OCBC Reports Better-Than-Expected First Quarter Profit and Offer to Take Great Eastern Private

OCBC Reports Better-Than-Expected First Quarter Profit and Offer to Take Great Eastern Private

Oversea-Chinese Banking Corp (OCBC), Singapore’s second-largest bank, announced a 5% rise in first-quarter profit, surpassing expectations. Additionally, the bank made a S$1.4 billion ($1.04 billion) offer to acquire its insurer arm, Great Eastern. As Great Eastern’s largest shareholder, OCBC offered a 37% premium over the insurer’s last traded shares price to purchase the 11.56% stake that it does not currently own, valuing Great Eastern at S$12.12 billion. If the deal goes through, OCBC plans to delist Great Eastern from the Singapore stock exchange.

OCBC, Southeast Asia’s No. 2 lender, forecasted its net interest margin to be at the higher end of a 2.20% to 2.25% range for the full year. The net interest margin, which is a key profitability metric for banks, slightly declined to 2.27% during the quarter from 2.30% a year earlier. The bank’s full-year forecast now considers a lower number of global rate cuts. OCBC also maintained its 2024 targets of low single-digit loan growth, credit costs between 20 to 25 basis points, and a 50% dividend payout ratio target.

During a briefing with analysts and reporters, OCBC’s Group CEO Helen Wong highlighted that while some recent economic indicators show promise, there are still near-term risks such as geopolitical volatility and key elections happening this year. Wong emphasized the importance of being cautious despite the favorable economic signs. She also addressed speculations about her potential candidacy for the HSBC CEO role, clarifying that she is not available for that position.

OCBC’s first-quarter net profit rose to S$1.98 billion ($1.46 billion) from S$1.88 billion a year earlier, outperforming analysts’ estimates. The stock market reacted positively to OCBC’s results, with shares rising by 1.5% on Friday morning, surpassing the local benchmark stock index’s 0.7% increase. This quarter’s strong performance by OCBC is in line with the impressive earnings reported by other Singaporean banks. Larger peer DBS Group reported a 15% jump in first-quarter net profit, exceeding expectations, while United Overseas Bank (UOB) posted a smaller-than-expected 2% drop in profit and expressed confidence in maintaining its net interest margin.

Singaporean banks have benefited from strong inflows from wealthy clients in Asia, Europe, and the Americas, attracted by the city-state’s political stability. OCBC’s wealth management assets under management saw a 1% increase to S$273 billion in the first quarter compared to the previous year. The overall positive performance of Singaporean banks reflects a higher-for-longer interest rates environment globally, contributing to their financial success.

OCBC’s robust first-quarter results, coupled with the strategic move to take Great Eastern private, demonstrate the bank’s commitment to growth and profitability. Despite the challenges in the global economic landscape, Singaporean banks continue to perform well and position themselves for future success.

Economy

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