By Yantoultra Ngui
SINGAPORE (Reuters) -Singapore’s second-largest bank Oversea-Chinese Banking Corp (OCBC) said it expected interest rates to trend downwards, likely from second half of 2024, after posting a 12% jump in fourth-quarter net profit that missed expectations.
Against that backdrop, OCBC said it was targeting 2024 net interest margin (NIM), a key profitability gauge, to be in the range of 2.20% to 2.25%, lower than 2023 NIM of 2.28%, according to OCBC’s Group CEO Helen Wong’s presentation slides accompanying the earnings results.
Return on equity (ROE) in 2024 was set to range between 13% and 14%, versus 13.7% in 2023, while loan growth is expected to be in the low single digits, according to the slides. Credit costs, or allowances for loans as a percentage of average loans, were forecast at between 20 to 25 basis points versus 20 bps in 2023.
“Looking ahead, we anticipate challenges in the global macro environment, including changes in monetary policies, persistent inflationary pressures, major elections and rising geopolitical tensions,” Wong said in a separate press statement.
“Nonetheless, we believe that Asia holds immense growth potential,” she added.
OCBC’s results rounded up a strong fourth-quarter earnings season by Singapore banks, the largest in Southeast Asia, which posted higher profits for the fourth quarter because of higher interest rates, though growth momentum is poised to slow as big central banks pivot toward rate cuts and volatile markets weigh on their mainstay wealth businesses.
Larger rival DBS Group posted this month a 2% rise in fourth-quarter net profit that beat forecasts and also projected its 2024 net interest margin to be slightly below last year because interest rates are expected to soften.
Smaller peer United Overseas Bank also reported last week a stronger-than-forecast fourth-quarter net profit that topped market expectations, but cut its 2024 loan growth projections amid a challenging global economic environment.
OCBC, which is also Southeast Asia’s second-largest lender by assets, said October-December net profit rose to S$1.62 billion ($1.21 billion) from S$1.44 billion a year earlier mainly driven by higher operating profit and lower allowances for assets including loans.
This was lower than the mean estimate of S$1.72 billion from four analysts polled by LSEG.
It announced an increase in final dividend to 42 Singapore cents per share from 40 cents a year earlier, bringing its total 2023 dividend to 82 cents per share, up 21% from a year earlier.
($1 = 1.3436 Singapore dollars)
(Reporting by Yantoultra Ngui; Editing by Chris Reese and Jamie Freed)
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