Here’s How Oversea-Chinese Banking Corp Limited’s Wing Hang Bank Did in 2015

2015 marked the first full year for OCBC Wing Hang as a subsidiary of Singapore’s Oversea-Chinese Banking Corp Limited (SGX: O39).

OCBC is the longest established bank in Singapore, and today has operations in 18 countries and territories. It is also one of the three major banks based out of Singapore along with DBS Group Holdings Ltd (SGX: D05) and United Overseas Bank Ltd (SGX: U11).

The Hong Kong-based Wing Hang Bank was acquired by OCBC for S$6.23 billion back in the second-half of 2014. According to OCBC’s chief executive Samuel Tsien, the acquisition is expected to diversify OCBC’s deposit base, expand its earnings base, and give it a leg-up in its Pearl River Delta strategy in China. A recent briefing for OCBC’s 2015 fourth-quarter earnings had shed some light on Wing Hang’s performance:

  1. OCBC Wing Hang recorded S$386 million in profit before tax (PBT) for 2015. This represented 8% of OCBC’s total profit before tax (PBT) for the year. Geographically, Greater China was 20% of OCBC’s total PBT. OCBC Wing Hang is a major contributor to this region, making up around 40% of OCBC’s PBT from Greater China.
  2. OCBC Wing Hang recorded HK$4.85 billion in total income for 2015. Net interest income was HK$3.77 billion while non-interest income was HK$1.08 billion.
  3. The new subsidiary also recorded a cost to income ratio of 48.4% and a return on equity (ROE) of 8.2%. This compares with OCBC’s cost to income ratio of 42% and ROE of 11.5%. It looks like OCBC Wing Hang has some catching up to do.
  4. OCBC Wing Hang’s net interest margin (NIM) was 1.76% for 2015. This compares favorably to the NIM of 1.67% recorded by its parent for the same year.
  5. Moving on to customer deposits, OCBC Wing Hang recorded HK$188 billion (about S$33 billion) in deposits and a loan to deposit ratio of 82.1%. For context, OCBC recorded S$246 billion in customer deposits and a loan to deposit ratio of 84.5%.
  6. From a loan perspective, OCBC Wing Hang had HK$154 billion (about S$27 billion) in customer loans and a non-performing loan (NPL) ratio of 0.6%. OCBC logged in S$211 billion in customer loans and a NPL ratio of 0.9%.
  7. OCBC Wing Hang’s CASA ratio, or the ratio of deposits in current and saving accounts to total deposits, came in at 30.7%. In general, a higher CASA ratio points to lower cost of funds because banks often do not provide high interest rates for current and savings accounts. For comparison, OCBC’s CASA for the year was 48.9%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.