OCBC Reports Record Earnings from Banking Operations

Despite market uncertainties and a challenging investment environment impacting the investment portfolio of its insurance business in the last quarter of the year, OCBC delivered strong results for 2018.

Oversea-Chinese Banking Corporation Limited (OCBC) reported a net profit after tax of S$4.49 billion (US$3.32 billion) for the financial year ended 31 December 2018, according to a media release sent on Friday. This result is up 11 percent from S$4.05 billion a year ago.

This was driven by record earnings from the Group’s banking operations which rose 22 percent year-on-year, led by income growth, disciplined cost control and lower allowances, Singapore's second largest bank said. The Group’s FY18 return on equity increased to 11.5 percent from 11 percent a year ago.

Higher Dividend

Supported by record earnings and a strong capital position, the Board has proposed a final tax-exempt dividend of 23 cents per share, representing an increase of 21 percent from the final dividend of 19 cents a year ago and a 15 percent rise from the interim dividend of 20 cents.

Together with the interim dividend of 20 cents per share, this will bring the FY18 total dividend to 43 cents, up 16 percent or 6 cents, from 37 cents per share in 2017.

Uncertain Outlook

«Despite the market uncertainties and challenging investment environment particularly impacting the investment portfolio in our insurance business in the last quarter of the year, we are pleased to have delivered strong results for 2018,» OCBC CEO Samuel Tsien said.

«Looking ahead, global economic growth is expected to slow on concerns of continued trade and geopolitical tensions, subdued market and investment sentiments and rising policy risks in the advanced economies. In spite of the uncertain outlook, we are confident that our focused strategy will allow us to continue to prudently expand our franchise in our key markets and support our customers,» Tsien added.

Improved Cost-to-Income Ratio

The Group’s total income climbed to a new high of S$9.7 billion from S$9.53 billion in the previous year. Operating expenses were S$4.21 billion in 2018 and 4 percent above a year ago, with the cost-to-income ratio (CIR) at 43.4 percent.

The Group’s overall wealth management-related income – comprising income from insurance, private banking, asset management, stockbroking and other wealth management products – was S$2.84 billion in FY18 and represented 29% of the Group’s total income.

Bank of Singapore

As at 31 December 2018, OCBC subsidiary Bank of Singapore’s assets under management (AUM) grew 3 percent to S$139 billion (US$102 billion) from S$132 billion (US$99 billion ) a year ago, driven by sustained net new money inflows, the bank said. Including secured loans, its earnings asset base grew 4 percent to S$171 billion (US$125 billion) from S$161 billion (US$121 billion ) in the previous year.

To continue to provide our shareholders with the option of reinvesting in OCBC Bank, the Scrip Dividend Scheme will be applicable to the final dividend. The estimated total dividend payout will amount to S$1.82 billion, an increase of 17 percent from FY17. This represents a dividend payout ratio of 40 percent of the Group’s core net profit in 2018.