Oversea-Chinese Banking Corp Limited’s 6 Income Sources

Oversea-Chinese Banking Corp Limited (SGX: O39) is one of Singapore’s three listed banks. It is the second largest bank by assets, which comes in at S$395.7 billion as of 30 June 2016, and is also part of the Straits Times Index (SGX: ^STI).

Let’s look at how OCBC generates its income; for banks, income is the equivalent of revenue.

OCBC’s income generation falls under two broad categories of net interest income and non-interest income.

The first category is OCBC’s main business, which is to lend money to individuals and organisations. Under this category OCBC generates income from the difference in the interest it collects on the money it has lent as compared to the interest it pays on the money it has borrowed (mainly from depositors).

In 2015, OCBC’s net interest income came in at S$5.19 billion, which made up 60% of total income.

The other category, non-interest income, can be further broken down into five groups. They are fee and commission income, dividend and rental income, net trading income, net gains from investment securities, and life and general insurance.

In total these five groups contributed S$3.53 billion in income in 2015, representing the other 40% of total income. The breakdown of each group is as follows:

Source: OCBC’s 2015 earnings

From the table above, it can be seen that fee and commission income was the biggest contributor in the non-interest income category. This is followed by OCBC’s insurance business, which stems from the bank’s majority-stake in Great Eastern Holding Limited (SGX: G07).

It is interesting to point out too that OCBC’s fee and commission income can be further broken down into smaller allocations such as Brokerage, Wealth management, Fund management, Credit card, Loan-related, Trade-related and remittances, Guarantees, Investment banking, Service charges, and Others.

By taking an in-depth look at the various income generating sources OCBC has, it can give investors a better understanding of the bank’s risks and future opportunities.

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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 Esjay owns shares in Oversea-Chinese Banking Corp.