OCBC’s 2Q25 results were a slight miss on NIM weakness. Therefore, while NIM guidance was lowered, other 2025 targets were retained.
OCBC also reaffirmed its 60% dividend payout and capital return plan for 2025. We trimmed earnings by 1- 4% and lowered our dividend projections accordingly. We keep our rating, as despite expectations for softer FY25 PATMI, the 5.7% yield remains decent.
2Q25 a slight miss.
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1H25 reported ROE stood at 12.6% (FY24: 13.7%) while the fully phased-in CET-1 ratio was at 15.3% (-20bps q-o-q).
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Results highlights.
The main drag in 2Q was NIM. OCBC's 2Q25 NIM compressed by 12bps q-o-q (-28bps y-o-y) to 1.92%, following 1Q25’s 11bps q-o-q decline. OCBC attributed the NIM drop to:
S$ and HKD loans repricing lower due to lower benchmark rates, which impacted NIM by 17bps q-o-q. About 80% of S$ loans and almost its entire HKD loans are on floating rates; and
impact from strategic liquidity deployment into high-quality assets in 1Q25 (-2bps to NIM q-o-q); mitigated by lower funding cost (+7bps impact to NIM q-o-q).
Otherwise, loan growth was 1% q-o-q (+7% y-o-y) while CASA growth remained robust (+3% q-o-q; +14% y-o-y).
Costs were also lower q-o-q, with opex down 2% q-o-q (+1% y-o-y) on lower staff cost while credit cost was 12bps (1Q25: 24bps; 2Q24: 15bps) with both impaired and non-impaired allowances down sequentially.
Fees were up a healthy 6% q-o-q (+24% y-o-y) thanks to wealth management activities, although overall non-II was down 4% q-o-q (+5% y-o-y) due to softer contribution from insurance.
Highlights of briefing by OCBC management:
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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/.
