UPDATE: OCBC reports 4Q21 net profit fell 14 percent missing forecasts

OCBC building in Signapore’s central business districtOCBC building in Signapore’s central business district. Photo taken pre-Covid.

This article was initially published on Wednesday, 23 February 2022 at 8:53 a.m. SGT; it has since been updated with more details.

OCBC reported Wednesday its fourth quarter net profit fell 14 percent on-year to S$973 million, missing a forecast from Daiwa, as operating expenses rose.

Net interest income for the quarter ended 31 December grew 4 percent on-year to S$1.49 billion on 6 percent asset growth, the Singapore bank reported. Net interest margin fell 4 basis points to 1.52 percent from lower asset yields, OCBC said.

Non-interest income edged up 1 percent on-year in the quarter to S$1.06 billion, OCBC said. 

Operating expenses rose 15 percent on-year in the quarter to S$1.29 billion, on higher staff costs due to a strategic expansion and business activity growth and the absence of government job support grants, OCBC reported.

Daiwa had forecast net profit of S$1.34 billion, with net interest income of S$1.48 billion, non-interest income of S$1.20 billion and net interest margin (NIM) of 1.49 percent. The average forecast from a Refinitiv poll of four analysts had forecast S$1.18 billion net profit.

OCBC said total allowances rose 11 percent to S$317 million in the quarter.

In the press conference following the results, Helen Wong, CEO of OCBC, noted the bank also has put in some provisioning around project financing due to construction delays faced by some of its clients.

“Over Covid, there has been difficulty in certain projects around the world. And that, there is shortage of manpower or the some of the logistic arrangement that has been causing delays. And we’re taking on conservative view on these delays,” she said.

“In the last quarter, we’re talking about three more chunky deals. This is not systemic,” she added. “But with the world moving on with living with Covid, living with endemic, and the economy continues to open up, I think these issues that were caused during the last few years should be gradually being recovered. And so we expect the sponsors to continue to provide support to the projects.”

Outlook

CEO Wong was positive on the results for the year. 

“Supported by our solid balance sheet, diversified funding base, and continued investment in people and technology, we are back to pre-pandemic profitability levels. We achieved good momentum across our customer franchise and reported record wealth management and fee-based income, broad-based loan and insurance sales growth,” she said in the statement.

“Looking ahead, we are cautiously optimistic that the operating environment will improve. We will work towards executing on our long-term goals and refining our strategic priorities to capture the opportunities arising from Asia’s growth and Covid-19-driven acceleration of economic, social and structural trends,” Wong added.

Full-year results

For the full year, OCBC reported net profit of S$4.86 billion, up 35 percent on-year, as strong growth in non-interest income and lower allowances offset a decline in net interest income due to the low interest rate environment. 

Net interest income for 2021 fell 2 percent on-year to S$5.86 billion, as NIM fell 7 basis points, OCBC said. 

Non-interest income for the full year grew 14 percent from 2020 to S$4.74 billion, on broad-based fee growth on higher transaction volumes and customer activity, and as wealth management fees rose over S$1 billion for the first time, OCBC said. 

Dividend

OCBC proposed a final dividend of 28 Singapore cents a share, bringing the total dividend for the year to 53 Singapore cents, matching pre-pandemic levels. In 2020, OCBC declared a 15.9 Singapore cent final dividend and a 15.9 Singapore cent interim dividend. 

Read more details of OCBC’s results.