SINGAPORE – OCBC Bank is poised to meet its ambitious targets for 2024 after announcing a robust 9% increase in its third-quarter net profit, reaching $1.97 billion and surpassing analysts' expectations.

As the second-largest bank in Southeast Asia by assets, following DBS, OCBC reported that this significant profit growth from $1.81 billion in the same quarter last year eclipsed the average market forecast of around $1.91 billion based on a survey by LSEG.

Strategic Goals and Financial Projections

The bank has outlined its strategic goals, projecting full-year net interest margins to hover around 2.2%. It anticipates low single-digit growth in loans alongside credit costs estimated at approximately 20 basis points, and aims for a return on equity exceeding 14%. Group CEO Helen Wong emphasized their commitment to effectively managing the bank's balance sheet in preparation for a potentially lower interest rate environment.

Market Vigilance Amid Geopolitical Uncertainties

"Moving forward, we are vigilant in monitoring potential volatilities driven by the uncertain geopolitical landscape," Wong stated, highlighting the bank's proactive approach amid global uncertainties.

Strong Performance Compared to Competitors

OCBC's outstanding results cap off a remarkable earnings season for Singaporean banks, which have recently benefitted from rising global interest rates and the influx of wealth into Singapore due to its political stability. Both of OCBC's primary competitors, DBS and UOB, also reported record profits for the quarter, driven by increased income from fees and robust trading activity.

Factors Contributing to Profit Growth

The growth in OCBC's performance is notably attributed to a surge in wealth management activities, which boosted both fee and trading income. Furthermore, additional gains were realized in insurance income, coupled with a reduction in allowances for potential loan losses.

February Indicators on Interest Margins and Return on Equity

However, it's important to note that while net interest margins showed a slight decline to 2.18% in this quarter, compared to 2.27% a year earlier, this trend mirrors the performance observed by other major banks such as DBS and UOB.

Increase in Return on Equity and Market Reaction

OCBC also reported a marginal rise in return on equity, increasing from 14% in Q3 2023 to 14.1% in the recent quarter. Following the announcement, OCBC shares saw a notable uptick, closing 3.8% higher at $15.88 on November 7.

Looking Ahead to 2024