In my last post, we looked past the headlines of UOB’s slight earnings dip to find the underlying growth in its customer base. Just a day later, Oversea-Chinese Banking Corporation (OCBC) released its own Q1 2026 report card with quite some stellar results.
OCBC actually posted a 5% year-on-year increase in net profit to a record S$1.97 billion
Let's look under the hood to see how did they achieve this while operating in the exact same lower-interest-rate environment as their peers.
NIM Compression Managed
OCBC was no exemption to the net interest margin compression.
- Net Interest Income (NII): OCBC’s NII declined by 5% year-on-year to S$2.22 billion.
- Net Interest Margin (NIM): Their NIM dropped by 28 basis points from a year ago, landing at 1.76%. OCBC saw worst NIM compression that DBS and UOB this quarter.
However, the drop in asset yields was mitigated by two things: lower funding costs (paying less on deposits) and a robust 10% growth in average assets
Even with loans expanding by 9%, OCBC's asset quality remains rock solid. Their Non-Performing Loan (NPL) ratio has stayed completely flat at 0.9% for eight consecutive quarters
Non-Interest Income Steals The Show
The real reason OCBC managed to hit record total income (S$3.83 billion) despite the NII squeeze comes down to their diversified revenue streams.
- Non-Interest Income Surge: This segment jumped a massive 23% year-on-year to S$1.61 billion. It now makes up over 40% of the group's total income.
- Wealth Management: Just like UOB, OCBC is leaning heavily into the underpenetrated ASEAN affluent segment. Their wealth management income rose 11% to S$1.48 billion. Furthermore, wealth management fees specifically skyrocketed by 34%.
- AUM Growth: Banking wealth management Assets Under Management (AUM) grew 12% to S$342 billion, driven by net new money inflows across all wealth segments.
- Insurance: Income from life and general insurance improved by 34% to S$409 million
. OCBC owns a 93.7% stake in insurer Great Eastern Holdings.
This perfectly validates a broader structural trend in Singapore banking: as the easy money from high interest rates fades, the banks with strong wealth management and fee-generating arms are the ones that will continue to grow the bottom line.
The Next Frontier
CEO Tan Teck Long highlighted that this performance is a direct result of executing their "Next Frontier" strategy
Management pointed to the recent acquisition of HSBC’s wealth business in Indonesia. According to OCBC: The total AUM to be transferred is S$6.6 billion. This comprises S$4.3 billion of customers’ investments in mutual funds and bonds, as well as insurances, and customer deposits of S$2.3 billion.
This gives OCBC a high-quality portfolio with significant AUM and deepens their CASA (Current Account Savings Account) balances. In fact, total customer deposits across the group already grew 10% year-on-year to S$444 billion, improving their CASA ratio to a very healthy 50.2%.
The acquisition is said to have great synergy with OCBC Indonesia's existing portfolio, and will be earnings accretive to OCBC after completion expected in the second quarter of 2027.
My Verdict
OCBC stands strong with an annualized Return on Equity (ROE) standing strong at 13.0% and Net Asset Value (NAV) per share climbing to S$13.82 (up from S$13.17 a year ago).
It is my view that the banks have performed incredibly well against the odds, to be growing profits even in this adverse macro environment. They are generating record non-interest income today, which perfectly sets the stage for a big bottom-line recovery when interest rates bottom out.
CFO Goh Chin Yee also noted at the results briefing that OCBC is sitting on S$800 million worth of capital for share buybacks, which they are open to giving out as special dividends. Dividing this figure by the shares outstanding of roughly 4.5bil shares, this gives us potentially yet another special dividend of $0.17-0.18 per share. All Huat !!
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