OCBC’s 1Q25 results were in line and management retained its 2025 guidance for now, albeit with possible changes ahead. While earnings were muted, proactive steps taken to protect NII could see NIM holding steady ahead while the pre-emptive provisioning helps lift already solid loan provision coverage levels.
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1Q25 results are in line.
OCBC reported earnings of S$1.9bn (+12% q-o-q, -5% y-o-y) made up 25-26% of our and Street forecasts. 1Q25 reported ROE stood at 13% (FY24: 13.7%) while the fully phased-in CET-1 ratio under the final Basel III reforms was at 15.5% (+20bps q-o-q).
Results highlights.
While a stronger sequential set of earnings was expected post a seasonally softer 4Q, y-o-y PATMI trend was weaker than peers mainly due to NIM. OCBC’s NIM compression of 23bps y-o-y (-11bps q-o-q) was more severe than peers. This was on account of a higher proportion of floating rate book (80% floating for S$ book and >95% for the US$ and HKD book) and its strategic decision to build up high quality but lower yielding assets in order to help protect NII ahead of US Federal Funds Rate (FFR) cuts.
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Meanwhile, 1Q credit cost ticked up to 24bps (+8bps y-o-y; +3bps q-o-q) due to pre-emptive provisioning. Elsewhere, loans growth was at a healthy +7% y-o-y led by mortgage and corporate loans (transport, storage and communications) while deposits rose 9% y-o-y, led by +13% y-o-y growth in CASA.
Non-II grew by a healthy clip of +10% y-o-y (+36% q-o-q) with fees, insurance and trading all aiding in the growth. CIR was 38.7%, up from 37.1% in 1Q24 due to weaker income growth but lower vs 4Q24 of 45.7%.
Briefing highlights.
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Above is an excerpt from a report by RHB Securities Research. Clients of RHB may be the first to access the full PDF report @ https://www.rhbtradesmart.com/.
