Oversea-chinese Banking Corporation Limited · SGX:O39
Oversea-chinese Banking — H1 2004 Earnings Presentation
29 slides from Oversea-chinese Banking's earnings presentation, Aug 11, 2004
Slide 1: First Half 2004 Results
Presentation to Media and Analysts First Half 2004 Results 11 August 2004
Slide 2: Agenda
Agenda • Results at a Glance • Income Statement Trends • Loans and Deposits • Asset Quality and Provisions • Consolidation of Great Eastern Holdings • Further Capital Management Initiatives • Conclusion 2
Slide 3: Results at a Glance – Half Year
Results at a Glance – Half Year 1H04 1H03 YoY 2H03* HoH S$m S$m +/(-)% S$m +/(-)% Net Interest Income 745 707 5 728 2 Non-Interest Income 428 322 33 436 (2) - Fee Income 232 170 37 203 15 Total Income 1,172 1,029 14 1,164 1 Operating Expenses 441 424 4 430 3 Operating Profit 731 605 21 733 (0) Goodw
Slide 4: Results at a Glance - Quarterly
Results at a Glance - Quarterly 2Q04 2Q03 YoY 1Q04 QoQ S$m S$m +/(-)% S$m +/(-)% Net Interest Income 380 356 7 365 4 Non-Interest Income 267 174 53 161 66 - Fee Income 117 88 34 115 2 Total Income 647 530 22 526 23 Operating Expenses 236 223 6 206 15 Operating Profit 411 307 34 320 29 Goodwill 36 32
Slide 5: Agenda
Agenda • Results at a Glance • Income Statement Trends • Loans and Deposits • Asset Quality and Provisions • Consolidation of Great Eastern Holdings • Further Capital Management Initiatives • Conclusion 5
Slide 6: Growth in Net Interest Income, Margins Maintained
Growth in Net Interest Income, Margins Maintained Net 1.90% 1.89% 1.94% 1.90% 1.92% interest 1.88% • Net interest income on a margin rising trend over past six quarters 380 • 2Q04 net interest income 369 365 up 7% YoY and 4% QoQ, 356 359 due to higher loan volume 352 Net and slightly higher interest
Slide 7: Strong Growth in Non-Interest Income
Strong Growth in Non-Interest Income 41.2% Non- 39.1% interest 35.8% income/ • 2Q04 non-interest income 32.9% Total 29.6% 29.8% 30.6% income boosted by securities/ 29.7% derivatives dealing income of S$49m, against S$62m loss 267 in 1Q04 230 206 • Contribution of S$35m from GEH for the month of June
Slide 8: Robust Fee Income
Robust Fee Income Fee 19.5% 19.7% income/ 21.9% Total 18.1% income • Fifth consecutive quarter of growth in fee income 18.0% 16.5% 16.5% 16.9% • Strong 1Q fee income level 115 117 sustained in 2Q04 despite 103 100 lower stockbroking and investment banking income 88 82 Fee • Wealth management income
Slide 9: Cost Ratio Remains Comfortable - Investing to Support Business Growth
Cost Ratio Remains Comfortable - Investing to Support Business Growth Cost-to- 42.1% 41.9% 41.2% 40.3% income • Excluding S$5m cost 39.1% ratio 36.4% 36.4% contribution from GEH in 2Q04, underlying 37.6% expenses rose 3% YoY in 236 1H04, 12% QoQ in 2Q04 223 216 214 206 201 33 51 • Increased headcoun
Slide 10: Operating Profit Up 21% YoY in 1H04
Operating Profit Up 21% YoY in 1H04 Operating Profit (S$m) 411 375 358 320 307 78 50 298 297 308 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 Gains from divestment of non-core assets 10
Slide 11: Provisions Remain Low
Provisions Remain Low Specific Provisions for Loans Provisions for Diminution in Investments and Other Assets • Strengthening of credit 70 General Provisions processes and credit 64 culture since 2nd half 2002 Total has contributed to lower 24 Provisions provisions 54 (S$m) • Measures include early
Slide 12: Continued Uptrend in Core Net Profit
Continued Uptrend in Core Net Profit Net Profit (S$m) 303 292 279 256 72 54 224 220 224 159 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 Gains from divestment of non-core assets 12
Slide 13: Improving EPS and ROE
Improving EPS and ROE 12.6% 12.2% 11.8% ROE 10.7% 9.5% 9.5% 9.1% 6.8% 90 89 81 80 67 22 16 EPS¢ 50 68 64 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 Non-core assets divestment gains Excluding divestment gains Note: Quarterly ROE and EPS are annualised; ROE refers to return on ordinary shareholders’ funds 13
Slide 14: Agenda
Agenda • Results at a Glance • Income Statement Trends • Loans and Deposits • Asset Quality and Provisions • Consolidation of Great Eastern Holdings • Further Capital Management Initiatives • Conclusion 14
Slide 15: Loan Growth Driven by Consumer Loans and Malaysia Loans
Loan Growth Driven by Consumer Loans and Malaysia Loans Loans (S$bn) • Group loans up 4% over 54.7 Dec 03, led by housing 52.6 53.0 51.2 51.4 loans (+7% to S$16.5bn), 49.7 6.8 6.4 6.2 as well as loans to general 6.6 6.3 commerce, transport & 6.7 7.9 8.3 communication, and 7.8 8.0 7.5 financial insti
Slide 16: Growth in Deposits, Lower Loans-to-Deposits Ratio
Growth in Deposits, Lower Loans-to- Deposits Ratio Loans- 93.8% 93.2% to- 85.0 90.9% 91.5% deposits • Customer deposits grew 89.1% 90.0% 7% from Dec 03, due to 75.0 85.3% higher fixed deposit and 90.1% current account balances 65.0 55.3 57.2 80.0% 54.8 53.9 53.5 54.3 • Loans-to deposits ratio 55.0 d
Slide 17: Agenda
Agenda • Results at a Glance • Income Statement Trends • Loans and Deposits • Asset Quality and Provisions • Consolidation of Great Eastern Holdings • Further Capital Management Initiatives • Conclusion 17
Slide 18: Sustained Improvement in Asset Quality
Sustained Improvement in Asset Quality NPL Ratio 8.0% 7.5% 7.1% 6.9% 6.6% 6.1% 4,290 4,115 3,890 3,834 3,644 3,512 NPLs (S$m) 1,250 1,219 1,105 1,068 1,040 1,028 2,559 2,480 2,388 2,389 2,266 2,150 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Singapore Malaysia International 18
Slide 19: Provision Coverage Remains Strong
Provision Coverage Remains Strong SPs / Unsecured NPLs 105% 103% 105% 100% 100% 99% (SPs+GPs) / NPLs 70% 70% 66% 67% 63% 63% SPs / NPLs 35% 36% 36% 37% 37% 35% Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 19
Slide 20: Agenda
Agenda • Results at a Glance • Income Statement Trends • Loans and Deposits • Asset Quality and Provisions • Consolidation of Great Eastern Holdings • Further Capital Management Initiatives • Conclusion 20
Slide 21: Impact of GEH Consolidation
Impact of GEH Consolidation • Shareholding in GEH rose OCBC OCBC OCBC Adjusted Group Adjusted1/ Group 2Q04 / from 48.9% to 81.1% in 2Q04. 2Q04 2Q04 2Q03 2Q03 GEH equity-accounted as associate at 48.9% for April & S$m +/(-)% S$m +/(-)% May 04, and consolidated as Net Interest Income 380 378 356 6 sub
Slide 22: Computation of Goodwill
Computation of Goodwill GEH shares acquired 152.9m Acquisition cost of increased stake S$m • Acceptances of 138.7m GEH shares 1,628 (1) • Acceptances of GEH options 10 • Open market purchase of 14.2m GEH shares 170 • Total acquisition cost - [A] 1,808 Estimated fair value of GEH’s net tangible asset
Slide 23: Treatment of Goodwill
Treatment of Goodwill • From June – December 2004, total goodwill of S$1,076 million to be amortised over a period of 20 years: 2Q04 (1 month) S$4.5m 3Q04 S$13.5m est. 4Q04 S$13.5m est. • Commencing January 2005, o Adoption of Financial Reporting Standard 103 on Business Combinations o Value of in-f
Slide 24: Asset and Revenue Composition Transformed with the Addition of GEH
Asset and Revenue Composition Transformed with the Addition of GEH • Total assets jumped 35% from S$87 billion in March 04 to S$118 billion in June 04, with S$30bn from GEH. Malaysia assets rose from 14% to 19% of total assets • Non-interest income contribution rises from 35% in 2003 to approximatel
Slide 25: Next Steps
Next Steps • Offer for GEH is driven by revenue synergies, not cost savings. GEH will retain its own brand name and continue to be managed separately • We will review relevant business areas where incremental revenues can be generated from closer partnership, e.g. in product development, marketing a
Slide 26: Agenda
Agenda • Results at a Glance • Income Statement Trends • Loans and Deposits • Asset Quality and Provisions • Consolidation of Great Eastern Holdings • Further Capital Management Initiatives • Conclusion 26
Slide 27: Further Capital Management Initiatives
Further Capital Management Initiatives • We are setting aside S$500m for share buybacks. This comes on top of the S$1.7bn excess capital we have returned to shareholders over the past year, including two selective capital reductions which cancelled 7.2% of our share capital • We have also raised our
Slide 28: Conclusion
Conclusion • Steady improvement in our core businesses since the first quarter of 2003 • Strong operating results driven by top line growth • Pro-active capital management initiatives will continue. Group Tier 1 and Total CAR remain strong at 12.6% and 17.7% respectively under MAS revised capital fr
Slide 29: First Half 2004 Results – Thank You
First Half 2004 Results Thank You
Oversea-Chinese Banking — H1 2004 Earnings Presentation on 6ix