OCBC Q2 profit up 59% to $1.16 billion; dividend boosted to 25 cents a share

SINGAPORE – OCBC Banks’s earnings continued to rebound from last year as it posted on Wednesday (Aug 4) a 59 per cent increase in second-quarter net profit to $1.16 billion on the back of lower allowances.

It also declared an interim dividend of 25 cents per share for the first half of the year, up from 15.9 cents a year ago.

This represents a payout ratio of 42 per cent against the group’s first-half net profit and comes after the Monetary Authority of Singapore last month lifted restrictions that capped dividend payouts from local banks and finance companies at 60 per cent of the previous year’s dividend amid the coronavirus pandemic.

OCBC’s earnings topped the $1.14 billion average estimate of six analysts polled by Bloomberg.

Its share price rose after the earnings announcement with the stock trading up six cents or 0.5 per cent at $12.30, as at 9.16am.

Group chief executive Helen Wong said net profit growth was driven by robust banking and insurance performance, while wealth management income grew strongly and private banking assets under management continued to expand.

“While net interest margin remained relatively stable amid a low rate environment, fee and investment-related income grew in tandem with renewed consumer and business confidence,” she said.

Ms Wong added that the bank remains watchful on the current operating environment in the light of the recent resurgence in Covid-19 cases and heightened safety measures in its key markets.

Net interest income fell 2 per cent to $1.46 billion. Net interest margin, a key gauge of banks’ profitability, declined 2 basis points to 1.58 per cent.

Non-interest income dipped 3 per cent to $1.11 billion in the second quarter, mainly due to lower trading, investment and insurance income and partly offset by a 28 per cent increase in fee income.

Fee income for the second quarter rose to $563 million from $440 million a year ago.

Allowances set aside for bad loans were lower than a year ago as operating conditions improved, with total allowances falling to $232 million from $750 million a year ago.

The group’s net profit for the first half of this year rose 86 per cent to $2.66 billion.