OCBC Q3 2024 results driven by customer growth and net new money inflow: CEO Helen Wong

THE growth OCBC has seen in the third quarter ended September has been customer driven, said CEO Helen Wong, as growth plans and initiatives have paid off for the bank across geographies.

“I feel the growth is very much customer driven, which is good because this will be a longer-term growth for OCBC,” said Wong in an earnings briefing on Friday (Nov 8).

Higher than expected

OCBC’s net profit for the third quarter ended September rose 9 per cent to S$1.97 billion, from S$1.81 billion in the previous corresponding period, beating the S$1.9 billion Bloomberg consensus.

Total income rose 11 per cent year on year to S$3.8 billion from S$3.43 billion, with non-interest income climbing 41 per cent to S$1.37 billion, from S$973 million previously.  

Net fee income was up 10 per cent at S$508 million, underpinned by higher wealth management, investment banking and loan-related fees.

Net trading income more than doubled to a new quarterly high of S$508 million; insurance income from the lender’s insurance arm, Great Eastern, rose 6 per cent to S$233 million, buoyed by underlying business performance.

Net new money inflows have contributed to non-interest income growth. About S$5 billion net new money inflow came in during Q3 2024, accounting for the bulk of the about S$12 billion net new money inflow for the nine-month period ended September.

This has also resulted in assets under management hitting a record high of S$280.4 billion, with contribution from Bank of Singapore, premier private client and premier banking segments.

“We are seeing some of the results that we have invested in people, in products and also in capabilities to serve customers,” said Wong.

Meanwhile, net interest income for the quarter fell 1 per cent on the year to S$2.43 billion. This came as average assets grew 3 per cent, and net interest margin was down nine basis points (bps) at 2.18 per cent amid higher funding costs.

OCBC has been preparing for the peaking of interest rates and subsequent cuts, and has done a few things right, said Wong. One was in driving volume growth to counter the drop in net interest margin (NIM) and bring in more net interest income (NII). The bank has also been deploying liquidity into high quality assets to protect NII.

Second, OCBC has grown its fixed rate mortgages, which has been particularly successful in Singapore, and putting it into cash flow hedges. New account openings in the retail and small and medium enterprise (SME) space has also helped in building up the current accounts saving accounts (Casa) base.

Initiatives such as OCBC MyOwn Account, targeted at children aged 7 to 15, have seen interest from parents, with a few thousand accounts opened since its launch on Oct 20.

“If you look at how our Casa has been trending up, it is now closed to 49 per cent of total deposit; and we hope to be able to do it with the same momentum going into next year,” said Wong, adding that the bank has also phased out higher cost fixed deposits.

OCBC is looking to capture more new customers in the SME segment, and has to be prepared with digital services as SME owners are digitally savvy. Currently, SMEs make up more than 20 per cent of the deposits in OCBC’s commercial banking business, and consist of mainly working capital accounts.

“Once they bank with you, they trust you, they don’t move their money away, and this is the money they use day in and day out to do business,” said Wong.

The bank’s non-performing loans ratio stood at 0.9 per cent, down 0.1 percentage point from the previous year. OCBC notably downgraded a corporate in Hong Kong relating to real estate, and is largely secured with the average loan to value ratio below 50 per cent.

This is not emblematic of the whole industry or OCBC’s loan book, said Wong. The bank is keeping a close eye on the Hong Kong office sector, and has reduced exposure to the sector by over 50 per cent as at September 2024 compared to September 2023.

“This is due to actively engaging clients to deleverage early on,” said Wong.

Annualised earnings per share increased to S$1.73 for the quarter, up from S$1.58 a year earlier. Total allowances fell 8 per cent on the year to S$169 million.

Operating expenses were up 9 per cent year on year at S$1.46 billion, driven mainly by higher expenses brought on by increased business volumes, as well as information technology-related costs. Cost-to-income ratio stood at 38.5 per cent, as income growth outpaced higher expenses.

Credit costs for the quarter stood at 22 bps, five bps higher than in Q3 FY2023, and seven bps higher than in Q2 FY2024.

Return on equity

Annualised return on equity inched up 0.1 percentage point on year to 14.1 per cent for the quarter.

OCBC’s stake in Great Eastern now stands at 93.72 per cent at the end of October, gaining about 0.4 per cent from the 93.32 per cent stake as at end of July.

“We are firmly placed to deliver the 2024 targets which includes NIM around 2.2 per cent, low single digit loan growth, full credit costs in the range of 20 bps and (return on equity) of about 14 per cent,” said Wong.