OCBC is the last of the local banks to release their results. As expected, similar to the other two banks, they have benefitted from the higher NIM this year and achieved a record net profit.
A final dividend of 42 cents is declared, slightly higher than last year’s 40 cents. The increase might look disappointing when viewed on its own, but on a full year basis, it is a good 21% increase! Hence, I have no complain about it.
Psychologically, I might feel a bit happier though, if they have declared an interim dividend of 34 cents (vs 28 cents) and final dividend of 48 cents (vs 40 cents). Yes, it’s the same amount of dividend for the full year, but our mind always plays trick on us.
At today’s closing price of $13.01, the annual dividend of $0.82 provides a yield of 6.3%. Of course, the concern will always be if this can be sustained, with the expected rate cut in the second half of this year.
Assuming the boss is spot on with her 2024 target, then I would think the group can at least maintain what they achieved this year. The drop in NIM can be mitigated by the increase in loan growth and non-interest income. So dividend for the upcoming financial year is likely to be around $0.82.
As for FY2025, it really depends on how much further NIM will drop, how much they can grow their loan book, how fast they can grow their non-interest income, and even if allowance will be smaller. As seen from the above table, all these will impact the eventual net profit.
Among these, I will be keeping a closer eye on the growth of their non-interest income. While they have grown it by 7% this year, it pales compared to the double digits growth by DBS and UOB.
This is the second full year since Helen took over the stewardship of the group. She has re-organised and set a new direction for the group. Let see if this will be translated into actions and results for OCBC in the next two years.
I will be holding on to my current stake.
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