OCBC CEO Signals Caution on Inflation, Slowing Global Growth

Oversea-Chinese Banking Corp. slightly raised its outlook for lending margins for the year while sounding caution on the economic outlook and the impact of higher interest rates.

(Bloomberg) — Oversea-Chinese Banking Corp. slightly raised its outlook for lending margins for the year while sounding caution on the economic outlook and the impact of higher interest rates.

Net interest margin for 2023 will be above 2.2%, Chief Executive Officer Helen Wong said in a presentation Friday after reporting a second-quarter profit that jumped 34% from a year ago. Net income rose to S$1.71 billion ($1.3 billion), just shy of the S$1.74 billion average estimate of five analysts surveyed by Bloomberg. 

The bank is “watchful” of impacts from persistent inflationary pressures and higher interest rates as global growth momentum is expected to slow heading into next year, Wong said.

So far, Singapore’s major lenders are benefiting from higher interest rates alongside global peers. DBS Group Holdings Ltd. and United Overseas Bank Ltd. both reported quarterly profit that came in above forecasts. The former joined Standard Chartered Plc to signal an improving outlook for the remainder of the year after the Federal Reserve’s latest rate hike last week.

At OCBC, insurance income rose 26%, helping to cushion the blow from lower fee and trading income. Loans allowances more than tripled to S$252 million from a year ago, as the bank said it took a “prudent approach” for non-impaired assets. 

The three major Singapore banks also benefited from money flows into Singapore, a global financial hub which is viewed as a safe haven.

Other Key Numbers:

  • Return-on-equity at 13.5%, from 10.3% a year ago
  • Net interest margin was 2.26% in the second quarter, higher than a year ago though below the preceeding three months
  • Fee and commission income shrank 10% to S$430 million; trading income dropped 2% to S$262 million
  • Wealth management assets under management rose to S$274 billion, driven by new inflows

(Updates with quarterly numbers throughout)

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