OCBC traders cash in even as banking profit plummets
Traders at OCBC outperformed their colleagues in other departments during a first half that saw group net profit plummet 42% at the Singapore bank.
OCBC’s Global Treasury and Markets division registered a 46% year-on-year rise in operating profit (after allowances) to S$378m in H1, driven by “higher net trading income, net interest income and realised gains from its fixed income portfolio”, according to the bank’s first-half financial report.
This result means OCBC’s traders have exactly matched the numbers of their rivals at DBS, which yesterday announced a S$378m profit in Treasury Markets, but with an even higher year-on-year increase of 89%. Singapore’s other local bank, UOB, also benefited from market volatility as its Global Markets division generated a profit of S$288m for the first half, up 76%.
Overall H1 profit at OCBC, however, fell 42% to S$1.43bn as the bank set aside higher allowances against expected credit losses “in the deteriorating economic environment brought about by the Covid-19 pandemic”. Global Wholesale Banking – which houses services including investment banking and cash management – was particularly badly affected. The division’s operating profit was only S$30m, down 97% from a year ago, “attributable to a substantial rise in allowances”.
As OCBC looks to keep costs under control, chief executive Samuel Tsien said it will “continue to contain all discretionary expenditure, including management compensation”. This suggests that senior staff will receive conservative 2020 bonuses.
OCBC did not break out profit or revenue for its private bank, Bank of Singapore, although the unit’s assets under management grew 8% quarter-on-quarter and 1% year-on-year to US$113bn (S$157bn).
It was a busy first half for OCBC’s technologists, who like their counterparts at DBS and UOB, rolled out new products during the pandemic and had to cope with sharp rises in usage of their digital channels. There was, for example, a 1.8-fold increase in the number of SME accounts opened digitally in H1, while digital wealth transactions were 2.3-times higher than a year previously. The bank accelerated its “digital transformation” in H1 via a range of new projects, such as integrating with Google Pay to enable peer-to-peer payments.
Meanwhile, CEO Tsien reaffirm his commitment, first made back in April, not to make “retrenchments in the midst of Covid-19”. OCBC’s headcount inched up by 113, from 30,492 at end-December to 30,605 at end-June. As we reported in June, it has more ambitious plans for the second half and wants to take on 2,100 full-time staff, although natural attrition will mean its headcount will not rise by this amount.
Tsien said it is important for bank to “defensively shore up their balance sheet and prepare for the slow recovery”. “With the ongoing pandemic and rising geo-political risks, the near-term market outlook is very uncertain,” he added.