OCBC - DBS Research 2023-11-10: NIM Peaked During 3Q23; Asset Quality Continues To Hold Up

• OCBC (SGX:O39) reported 3Q23 revenue of S$3.4bn (+9% y-o-y/-1% q-o-q) with net profit of S$1.8bn (+21% y-o-y/+6% q-o-q), largely in line with the consensus. Higher net profit q-o-q was driven by lower allowances q-o-q, although non-fee income weighed on non-interest income during 3Q23.
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• Capital ratios remained strong, with CET1 and total CAR at 15.3% (2Q23: 15.4%) and 16.9% (2Q23: 17.8%), respectively.

Net interest income improved on higher NIM.

• 3Q23 net interest income of S$2.5bn rose 17% y-o-y/3% q-o-q, as 3Q23 saw a 1bps improvement q-o-q in NIM to 2.27%.
• Meanwhile, loan growth was -2% y-o-y/flat q-o-q.

Higher non-interest income supported by fee income.

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• Net fees and commissions rose 2% y-o-y/7% q-o-q to S$461m, driven by stronger wealth fee, loans, trade, guarantees, remittances, and other fees, although net new money declined this quarter.
• The trading income of S$216m (flat y-o-y/-31% q-o-q) declined due to a decline in non-customer trading income on the back of lower MTM valuation on FVTPL securities and derivatives, while profit from GEH, at S$220m (-12% y-o-y/-16% q-o-q), declined, as higher medical claims offset investment gains.

Lower credit costs in 3Q23

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Rui Wen LIM DBS Group Research | https://www.dbs.com/insightsdirect/ 2023-11-10 SGinvestors.io

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