costs which outpaced the increase in asset yields.
Net interest income rose 1 per cent to S$9.76 billion from S$9.65 billion, marking a new high. This was underpinned by a 5 per cent increase in average assets from customer loans, as well as high-quality assets which were income accretive but lower yielding.
Non-interest income grew 22 per cent to S$4.7 billion from S$3.9 billion.
OCBC group chief executive Helen Wong said: “We remain cautiously optimistic on the regional growth outlook and are poised to seize growth opportunities as they arise.”
She added that the bank will “remain agile” in navigating the increasingly complex geopolitical landscape and the volatile macroeconomic environment.
Shares of OCBC closed S$0.09 or 0.5 per cent lower at S$17.60 on Tuesday, before the announcement.
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