OCBC not sure worst of oil and gas NPL woes over

Some shareholders thought OCBC should control its expenses by cutting senior executives' pay.
Some shareholders thought OCBC should control its expenses by cutting senior executives' pay. ST PHOTO: JAMIE KOH

OCBC tackled concerns over bad loans, high expenses and dividends at its annual general meeting (AGM) yesterday.

More than 1,200 shareholders attended the AGM at the Sands Expo and Convention Centre, where several asked if the bank was past the worst of its non-performing loan (NPL) troubles.

All three local banks have had their earnings eroded by costly NPL exposure in the oil and gas sector. OCBC forked out specific allowances of $484 million last year, when its NPL ratio jumped to 1.3 per cent, up from 0.9 per cent in 2015. About half of last year's NPL ratio was linked to the oil and gas sector.

OCBC chief executive Samuel Tsien assured shareholders the bank has enough coverage. But the outlook for the oil and gas sector may not brighten anytime soon, he said. "The situation has stabilised, better than last year. But at this point, because we do not see a consistent rise in oil prices yet, we are not able to say that we're certain we've seen the worst of the oil and gas industry distress yet."

Mr Tsien said Singapore's economic outlook is similarly mixed, despite strong growth in exports in recent months. "The (economic) growth is very sectorial. The majority of the market is still quite slow right now… We will not be able to say that we will see a fairly strong growth for Singapore this year."

Some shareholders thought OCBC should control its expenses by cutting senior executives' pay. Operating expenses have been rising for at least five years, and amounted to $3.79 billion last year.

One shareholder asked: "DBS is cutting its senior officers' salary by 13 per cent. In view of the high NPLs, are you going to do something to reduce your expenditure?"

OCBC chairman Ooi Sang Kuang replied that the bank's senior management had been made more accountable for its business performance, and now get reduced variable compensation and slower fixed salary increments.

Mr Ooi was also reminded by another shareholder that he had agreed, at the previous AGM, to consider paying out a special dividend. "May I know why we are not getting that at this point?" the shareholder asked, referring to OCBC's 85th anniversary this year while noting that UOB paid 20 cents a share to mark its 80th anniversary.

Mr Ooi said no promises were made, and the decision not to give a special dividend was made in view of the bank's capital level.

At the end of the nearly two-hour session, all nine resolutions on the agenda were passed.

OCBC will report its first quarter results on May 9. Its shares closed up 0.62 per cent at $9.80 yesterday.

Wong Wei Han

A version of this article appeared in the print edition of The Straits Times on April 29, 2017, with the headline 'OCBC not sure worst of oil and gas NPL woes over'. Print Edition | Subscribe