First Quarter 2016 Results Presentation 29 April 2016 Disclaimer: This material should be read as an overview of OCBC’s current business activities and operating environment. It should not be solely relied upon by investors or potential investors when making an investment decision. OCBC Bank accepts no liability whatsoever with respect to the use of this document or its content.
Agenda Results Overview 1Q16 Group Performance Trends Performance of Major Subsidiaries – Great Eastern Holdings – OCBC Wing Hang – OCBC Malaysia – OCBC NISP Summary Appendix: Wealth management income Note: - Certain comparative figures have been restated to conform with the current period’s presentation - Amounts less than S$0.5m are shown as “0”; - “nm” denotes not meaningful; 2 - “na” denotes not applicable; - Figures may not sum to stated totals because of rounding
1Q16 Highlights Net profit of S$856m was 14% lower YoY; operating profit from banking operations up 3% YoY • Banking operations – Operating profit up 3% YoY, driven by increased Core net profit and core ROE net interest income, higher non interest income and cost discipline • Insurance operations – Earnings contribution from Great Eastern 13.2% 1/ 13.2% 12.3% (“GEH”) decreased by S$108m or 59% YoY, largely due to unrealised 10.1% mark-to-market losses from its bond & equity investment portfolio. Otherwise, GEH’s underlying insurance business fundamentals were 12.4% 11.8% Earnings 10.6% 10.7% strong, with Total Weighted New Sales up 9% and NBEV stable YoY • Operating expenses well-controlled, up 6% YoY and 5% lower QoQ +13% YoY • Net allowances rose YoY from higher specific allowances and prudent portfolio allowances set aside; down 13% QoQ 3,903 -14% • Share of results of associates up 19% YoY YoY 3,451 993 • Customer loans up 1% YoY in constant currency terms 856 • Customer deposits lower YoY from lower fixed deposits against Assets and weak loan demand; CASA ratio increased further to 49.3% liabilities • NPL ratio at 1.0%; credit cost stayed low at under 0.2%, coverage ratios healthy • Capital position strong; CET1 and Tier 1 at 14.6% and 15.1% respectively, Total CAR at 17.3%. Fully-loaded CET1 improved to 2014 2015 1Q15 1Q16 Capital and 12.4% Core net profit (S$m) liquidity Core ROE (%) • Leverage ratio at 8.2%, better than the 3% minimum requirement Fully loaded CET1 CAR (%) • Average all-currency Liquidity Coverage Ratio (“LCR”) for 1Q16 was 122% 1/ The YoY decline in 2015 ROE was largely due to the enlarged share base, arising from the OCBC Rights Issue in September 2014 3
1Q16 net profit decreased 14% YoY to S$856m 1Q16 1Q15 YoY 4Q15 QoQ OCBC Group S$m S$m +/(-)% S$m +/(-)% Net interest income 1,249 5 1,341 (3) 1,307 Non-interest income 859 (12) 960 (22) 753 Total income 2,108 (2) 2,301 (10) 2,060 Operating expenses (873) 6 (974) (5) (923) Operating profit 1,137 1,235 (8) 1,327 (14) Amortisation of intangibles (24) - (25) (2) (24) Allowances (64) 162 (193) (13) (167) Associates 89 19 63 68 106 Tax & non-controlling interest (“NCI”) (243) (19) (212) (8) (196) Net profit 856 993 (14) 960 (11) 4
1Q16 operating profit before GEH contribution (Banking Operations) up 3% YoY; however net profit fell 4% as a result of increased allowances 1Q16 1Q15 YoY 4Q15 QoQ Banking Operations S$m S$m +/(-)% S$m +/(-)% Net interest income 1,230 4 1,312 (2) 1,284 Non-interest income 578 4 677 (12) 599 Total income 1,808 4 1,989 (5) 1,883 Operating expenses (819) 6 (916) (5) (868) Operating profit 1,015 989 3 1,074 (5) Allowances (64) 156 (181) (10) (163) Associates 92 19 68 60 109 Amortisation, tax & NCI (204) (12) (181) (2) (179) Net profit from banking operations 782 813 (4) 780 - 181 (59) 180 (59) GEH net profit contribution 73 OCBC Group net profit 856 993 (14) 960 (11) 5
Agenda Results Overview 1Q16 Group Performance Trends Performance of Major Subsidiaries – Great Eastern Holdings – OCBC Wing Hang – OCBC Malaysia – OCBC NISP Summary Appendix: Wealth management income 6
Earnings well-diversified across key geographies and main businesses 1Q16 PBT 1Q16 PBT by Business 1/ by Geography PBT OCBC Group S$1,052m Wing Hang Others YoY: -15% Greater 0.4% China 7% Singapore Insurance 21% S$575m 10% YoY: -18% (within which Global Malaysia OCBC Wing Treasury Hang: 7%) S$190m 11% 49 % and YoY: -9% Markets 48% Indonesia Indonesia 6% S$61m YoY: +14% Global Corporate / 20 % 24% Greater China Investment S$222m 18% Banking Global YoY: -6% Consumer / Malaysia 55% Private Others Banking S$4m Singapore YoY: -90% 1/ Operating profit after allowances and amortisation. Excludes the Others segment, which 7 comprises mainly property holding, investment holding and items not attributable to the business segments described above.
Net interest income rose 5% YoY, driven by 13 bps improvement in NIM Net interest 1.74% 1.75% 1.67% 1.66% margin 1.67% 1.68% 1.62% 5,189 1,341 4,736 1,317 1,307 1,282 1,249 Net interest income (S$m) 2014 2015 1Q15 2Q15 3Q15 4Q15 1Q16 8
Non-interest income fell 12% YoY, mainly due to lower fee and insurance income 42.3% 41.7% 40.7% 40.4% 40.5% 37.1% 36.6% Non- interest income / Total 3,533 960 income 939 3,213 859 781 174 775 272 753 930 237 2/ 98 364 122 2/ 195 26 78 1/ 242 101 65 552 196 Non- 70 163 364 123 122 interest 193 62 182 47 45 income 39 34 (S$m) 1,643 438 1,495 408 402 395 374 2014 2015 1Q15 2Q15 3Q15 4Q15 1Q16 Fees & Dividends & Trading Net gains from Life & General commissions rental income income investment securities Insurance and others Note: Excludes non-core gains 1/ Includes a one-off gain of S$32m from the partial disposal of GEH’s stake in its China joint venture 9 2/ Includes a realised gain of S$136m from sale of an investment in GEH’s equity portfolio
Fee income down 5% YoY, from decline in wealth management, trade-related and investment banking fees -5% YoY -7% 1,643 QoQ 438 1,495 408 276 402 395 65 212 374 86 72 61 78 30 86 74 18 19 19 14 556 Fees and 146 558 commissions 137 137 135 (S$m) 126 219 62 172 49 57 52 51 506 135 467 129 124 118 109 2014 2015 1Q15 2Q15 3Q15 4Q15 1Q16 Wealth Brokerage & Fund Loan, Trade & Investment Others 2/ management 1/ Management Guarantees Banking 1/ Mainly comprising income from private banking, and sales of unit trusts, bancassurance 10 products, structured deposits and other treasury products to consumer customers 2/ Others includes credit card fees, service charges and other fee and commission income
Profit from life assurance declined 58% YoY and 65% QoQ, as a result of unrealised mark-to-market losses from bond and equity investments under its Non-participating Fund -58% YoY 768 -65% QoQ 630 207 236 Profit from 199 38 164 life assurance 50 (S$m) 132 423 164 331 41 83 116 62 57 47 35 1 138 135 35 35 33 34 33 (6) 2014 2015 1Q15 2Q15 3Q15 4Q15 1Q16 Participating Fund Non-participating Fund Investment-linked Fund 11
Operating expenses rose 6% YoY, but declined 5% QoQ 44.8% 43.0% 42.3% 42.0% 41.4% 41.3% 41.0% Cost / Income 3,664 3,258 974 673 923 918 900 873 636 188 162 164 164 157 737 619 206 Operating 183 179 180 172 expenses (S$m) 2,254 2,003 580 575 578 556 544 2014 2015 1Q15 2Q15 3Q15 4Q15 1Q16 Staff costs Others Property & equipment 12
Net allowances for loans and other assets higher YoY but lower QoQ 488 79 Net 193 allowances 357 for loans 167 43 and other 150 12 assets 232 35 (S$m) 196 76 99 80 65 1 64 47 177 163 45 74 56 50 32 20 (2) (1) 2014 2015 1Q15 2Q15 3Q15 4Q15 1Q16 Net specific allowances/ Impairment charges/ (write- Portfolio allowances (write-backs) back) for other assets As a % of avg. loans (bps) 1/ Net specific 10 11 9 9 12 14 19 loan allowances Total loan 19 19 13 15 21 28 30 allowances 2/ 1/ Quarterly figures annualised 13 2/ Total loan allowances include net specific allowances and portfolio allowances
Net specific allowances for loans were higher YoY 1Q16 1Q15 4Q15 S$m S$m S$m Allowances for new and 136 78 118 existing loans Write-backs 1/ (26) (23) (29) Recoveries 2/ (11) (10) (13) Net specific allowances 99 45 76 1/ Write-backs of specific allowances for existing NPLs due to settlements and repayments 14 2/ Recoveries of allowances for loans that had been written off
Customer loans up 1% YoY in constant currency terms as growth in corporate and consumer loans more than offset a drop in trade loans Loan growth 213 210 210 211 208 Group YoY: -1%; QoQ: -1% 22 21 24 24 22 In constant currency terms YoY: +1%; QoQ: flat 56 59 52 Rest of the world 57 58 YoY: -11% QoQ: +4% Customer 17 17 16 14 14 Greater China Loans (S$b) YoY: -9% QoQ: -8% 29 29 28 29 28 Indonesia YoY: +19% QoQ: -2% Malaysia 88 88 86 86 87 YoY: +2% QoQ: +3% Singapore YoY: +3% Mar15 Jun15 Sep15 Dec15 Mar16 QoQ: +1% Note: Customer loans by Geography based on where the credit risks reside, which may be 15 different from the borrower’s country of residence or the booking location of the loans
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