[SINGAPORE] OCBC is keeping its financial targets for 2025, but noted that its loan growth guidance of a mid-single digit will likely see the most headwinds, especially if the market continues to be “very uncertain”, said chief executive officer Helen Wong.
Nevertheless, current trade tariffs are expected to have a “first-order impact” on 3 per cent of OCBC’s loan book, with stress tests showing that its portfolio remains resilient, Wong said.
“Refinancing is always there, and we do think that there will be some flight to quality… (But if) economic growth is lower, of course, loan growth will be lower as well,” she said at the briefing for the lender’s first quarter 2025 results on Friday (May 9).
The lender is still planning for three rate cuts this year, Wong said, noting that its March exit NIM was 2.03 per cent.
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She also noted that the lender has cut some of its deposit pricing – it cut interest rates on its flagship 360 deposit account, for instance – which should help manage its funding costs, she added.
As for its costs, it plans to achieve a cost-to-income ratio in the low 40 per cent range, while credit costs are to be in the range of 20 to 25 basis points.
The lender took a “prudent approach” to set aside additional preemptive allowances in view of the current macroeconomic uncertainties and heightened geopolitical tensions.
Total allowances grew 2 per cent on quarter to S$212 million, comprising S$94 million in allowances for impaired assets and S$118 million in allowances for non-impaired assets.
China, Asean strong trading ties
Responding to questions about shift in trade flows, Wong noted that the China plus one strategy has been happening for many years – trade tension between the US and China dates as far back as 2015.
In fact, Chinese corporates are diversifying into more than one market, and they are already expanding beyond manufacturing to target Asean markets – resulting in Asean and China becoming each other’s largest trading partners over the years.
It is also not easy to shift manufacturing abilities in a short period of time, hence corporates are unlikely to react strongly to immediate tariff impact.
“What most bigger corporates have done is prepare for the future, so having a diversified manufacturing phase is important, but where you source your materials is also important,” the CEO said.
Supply chains will be easier to shift, but will also unlikely happen in a day or a quarter, for example.
“For any good business, if they do plan correctly, they always have options which will make them switch from time to time,” she said.
Q1 results beat
Net profit for the three months ended Mar 31, 2025, stood at S$1.88 billion, compared with S$1.98 billion from the year-ago period, narrowly beating the S$1.86 billion consensus forecast in a Bloomberg survey of five analysts.
Net interest income for the quarter fell 4 per cent to S$2.35 billion, due to a falling interest rate environment. NIM was down to 2.04 per cent for the quarter, from 2.27 per cent in the previous corresponding period.
Non-interest income was up 10 per cent to S$1.31 billion, on stronger fees, trading and insurance income.
The bank’s non-performing loans ratio was 0.9 per cent, down from 1 per cent in the same period a year ago.
Operating expenses rose 5 per cent from the same period a year ago to S$1.42 billion, driven by higher staff costs from annual salary adjustments and volume-related compensation, as well as “continued investments in technology”.
Shares of OCBC rose S$0.08 or 0.5 per cent to S$16.24 as at the midday break on Friday.
