SINGAPORE: Singapore’s Oversea-Chinese Banking Corp (OCBC) on Friday (Feb 24) rounded up a record annual results performance from the country’s banks benefiting from higher interest rates, but the outlook is more cautious due to a looming rate peak.
Singapore’s lenders, among the most well capitalised in the world, benefited from an early rebound in the pandemic-hit economy, but higher funding costs and weak wealth management fees have emerged as key risks.
Like DBS, Southeast Asia’s large bank by assets and smaller competitor United Overseas Bank (UOB), second-ranked OCBC warned that global interest rates were likely to peak in the second half of this year.
“Interest rate will continue to rise, but it will plateau off and potentially could come down in the second half of the year,” Ms Helen Wong, OCBC’s Group CEO told analysts and media on Friday after the bank’s net profit rose 34 per cent to S$1.31 billion in October to December from a year earlier.
However, this missed analyst’s estimates and the profit also fell 19 per cent from the third quarter, sending the bank’s shares down 0.3 per cent in a strong broader market.
OCBC’s non-interest income declined 42 per cent from a year earlier, as wealth management fees were hit by subdued customer investment activities and valuation losses reported by the bank’s insurance business.
However, OCBC’s annual profit rose 18 per cent to a record S$5.75 billion, following record numbers reported by DBS and UOB.
The outlook is more muted.
“The three banks will further improve their profitability in 2023; yet the pace of change will be less significant than last year because of growing funding and operating costs,” said senior credit officer Eugene Tarzimanov from Moody’s Investors Service.