OCBC's H1 net profit plunges 42% to S$1.43b

Q2 group net profit picked up 5% from Q1 but crashed 40% from a year earlier.

OCBC has reported a 42% crash in H1 net profit to S$1.43b from S$2.45b a year ago as the bank has also set aside higher allowances to cushion expected credit losses, according to an announcement.

On a quarterly basis, Q2 group net profit picked up 5% to S$730m from Q1’s S$698b but plunged 40% from Q2 2019’s S$1.22b.

OCBC recorded strong numbers in the first months of the year, but were offset by earnings from March due to business disruptions caused by the pandemic. There was some pick-up in activity by end-Q2, but feeble business and consumer sentiments still weighed on capital investments.

Net profit from banking operations fell 43% to S$1.16b from H1 2019’s S$2.03b. The same scenario happened with the net profit from insurance, crashing down to $268m in H1 from S$426m a year ago.

Total income went unchanged YoY at S$4.56b whilst net interest income of S$3.05b was slightly below the S$3.07b a year ago, as a 5% YoY increase in assets was offset by a sharp decline in net interest margin particularly in Q2.

Group NIM fell 10 basis points to 1.68% in H1 due to the shrinking of asset yields in a low interest rate environment which more than offset the drop in funding costs, in addition to a lower loans-to-deposits ratio.

Non-interest income rose 2% to S$1.51b from S$1.49b a year earlier. Net trading income was 13% higher YoY, led by rising customer-driven treasury activities, whilst net gains from the sale of investment securities rose by S$65m. Net fee income dropped 4% YoY as transactional and credit card fees were impacted by reduced customer activity. These more than offset a rise in fees from wealth management earned especially in early Q1 and brokerage from higher online trading activities.

Assets under management at OCBC’s private banking subsidiary Bank of Singapore grew 8% QoQ and 1% YoY to S$157b at 30 June.

For H1, OCBC declared an interim dividend of 15.9 cents apiece, representing half of the maximum 31.8 dividends per share that could be paid out in FY2020. The scrip dividend scheme will be applicable to the interim dividend, giving shareholders the option to receive the dividend in the form of shares, with the issue price of the shares set at a 10% discount.