Over the next 2 days (today and tomorrow), the 3 Singapore-listed banks will be releasing their financial results for the first half of the year ended 30 June 2021.
This morning, Oversea-Chinese Banking Corporation (or OCBC), as well as United Overseas Bank (or UOB) released their results – however, in this post, I will be focusing on the former (with my review on latter bank’s coming up in the later half of the day.)
What I’ll be looking at in this post is the bank’s financial results, its key financial ratios, along with dividend payouts declared (which is in the forefront of fellow shareholders’ minds following the Monetary Authority of Singapore, or MAS’ announcement to lift the cap on dividend payouts – you can read the full article by The Business Times about it here, for those of you who have missed out on the news.)
Let’s get started…
Financial Results (1H FY2020 vs. 1H FY2021)
In this section, let us take a look at some of the key financial results reported by the bank for the first half of the current financial year (compared against the same time period last year):
| 1H FY2020 | 1H FY2021 | % Variance | |
| – Net Interest Income (S$’mil) | $3,109m | $2,902m | -6.7% |
| – Net Fee & Commission Income (S$’mil) | $986m | $1,148m | +16.4% |
| – Other Non-Interest Income (S$’mil) | $1,020m | $1,436m | +40.8% |
| Total Income (S$’mil) | $5,115m | $5,436m | +7.3% |
| Total Expenses (S$’mil) | $2,216m | $2,287m | +3.2% |
| Net Profit Attributable to Shareholders (S$’mil) | $1,428m | $2,661m | +86.3% |
Apart from a slight dip in its net interest income (primarily due to an 11 basis points contraction in its net interest margin to 1.57%, as asset yields declined faster than the drop in funding costs in the low interest rate environment), it was largely an improved set of results reported by the Singapore bank.
Particularly, the huge 40.8% year-on-year (y-o-y) jump in its other non-interest income can be attributed to growth in its wealth management income (comprising of consolidated income from insurance, premier and private banking, asset management and stockbroking, which rose 25% to S$2.14b, compared to S$1.7b a year ago), in its net trading income (which jumped 54% to S$528m, mainly due to an increase in customer flow treasury income, led by robust customer activity levels, as well as mark-to-market gains in Great Eastern Holdings), along with an increase in profits from life insurance (where it skyrocketed by 85% to S$627m, driven by higher mark-to-market gains as a result of more favourable market conditions.)
On the whole, the improvements in its total income, along with a much lower total allowances (down from S$1.41b last year to just $393m this year), led to its net profit attributable to shareholders recording a huge jump by 86.3% to S$2,661m.
Key Financial Ratios (Q1 FY2021 vs. Q2 FY2021)
Next, let us take a look at some of the key financial ratios reported by the bank for the current period under review, compared to the ratios reported by the bank 3 months ago (i.e. Q1 FY2021) to find out whether they have improved or deteriorated:
| Q1 FY2021 | Q2 FY2021 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 1.56% | 1.58% | +0.02pp |
| Return on Assets (%) | 1.44% | 1.11% | -0.33pp |
| Return on Equity (%) | 12.4% | 9.3% | -3.1pp |
| Non-Performing Loans Ratio (%) | 1.5% | 1.5% | – |
My Observations: Looking at the bank’s key financial ratios, it’s a mixed bag – while the net interest margin recorded a slight improvement, but its return on assets, as well as its return on equity, both declined, while non-performing ratio remain unchanged at 1.5% (which is the ratio recorded before the pandemic.)
Dividend Payouts (1H FY2020 vs. 1H FY2021)
The following table is the bank’s dividend payouts declared for the current period under review, against that declared in the same time period last year:
| 1H FY2020 | 1H FY2021 | % Variance | |
| Dividend Per Share (S$’cents/share) | 16.0 cents | 25.0 cents | +57.2% |
Following the lifting of cap on dividend payouts by the MAS, OCBC have restored its interim dividend payout to the same amount paid out in FY2019, which is also 25.0 cents.
If you are a shareholder of the bank, the following are some of the important dates regarding its dividend payout you need to take note of:
Ex-Date: 13 August 2021
Record Date: 16 August 2021
Payout Date: 26 August 2021
Closing Thoughts
On the whole, I felt the bank’s most recent set of results was a little of a mixed bag – its financial results recorded a strong improvement compared to last year (where the period consists of a 2-month ‘circuit breaker’ implemented by the Singapore government when the number of daily community cases was in 4-figures, and this badly affected businesses, as well as the economy), and this was largely within my expectations, as in the period under review, most of the businesses were able to resume their normal operations, and with economy on the whole recording improvements. However, on the other hand, its key financial ratios, particularly its return on assets as well as return on equity have declined compared to 3 months ago.
The announcement on the lifting of cap on dividend payout by the MAS came as a surprise to me (I was of the opinion previously that the MAS would lift the cap in 2 phases – a partial lifting of the cap this financial year, before completely removing it the following year.) Along with the lifting of the cap, the bank have also restored its interim payout to that paid out in FY2019 – and this in my opinion will definitely delight shareholders.
Looking ahead in the second half of 2021, I am of the opinion that the worst is over, and in the quarters ahead (barring any more resurgence in the number of Covid cases, and the need for re-tightening of safe distancing measures), we should see the economy gradually recovering – and will lead to some of the bank’s financial ratios (like its return on assets as well as its return on equity) improving as a result.
With that, I have come to the end of my review on OCBC’s latest results release. As always, I do hope that you’ve found the contents above useful, and as always, everything you have just read above is purely for educational purposes and they do not represent any buy or sell calls for the bank’s shares. You should always do your own due diligence before you make any investment decisions.
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Disclaimer: At the time of writing, I am a shareholder of Oversea-Chinese Banking Corporation Limited.
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