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5 Good Reasons to Like OCBC Right Now

Oversea-Chinese Banking Corp Limited (SGX: O39), or OCBC, is one of the three main local banks listed in Singapore. The bank recently announced its 2019 first-half earnings update. Here are five positive things that I think investors should know about the latest results.

The results

Here’s a quick summary of some key financial metrics from the earnings update:

Source: OCBC’s Result Presentation

Overall, we can see that all metrics improved on a year-on-year basis. Here are the five points worth mentioning.

  1. First of all, net interest income grew 9% year-on-year driven by improvement in net interest margin and loan growth. Moreover, non-interest income jumped 12% year-on-year from both banking and insurance operations. Thus, we can see that growth was broad-based across the group’s different businesses.
  2. Secondly, not only did the bank improved its top-line, it also reduced its cost-to-income ratio from 43.0% to 42.4%. This resulted in operating profit growing even faster than total income.
  3. Thirdly, return on equity (ROE) improved from 11.5% last year to 11.7% this fiscal year. Here, what it means is that investors are getting a higher return on the capital invested in the business.
  4. Next, OCBC proposed a final dividend per share of 25 cents for the quarter, up 5 cents per share, or 25%, as compared to the same period last year. Such a move may indicate that OCBC’s management is confident of the bank’s near-term prospects despite the macro challenges.
  5. Last but not least, OCBC maintained an extremely sound capital position, as of 30 June 2019. Its Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR, and Total CAR were 14.4%, 15.1%, and 16.8%, respectively. These ratios were well above the respective regulatory requirement of 6.5%, 8% and 10%, indicating that it is well-positioned to weather through any bad storms.

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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 Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended the stocks of Oversea-Chinese Banking Corp Limited.