OCBC has raised its full-year loan growth forecast to high-single digits to low-double digits, up from its previous guidance of mid-single-digit growth, following a stronger-than-expected first half. This upward revision is supported by continued momentum in wealth management and corporate lending, which have helped offset the impact of lower interest rates. The bank also anticipates its total income to grow year on year, despite a slight dip in net interest income.
This upgraded outlook comes as OCBC reported a record second-quarter net profit of S$2.22 billion, a 22 per cent increase from the previous year and surpassing the S$1.91 billion consensus forecast. Profit before tax climbed 20 per cent to S$2.76 billion, with total income reaching a record S$4.17 billion, up 18 per cent.
The bank's strong performance was primarily driven by a 51 per cent surge in non-interest income to a record S$1.91 billion. Fee income saw a 28 per cent rise, boosted by robust wealth management fees. Trading income experienced an 85 per cent jump, attributed to increased customer activity and a rebound in equity markets benefiting Great Eastern. Insurance income also grew by 68 per cent.
However, net interest income decreased by 1 per cent to S$2.26 billion, as lower interest rates compressed margins.
The board has declared an interim dividend of S$0.47 per share, an increase from S$0.41 in the prior year.
Group CEO Tan Teck Long highlighted that the bank's loan pipeline remains strong, supported by sectors such as supply chain diversification, energy transition, and sustainable finance. However, he cautioned that the exceptional growth rate seen in the second quarter, partly fueled by M&A financing, is not expected to continue at the same pace in the latter half of the year.
Separately, Bank of Singapore, OCBC's private banking arm, has reported no significant client asset outflows following the implementation of new Chinese regulations affecting offshore trust structures. CEO Jason Moo stated that while it is still early, the bank is engaging with affected clients and has not observed substantial asset movements. He also noted that the trust business is a small contributor to revenue.
Tan also commented on the bank's approach to artificial intelligence, emphasizing a strategy of selective deployment where it creates value, rather than pursuing AI as a standalone strategy. OCBC's approach, termed "ADD," integrates AI, digitalization, and data analytics to enhance processes and productivity. Tan expressed a preference for simpler, more cost-effective AI tools over complex generative AI solutions.
Regarding acquisitions, Tan indicated that OCBC is open to opportunities, particularly those that strengthen its retail and wealth franchises, citing the recent acquisition of HSBC Indonesia's wealth business as an example. The bank is less inclined to acquire corporate loan books, as it has the capacity for organic growth in that area.
Asset quality remained stable, with the non-performing loan ratio unchanged at 0.9 per cent. Total allowances increased to S$156 million, primarily due to management overlays set aside for macroeconomic uncertainties in Indonesia. Tan reassured that the bank's credit quality in Indonesia remains sound, with the increased provisions reflecting standard management practices rather than portfolio deterioration.
OCBC shares saw a 3.1 per cent increase to S$30.23 on Friday, with the stock up 52.3 per cent year to date.
