OCBC’s wealth business drives Q1 profit up 5% to $1.97 billion, more than expected

SINGAPORE – Strong growth in wealth management boosted OCBC Bank’s non-interest income to a new high in the first quarter, lifting the bank’s net profit by 5 per cent.

Earnings for the quarter ended March 31 were $1.97 billion, up from $1.88 billion a year ago and beating analysts’ forecast of $1.88 billion in a Bloomberg poll.

OCBC’s shares jumped on the news, climbing 1.7 per cent to $22.26 as at 9.15am. Shares of DBS dipped 0.1 per cent to $58.78 while UOB rose 0.2 per cent to $36.76.

The bank’s net interest income declined 5 per cent to $2.22 billion, amid a lower interest rate environment. Net interest margin fell to 1.76 per cent, 28 basis points below 2.04 per cent a year ago.

Non-interest income rose 23 per cent to $1.61 billion and accounted for more than 40 per cent of total income.

Net fee income grew 24 per cent to $675 million on broad-based growth. Of this, wealth management fees increased 34 per cent, supported by robust contributions across all wealth product channels on higher customer activity. Investment banking, trade-related and loan-related fees were also higher compared with the previous year.

The group’s wealth management income – from private banking, premier private client, premier banking, insurance, asset management and stockbroking – surged 11 per cent to $1.48 billion.

The wealth business’s share of the bank’s total income rose to 39 per cent from 37 per cent a year ago.

In his first quarter as OCBC group chief executive, Mr Tan Teck Long said resilient performance across banking, wealth management and insurance helped cushion the impact of lower interest rates.

“We achieved a new high for non-interest income, led by our wealth business, which helped us offset lower net interest income amid a low interest rate environment,” he said.

Wealth fees grew 34 per cent year on year to hit $422 million.

“Against this backdrop, we continued to make disciplined strategic investments to strengthen our long-term growth engines,” he said.

OCBC on May 4 said it had struck a deal to acquire parts of HSBC’s wealth and premier banking portfolio in Indonesia, reportedly beating out UOB and other banks such as DBS, Malaysia’s CIMB Group and Japan’s Sumitomo Mitsui.

Mr Tan said that the acquisition aligns with the bank’s new corporate strategy to grow and deepen its wealth business in Indonesia, while strengthening its position as one of the top privately owned banks in the country.

He noted that HSBC’s wealth and premier banking portfolio in Indonesia is a high-quality one with assets under management of $6.6 billion, bringing scale and synergy to the group.

Looking ahead, Mr Tan said global conditions remain uncertain amid geopolitical tensions and elevated inflation risks.

Much of the near-term outlook will depend on how the war in the Middle East, with its impact on energy supply and prices, evolves, while the ongoing trade tariff situation is also being closely monitored, he noted.

Still, OCBC is well positioned to navigate the uncertainties with its strong capital, funding and liquidity position, as well as diversified income streams and disciplined risk management, he added.

OCBC was the last of the three local banks to report first-quarter earnings.

UOB on May 7 posted a 4 per cent fall in net profit to $1.44 billion, citing a softer operating environment, while DBS on April 30 said its earnings grew 1 per cent to $2.93 billion on record wealth management fees.