OCBC to return $2.5b capital via special dividends and share buybacks, Q4 profit misses estimates

SINGAPORE - OCBC Bank on Feb 26 announced it will return $2.5 billion of capital to shareholders over two years via special dividends and share buybacks, as the bank delivered a record profit of $7.59 billion for 2024.

OCBC plans to pay a final ordinary dividend of 41 cents per share for 2024, down from 42 cents in 2023. Including the interim dividend, total ordinary dividend for 2024 will be 85 cents per share, higher than the 82 cents for 2023.

The total payout will amount to $3.82 billion, which is in line with the group’s target payout ratio of 50 per cent, said OCBC.

It also proposes a special dividend of 16 cents per share, bringing total dividend to $1.01 per share, which represents a total payout ratio of 60 per cent for 2024.

Local peers DBS and UOB have also announced capital returns on the back of record earnings.

UOB on Feb 19 said it is returning $3 billion of surplus capital to shareholders over the next three years and DBS on Feb 10 said it will reward all staff, excluding senior managers, with a special one-time bonus of $1,000 each and plans to introduce a new “capital return” dividend.

OCBC shares opened at $17.30 on Feb 26, down 1.7 per cent from Feb 25’s closing price of $17.60. They closed 2.2 per cent lower at $17.21 while DBS shares gained 0.3 per cent to $46.67 and UOB shares rose 0.6 per cent to $38.44.

For the fourth quarter of financial year 2024, OCBC’s net profit rose 4 per cent year on year to $1.69 billion. The earnings missed the $1.81 billion forecast by analysts in a London Stock Exchange Group poll.

For financial year 2024, the group’s net profit grew 8 per cent from a year ago to a record $7.59 billion, driven by robust income growth and lower allowances.

In 2024, net interest income reached a new high of $9.76 billion, partly driven by a 5 per cent rise in average assets from customer loans.

Non-interest income rose 22 per cent to $4.72 billion. Within the segment, net fee income rose 9 per cent to $1.97 billion, led by a 22 per cent increase in wealth management fees across all wealth channels. Investment banking and loan-related fees also increased.

Net trading income surged 53 per cent to $1.54 billion. Non-customer flow treasury income more than doubled from a year ago, bolstered by strong investment performance from Global Markets and Great Eastern Holdings (GEH).

Ms Helen Wong, group chief executive of OCBC, said in a results statement: “We deployed capital to increase our stake in GEH to 93.72 per cent. GEH has significantly contributed to OCBC’s performance and is a strategic pillar of OCBC’s wealth management business, while OCBC has provided GEH access to our extensive retail and commercial customer base.”

On why OCBC increased its shareholding in GEH, Ms Wong said at the results briefing that the move is a natural progression in the bank’s strategy: “We know a balanced portfolio can help us to overcome, in particular, the uncertainty and the volatility in the market over the decade and our ambition, as we openly stated, is for OCBC to become Asia’s leading wealth management player.”

In Singapore, 70 per cent of Great Eastern customers hold OCBC’s products, while 20 per cent of OCBC customers hold a Great Eastern policy. Ms Wong added there is potential for OCBC customers to hold more Great Eastern products.

Wealth management income grew 13 per cent year on year to $4.89 billion. It accounted for 34 per cent of total income, up from 32 per cent a year earlier. This is driven by an increase of 14 per cent in banking wealth management assets under management (AUM) to $299 billion.

OCBC’s results follow those of DBS, which posted a 10 per cent rise in fourth-quarter earnings to $2.62 billion, and UOB, which reported that net profit in the fourth quarter rose 9 per cent year on year to $1.52 billion.

For its 2025 outlook, OCBC cautioned that trade tensions could impede global growth and trade, but noted that Asean economies are likely to remain resilient and well positioned to benefit from supply chain shifts. OCBC also said it will continue to keep an eye on escalating geopolitical complexities and growth opportunities.

Ms Wong said: “As we enter the new year, we remain cautiously optimistic on the regional growth outlook and are poised to seize growth opportunities as they arise. We will remain agile in navigating the increasingly complex geopolitical landscape and volatile macroeconomic environment.”