OCBC net profit more than doubled in Q1, wealth on the rise

Wealth management income jumped 40% in Q1 from the previous quarter.

Oversea-Chinese Banking Corporation (OCBC) is off to a strong start in 2021 with a net profit of more than $1.13b (S$1.5b) in Q1, more than double the $520m (S$698m) it recorded in Q1 2020. Net profit is also 33% higher from the $850m (S$1.13b) in Q4 2020.

The bank beat analysts’ performance expectations thanks to market-to-market and trading gains, reports Maybank Kim Eng’s Thilan Wickramasinghe. Whilst these may not be sustainable in the long run, more stable sources such as wealth and transaction fees are on the rise.

In its SGX filing, OCBC revealed that its wealth management income—comprising income from insurance, premier and private banking, asset management and stockbroking—rose 40% to about $910m (S$1.21b) during the quarter compared to Q4 2020. As a proportion of the group’s total income, wealth management income contributed 41% in the current quarter.

Overall, fees and commissions grew 13% to a record high of about $440m (S$585m), driven by a 28% increase in wealth management fees, which were underpinned by increased customer and investment activities as market sentiments improved.

An expected improvement in loan growth and stable net interest margins (NIM) will further support operation growth, according to Wickramasinghe.

“We think that as economic activity strengthens, wealth, along with brokerage, loan fees and investment banking (IB) should see sustained growth,” he noted. “NIMs seem to have stabilized and rising loan growth should keep them supported, in our view.”

The bank’s gearing towards North Asia and Singapore should be a further advantage as recovery takes hold, especially with OCBC saying that demand for loans from large Singapore corporates and North Asia is strengthening.

US$1 = S$1.33