OCBC should be seen as ‘financial conglomerate’ unlike local banking peers, says chairman
The lender has two banking licences, insurance arm Great Eastern and an asset manager
OCBC should be seen as a financial conglomerate of many parts, setting it apart from the other two local banks in Singapore, said its chairman Andrew Lee.
Speaking at the lender’s annual general meeting on Tuesday (Apr 30), Lee said that OCBC is “not just a pure bank” – it comprises two banking licences, including one for its private banking arm Bank of Singapore, insurance arm Great Eastern and an asset manager.
“What we are, in terms of the share price and in terms of how we operate, is the sum of the parts,” Lee added.
Lee was responding to several shareholders’ questions on the bank’s capital levels, share price performance, dividends and holdings in Great Eastern.
A shareholder asked if OCBC was reviewing its capital levels and returning the excess to shareholders; another asked if the lender would consider enhancing its share value through higher dividend payouts and bonus share issues.
Lee noted that OCBC’S capital levels are seen as “very high” compared with its local banking peers. Its common equity tier-1 (CET-1) ratio stood at 15.9 per cent for FY2023, while DBS’ was 14.6 per cent and UOB’S was 13.4 per cent.
While OCBC’S “seemingly excess” capital has had some impact on its return on equity – 13.7 per cent in FY2023 – it reflects the board’s views on increasing uncertainties in recent times, Lee said.
He noted that rising geopolitical tensions and unclear macroeconomics have resulted in “ambiguous times which we have not faced”.
“Being prudent is why we have survived in a sustained and continuous form for the past 92 years, and we have every intention to be around for the next 92 and more years.”
He added: “(To steer) through these unprecedented times, where you will more than possibly see storms, I would suggest that we be prudent.”
But Lee also noted that the lender is not a “hoarder” of capital.
OCBC has deployed capital very systematically, into opportunities that suited its strategy at the right price, and will continue to do so, he said.
In 2023, OCBC bought the Indonesian subsidiary of the Commonwealth Bank of Australia, while Great Eastern acquired Malaysia’s Ammetlife Insurance and Ammetlife Takaful.
Lee also shared that the lender is exploring the redevelopment of its Chulia Street property.
“We are not idle in the deployment of capital. But having said that, we recognise the view that if we seem to have excess capital, why not share it with the shareholders,” he said.
Lee noted that the lender has set out a clear dividend policy of a 50 per cent dividend payout going forward, and has achieved a 53 per cent payout ratio in the past two years.
But he added that he “definitely (hears) the shareholders”, and that the board is open to suggestions on further enhancing its share value.
Shareholders also asked about the group’s plans for Great Eastern – a separately listed entity that OCBC has a 88.4 per cent stake in.
Lee emphasised that the insurer remains a strategic pillar for the banking group, and that any improvement in Great Eastern’s performance will flow through to OCBC and be reflected in its share price and dividends.
OCBC, Singapore’s second-largest lender, is due to report its FY2024 first-quarter earnings on May 10. Its shares closed 0.3 per cent or S$0.04 higher at S$14.25 on Tuesday.