Oversea-chinese Banking Corporation Limited · SGX:O39
Oversea-chinese Banking — Q2 2016 Earnings Presentation
51 slides from Oversea-chinese Banking's earnings presentation, Jul 28, 2016
Slide 1: Second Quarter 2016 Results Presentation
Second Quarter 2016 Results Presentation 28 July 2016 Disclaimer: This material should be read as an overview of OCBC’s current business activities and operating environment. It should not be solely relied upon by investors or potential investors when making an investment decision. OCBC Bank accepts
Slide 2: Agenda
Agenda Results Overview 2Q16 Group Performance Trends Performance of Major Subsidiaries – Great Eastern Holdings – OCBC Wing Hang – OCBC Malaysia – OCBC NISP Appendix: Wealth management income Note: - Certain comparative figures have been restated to conform with the current period’s presentation -
Slide 3: 2Q16 Highlights
2Q16 Highlights Net profit of S$885m was 15% lower YoY; but 4% higher QoQ • Banking operations – Net profit flat YoY; and rose 3% QoQ driven by Net profit and ROE higher non-interest income and lower allowances 13.3% 13.4% • Insurance operations – Great Eastern’s (“GEH”) underlying insurance 10.4% 1
Slide 4: 2Q16 net profit declined 15% YoY, and rose 4% QoQ
2Q16 net profit declined 15% YoY, and rose 4% QoQ 2Q16 2Q15 YoY 1Q16 QoQ OCBC Group S$m S$m +/(-)% S$m +/(-)% Net interest income 1,260 1,282 (2) 1,307 (4) Non-interest income 788 939 1/ (16) 753 5 Total income 2,048 2,221 (8) 2,060 (1) Operating expenses (932) (918) 1 (923) 1 Operating profit 1,116
Slide 5: 1H16 net profit down 15% YoY, mainly from lower insurance contribution and increased allowances
1H16 net profit down 15% YoY, mainly from lower insurance contribution and increased allowances which were largely set aside in 1Q16 1H16 1H15 YoY OCBC Group S$m S$m +/(-)% Net interest income 2,567 2,531 1 Non-interest income 1,541 1,7981/ (14) Total income 4,108 4,329 (5) Operating expenses (1,855
Slide 6: 2Q16 net profit before GEH contribution relatively unchanged YoY and 3% higher QoQ
2Q16 net profit before GEH contribution (“Banking Operations”) relatively unchanged YoY and 3% higher QoQ 2Q16 2Q15 YoY 1Q16 QoQ Banking Operations S$m S$m +/(-)% S$m +/(-)% Net interest income 1,235 1,262 (2) 1,284 (4) Non-interest income 625 588 6 599 4 Total income 1,861 1,851 1 1,883 (1) Operati
Slide 7: 1H16 operating profit before GEH contribution up 1% YoY; net profit fell 2%
1H16 operating profit before GEH contribution up 1% YoY; net profit however fell 2% as a result of increased allowances 1H16 1H15 YoY Banking Operations S$m S$m +/(-)% Net interest income 2,519 2,492 1 Non-interest income 1,224 1,166 5 Total income 3,743 3,658 2 Operating expenses (1,747) (1,682) 4
Slide 8: Agenda
Agenda Results Overview 2Q16 Group Performance Trends Performance of Major Subsidiaries – Great Eastern Holdings – OCBC Wing Hang – OCBC Malaysia – OCBC NISP Appendix: Wealth management income 8
Slide 9: Earnings well-diversified across key geographies and main businesses
Earnings well-diversified across key geographies and main businesses 1H16 PBT 1H16 PBT by Business1/ by Geography PBT Others 3% Group OCBC Wing S$2,159m Hang YoY: -15% Greater 8% China Insurance Singapore 11% 22% S$1,082m YoY: -25% (within which OCBC Wing Hang: 8%) Malaysia Global S$404m Treasury an
Slide 10: Net interest income down 2% YoY from reduced asset volumes; NIM fell 7bps QoQ
Net interest income down 2% YoY from reduced asset volumes; NIM fell 7bps QoQ from lower LDR and decline in interbank placement rates Net interest 1.68% 1.71% 1.62% 1.67% 1.66% 1.74% 1.75% 1.68% 1.67% margin 5,189 4,736 1,317 1,341 1,282 1,307 1,249 1,260 Net interest income (S$m) 2,567 1H 2,213 2,5
Slide 11: Non-interest income declined 16% YoY from absence of investment gains from GEH
Non-interest income declined 16% YoY from absence of investment gains from GEH; up 5% QoQ boosted by higher fee and insurance income Non- interest 40.4% 40.5% 42.3% 41.7% income / 40.7% 38.5% 37.5% 37.1% 36.6% Total income 3,533 960 939 3,213 859 781 174 788 775 272 753 930 237 364 2/ 98 146 195 2/
Slide 12: Fee income down 5% YoY, but rose 11% QoQ
Fee income down 5% YoY, but rose 11% QoQ led by higher wealth management, credit card and loan-related fees -5% YoY +11% 1,643 QoQ 438 1,495 417 257 408 402 395 205 62 374 86 68 77 58 30 69 86 18 68 15 19 19 556 14 Fees and 558 146 791 137 137 136 commissions 135 (S$m) 126 145 174 29 135 51 39 38 46
Slide 13: Profit from life assurance declined 19% YoY
Profit from life assurance declined 19% YoY, as unfavourable financial market conditions led to unrealised mark-to-market losses in GEH’s bond and equity portfolio -19% YoY 768 +29% QoQ 207 630 236 Profit from 199 38 life 164 assurance 50 (S$m) 132 423 108 331 41 164 116 83 191 46 62 93 57 47 35 27
Slide 14: Operating expenses well-managed, up 1% YoY and QoQ only
Operating expenses well-managed, up 1% YoY and QoQ only. Cost containment measures have been put in place since 1Q16 42.0% 45.2% 43.0% 44.8% 45.5% Cost / 41.0% 41.4% 41.3% 42.3% Income 3,664 3,258 974 673 918 923 932 873 900 636 188 160 164 164 162 737 157 Operating 619 179 206 183 189 1,855 172 180
Slide 15: Net allowances for loans and other assets increased 9% YoY but lower QoQ
Net allowances for loans and other assets increased 9% YoY but lower QoQ Net allowances 488 for loans and other 79 assets 193 (S$m) 357 167 150 43 12 232 255 196 35 40 76 88 80 99 64 1 65 151 28 47 163 177 45 74 50 56 52 64 20 32 8 (2) (1) 2014 2015 1H16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Portfolio allow
Slide 16: Net specific allowances for loans were higher YoY but declined QoQ
Net specific allowances for loans were higher YoY but declined QoQ 2Q16 2Q15 1Q16 S$m S$m S$m Allowances for new and 90 90 136 existing loans Write-backs1/ (26) (32) (26) Recoveries2/ (12) (11) (11) Net specific allowances 52 47 99 1/ Write-backs of specific allowances for existing NPLs due to settl
Slide 17: Customer loans contracted 2% YoY
Customer loans contracted 2% YoY, led by lower trade loans and reduced offshore borrowings of Chinese entities Loan growth Group YoY: -2%; QoQ: -1% 210 210 213 211 208 205 In constant currency terms 24 24 22 21 22 YoY: -1%; QoQ: -1% 22 Rest of the world 57 59 56 52 49 YoY: -9% 58 QoQ: +2% Customer L
Slide 18: Customer loans continue to be well-diversified across geographies and industries
Customer loans continue to be well-diversified across geographies and industries Customer Loans by Geography Customer Loans by Industry As of 30 June 2016 As of 30 June 2016 Rest of the As of As of Other Asia World Industry 30-Jun-16 30-Jun-15 Pacific 6% S$b % S$b % Housing loans 58 28 55 26 (within
Slide 19: Oil & Gas and Commodities exposure
Oil & Gas and Commodities exposure Oil & Gas Commodities 2/ As of 30 Jun 2016 S$b S$b Total exposure 1/ 14.3 13.6 Of which: On-balance sheet exposure 12.6 11.5 % of total customer loans 6% 6% % NPL of total customer loans 0.45% 0.16% Offshore services sector • Offshore services sector made up 45% of
Slide 20: UK and European exposure minimal, less than 3% of total assets
UK and European exposure minimal, less than 3% of total assets Loans1/ Other Assets 2/ As of 30 Jun 2016 S$b S$b Total on-balance sheet 5.4 7.4 exposure Of which: UK 4.0 3.2 Rest of Europe 1.4 4.2 1/ Loans: • Loans are primarily extended to corporates, which are network customers from Asia • Asset q
Slide 21: Customer deposits stable YoY and up 2% QoQ
Customer deposits stable YoY and up 2% QoQ – CASA deposits grew 7% YoY, CASA ratio improved to 49.3% 250 246 252 246 246 242 24 21 22 20 17 17 113 111 106 106 108 Customer 112 Deposits (S$b) S$121b +S$8b YoY 43 43 44 44 42 42 +S$2b QoQ S$113b S$120b S$120b S$119b CASA ratio: S$114b 46.0% 47.5% 48.9%
Slide 22: Group LDR lower at 82.2%
Group LDR lower at 82.2%; SGD, USD and RMB LDRs lower YoY and QoQ 250 252 246 246 246 242 25 22 22 22 20 5 22 Others 210 5 210 5 213 211 6 7 12 208 6 205 14 12 10 8 IDR 9 15 16 18 25 16 24 17 23 5 24 5 25 6 7 23 17 RMB 10 10 9 8 7 7 6 23 23 6 24 HKD 26 25 24 28 29 30 29 28 28 MYR Customer 23 21 21 2
Slide 23: Funding sources well-balanced
Funding sources well-balanced – Customer deposits made up 77% of funding composition Funding Composition as of 30 Jun 2016 Wholesale Funding by Currency as of 30 Jun 2016 By Maturity: Others ≤ 1 year 60% Current Bank deposits 11% account Others > 1 year 40% Customer deposits 5% 5% AUD and savings 77
Slide 24: NPL ratio increased slightly QoQ to 1.1%
NPL ratio increased slightly QoQ to 1.1%; coverage for NPAs remained prudent 0.9% 0.9% 1.0% 1.1% 0.6% 0.7% NPL ratio 2,488 2,221 131 2,039 67 372 1,932 187 70 70 110 185 135 207 355 1,494 207 1,379 461 34 400 NPAs 33 148 305 179 653 (S$m) 159 202 246 103 717 699 707 441 474 522 516 545 604 536 388 3
Slide 25: NPAs increased YoY to S$2.49b
NPAs increased YoY to S$2.49b, mainly from the classification of a number of corporate accounts associated with the oil & gas support services sector 2Q16 2Q15 1Q16 S$m S$m S$m NPAs – Opening balance 2,221 1,379 2,039 New NPAs 924 484 497 Net recoveries/upgrades (567) (310) (232) Write-offs (90) (59
Slide 26: Capital position remained strong and well above regulatory requirements
Capital position remained strong and well above regulatory requirements 17.3 17.5 16.6 16.8 16.1 CAR 15.5 2.0 Tier 1 2.0 2.2 Tier 1 (% of RWA) 2.1 Tier 1 Tier 1 0.6 CAR 2.0 Tier 1 0.5 CAR 15.5 2.0 Tier 1 CAR CAR CAR 15.1 CAR 14.5 14.8 14.1 Tier 2 capital 13.5 Additional Tier 1 capital Common Equity
Slide 27: Interim dividend of 18 cents per share declared
Interim dividend of 18 cents per share declared 36.0 36.0 33.0 34.0 30.0 30.0 28.0 Net DPS 18.0 18.0 17.0 17.0 (cents) 15.0 15.0 14.0 Final net dividend Interim net 18.0 18.0 18.0 dividend 15.0 15.0 16.0 17.0 14.0 2009 2010 2011 2012 2013 2014 2015 1H16 Net Dividends 898 994 1,024 1,133 1,168 1,347
Slide 28: Agenda
Agenda Results Overview 2Q16 Group Performance Trends Performance of Major Subsidiaries – Great Eastern Holdings – OCBC Wing Hang – OCBC Malaysia – OCBC NISP Appendix: Wealth management income 28
Slide 29: GEH: 2Q16 earnings contribution of S$78m
GEH: 2Q16 earnings contribution of S$78m 2Q16 2Q15 YoY 1Q16 QoQ GEH S$m S$m +/(-)% S$m +/(-)% Profit from insurance business 118 141 (16) 91 30 - Operating profit 1/ 135 132 2 120 12 - Non-operating loss 2/ (36) (9) (314) (43) 14 - Others 20 18 11 13 48 Profit from Shareholders’ Fund 17 174 3/ (90)
Slide 30: GEH: 1H16 earnings contribution of S$151m
GEH: 1H16 earnings contribution of S$151m 1H16 1H15 YoY GEH S$m S$m +/(-)% Profit from insurance business 209 348 (40) - Operating profit 1/ 255 283 (10) - Non-operating (loss) / profit 2/ (79) 32 (344) - Others 33 33 1 Profit from Shareholders’ Fund 48 213 3/ (78) Profit from operations 257 561 (54
Slide 31: GEH: Operating profit 2% higher YoY
GEH: Operating profit 2% higher YoY on better performance from the Participating, Investment-linked and General Insurance Funds +2% YoY +12% QoQ 591 582 24 14 169 2 131 151 170 3 30 135 Operating 132 130 profit from 4 5 41 5 120 insurance 2 33 28 34 business (S$m) 41 323 255 1/ 275 109 7 75 79 66 65
Slide 32: GEH: Non-operating profit was negative due to unfavourable market conditions
GEH: Non-operating profit was negative due to unfavourable financial market conditions that led to unrealised mark-to- market losses from its bond and equity portfolio 145 Non-operating profit/(loss) 49 from insurance 41 business (S$m) 3 (9) (36) (43) (79) (79) 2014 2015 1H16 1Q15 2Q15 3Q15 4Q15 1Q1
Slide 33: GEH: Total weighted new sales rose 23% YoY
GEH: Total weighted new sales rose 23% YoY, underpinned by higher sales from all distribution channels in both Singapore and Malaysia +23% 979 YoY 910 37 28 308 12 318 268 306 9 246 Weighted 114 221 4 new 203 199 74 3 business 467 8 9 85 premiums 67 (S$m) 7 59 70 152 624 576 186 182 151 157 135 120
Slide 34: GEH: New business embedded value grew 24% YoY
GEH: New business embedded value grew 24% YoY, driven by sales growth; NBEV margin of 42.8% was comparable to a year ago NBEV 42.7% 42.8% 41.4% 40.5% 41.3% margin 39.6% 39.4% 37.9% (NBEV / Total 36.7% weighted new sales) 388 377 4 6 114 106 0 105 133 138 2 1 84 85 43 84 1 34 39 1 1 NBEV 189 28 33 31
Slide 35: OCBC Wing Hang: 2Q16 profit down 3% YoY, but up 10% QoQ
OCBC Wing Hang: 2Q16 profit down 3% YoY, but up 10% QoQ 2Q16 2Q15 YoY 1Q16 QoQ OCBC Wing Hang HKD m HKD m +/(-)% HKD m +/(-)% Net interest income 885 951 (7) 943 (6) Non-interest income 307 288 7 236 30 Total income 1,192 1,239 (4) 1,179 1 Operating expenses (591) (595) (1) (596) (1) Operating profi
Slide 36: OCBC Wing Hang: 1H16 net profit 3% lower YoY
OCBC Wing Hang: 1H16 net profit 3% lower YoY 1H16 1H15 YoY OCBC Wing Hang HKD m HKD m +/(-)% Net interest income 1,828 1,861 (2) Non-interest income 543 568 (4) Total income 2,371 2,429 (2) Operating expenses (1,187) (1,164) 2 Operating profit 1,184 1,264 (6) Allowances (67) (78) (14) Associates 41
Slide 37: OCBC Wing Hang: NIM up 1bp YoY; Non-interest income up 7%
OCBC Wing Hang: NIM up 1bp YoY; Non-interest income up 7% Net profit (HKD m) Net interest income (HKD m) Net interest margin 1.73% 1.76% 1.78% 1.72% 1.72% 1.81% 1.78%1.83% 1.73% 2,028 3,774 -3% 910 951 978 935 943 885 YoY 1,705 1,828 +10% QoQ 540 525 513 490 2014 1/ 2015 1H16 1Q15 2Q15 3Q15 4Q15 1Q1
Slide 38: OCBC Wing Hang: Loans lower YoY; NPL ratio at 0.7%
OCBC Wing Hang: Loans lower YoY mainly from reduction in trade-related and China offshore loans; NPL ratio at 0.7%; CASA ratio improved to 35.3% Gross Loans (HKD b) Deposits (HKD b) NPL Ratio Loans / Deposits 1/ 0.7% 80.5% 81.7% 82.1% 80.7% 81.5% 0.4% 0.4% 0.6% 0.6% 0.6% 78.4% 200 202 189 188 186 16
Slide 39: Greater China customer loans 14% lower YoY and down 5% QoQ
Greater China customer loans 14% lower YoY and down 5% QoQ 59 57 58 56 4 4 4 4 52 2 2 2 49 2 4 2 4 2 Customer 29 29 30 29 Loans to Greater 27 Macau China 27 (S$b) Taiwan Hong Kong Offshore 2/ 16 17 17 15 13 China 1/ 12 7 6 6 6 6 5 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Note: Customer loans to Greater C
Slide 40: Asset quality of Greater China book remained sound
Asset quality of Greater China book remained sound; NPL ratio at 0.7% Total 356% 275% 240% 241% 260% allowances/ NPAs 137% NPL ratio 0.7% 0.4% 0.3% 0.3% 0.4% 0.4% 414 Greater China NPAs (S$m) 244 241 218 202 159 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 40 Note: NPAs comprise NPLs and classified debt secu
Slide 41: OCBC Malaysia: 2Q16 net profit rose 5% YoY
OCBC Malaysia: 2Q16 net profit rose 5% YoY 2Q16 2Q15 YoY 1Q16 QoQ OCBC Malaysia RM m RM m +/(-)% RM m +/(-)% Net interest income 335 348 (4) 331 1 Islamic banking income 1/ 119 123 (3) 126 (6) Non-interest/finance income 144 145 (1) 138 4 Total income 598 616 (3) 595 − Operating expenses (275) (254)
Slide 42: OCBC Malaysia: 1H16 net profit 1% higher YoY
OCBC Malaysia: 1H16 net profit 1% higher YoY 1H16 1H15 YoY OCBC Malaysia RM m RM m +/(-)% Net interest income 666 676 (1) Islamic banking income 1/ 245 253 (3) Non-interest/finance income 282 281 − Total income 1,193 1,210 (1) Operating expenses (537) (497) 8 Operating profit 656 713 (8) Allowances
Slide 43: OCBC Malaysia: Net interest/finance income down 3% YoY
OCBC Malaysia: Net interest/finance income down 3% YoY; Non-interest/finance income 2% lower Net interest/finance income (RM m) Non-interest/finance income1/ (RM m) Net interest/ Non-interest/finance finance margin income/ Total income 2.11% 1.99% 1.97% 28.9% 1.98% 1.97% 2.00% 2.01% 1.99% 1.94% 26.0
Slide 44: OCBC Malaysia: Loans increased 2% YoY; NPL ratio improved to 1.9%
OCBC Malaysia: Loans increased 2% YoY and deposits unchanged; NPL ratio improved to 1.9% Gross Loans (RM b) Deposits (RM b) NPL Ratio Loans / Deposits 92.1% 93.2% 92.1% 2.1% 2.1% 2.1% 2.1% 89.0% 89.7% 1.9% 1.9% 87.2% 75 76 75 73 74 76 68 70 70 69 69 65 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Mar15 Jun15
Slide 45: OCBC NISP: 2Q16 net profit increased 26% YoY
OCBC NISP: 2Q16 net profit increased 26% YoY 2Q16 2Q15 YoY 1Q16 QoQ OCBC NISP IDR b IDR b +/(-)% IDR b +/(-)% Net interest income 1,341 968 39 1,305 3 Non-interest income 363 242 50 336 8 Total income 1,704 1,210 41 1,641 4 Operating expenses (790) (686) 15 (767) 3 Operating profit 914 524 75 874 5
Slide 46: OCBC NISP: 1H16 net profit rose 24% YoY
OCBC NISP: 1H16 net profit rose 24% YoY 1H16 1H15 YoY OCBC NISP IDR b IDR b +/(-)% Net interest income 2,646 1,949 36 Non-interest income 699 443 58 Total income 3,345 2,392 40 Operating expenses (1,557) (1,335) 17 Operating profit 1,788 1,057 69 Allowances (580) (77) 654 Non Operating Income 8 0 nm
Slide 47: OCBC NISP: Net interest income 39% higher YoY; NIM 4.62%
OCBC NISP: Net interest income 39% higher YoY; NIM stood at 4.62% Net interest income (IDR b) Non-interest income (IDR b) Non-int. income/ Net interest margin Total income 4.70% 4.67% 4.79% 4.62% 4.15% 4.07% 4.15% 3.82% 3.60% 20.9% 20.0% 20.5% 21.3% 19.6% 4,419 16.6% 16.2% 17.0% 1,341 7.5% 1,303 1,3
Slide 48: OCBC NISP: Loans grew 16% YoY, NPL at 1.4%
OCBC NISP: Loans grew 16% YoY, NPL at 1.4%; deposits up 9%, with CASA ratio at 41.9% Gross Loans (IDR t) Deposits (IDR t) NPL Ratio Loans / Deposits 1.4% 1.3% 1.3% 1.3% 1.4% 1.4% 98.0% 94.7% 92.8% 87.3% 89.7% 84.6% 86 85 86 93 82 91 90 85 87 74 82 70 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Mar 15
Slide 49: Agenda
Agenda Results Overview 2Q16 Group Performance Trends Performance of Major Subsidiaries – Great Eastern Holdings – OCBC Wing Hang – OCBC Malaysia – OCBC NISP Appendix: Wealth management income 49
Slide 50: 1H16 wealth management income declined YoY
1H16 wealth management income declined YoY, from lower GEH contribution. Excluding GEH, wealth management income grew 5%. BOS’ AUM rose 12% YoY to US$61b Wealth Management Income1/ (S$m) Bank of Singapore Earning Asset Base (US$b) As % of Group income 76 31% 65 68 Dec 11 – 28% 27% 28% 15 27% 25% 57
Slide 51: Second Quarter 2016 Results Thank You
Second Quarter 2016 Results Thank You
Oversea-Chinese Banking — Q2 2016 Earnings Presentation on 6ix