OCBC posts record Q1 profit, makes $1 billion bid to take Great Eastern private

By Yantoultra Ngui and Poonam Behura

SINGAPORE (Reuters) -Singapore's second-largest bank Oversea-Chinese Banking Corp (OCBC) posted on Friday a better-than-expected 5% rise in first-quarter profit and made a S$1.4 billion ($1.04 billion) offer to take its insurer arm Great Eastern private.

OCBC, Great Eastern's biggest shareholder, offered a 37% premium over Great Eastern's last traded shares price to buy the 11.56% stake in the insurer that it does not currently own, valuing the insurer at S$12.12 billon.

It plans to delist Great Eastern from the Singapore bourse if the deal goes through.

OCBC, which is also Southeast Asia's No. 2 lender, forecast its net interest margin at the higher end of a 2.20% to 2.25% range for the full year. It had first provided the range in February.

Net interest margin, a key profitability gauge for banks, declined slightly to 2.27% during the quarter from 2.30% a year earlier.

It's full year forecast now assumes a lower number of global rate cuts, said OCBC's Group CEO Helen Wong during a briefing with analysts and reporters.

OCBC maintained 2024 targets of low single-digit loan growth, credit costs between 20 to 25 basis points and 50% dividend payout ratio target.

"While some recent economic indicators are looking more favourable, near-term risks remain, such as heightening geopolitical volatility arising from ongoing wars and the outcome of a number of key elections this year," Wong said.

OCBC said January-March net profit climbed to S$1.98 billion ($1.46 billion) from S$1.88 billion a year earlier, driven by stronger operating profit.

That beat the mean estimate of S$1.77 billion, or a 5.9% year-on-year decline, from four analysts polled by LSEG.

Shares of OCBC rose 1.5% Friday morning, outperforming the local benchmark stock index's 0.7% rise.

Separately, Wong said she was not available for the HSBC CEO job after Citigroup analysts named her as one of several potential external candidates to replace Noel Quinn following his announcement on April 30 to step down from the role.

Wong has previously worked at HSBC alongside the likes of Lloyds Banking Group CEO Charlie Nunn and former Standard Chartered investment bank chief Simon Cooper.

"I am not available for that job," she said when asked about her interest in the HSBC top role.

STRONG QUARTER

OCBC's results rounded up strong first-quarter earnings from Singapore banks that all beat market expectations amid a higher-for-longer interest rates environment globally.

The city-state has benefited from strong inflows from wealthy clients in Asia, including in China, as well as from Europe and the Americas, drawn in by its political stability.

In the first quarter, OCBC reported a 1% rise in wealth management assets under management to S$273 billion from a year earlier.

Larger peer DBS Group posted this month a 15% jump in first-quarter net profit that trumped forecasts. It added full-year earnings for 2024 were expected to exceed the record result.

Smaller peer United Overseas Bank (UOB) posted on Wednesday a smaller-than-expected 2% drop in first-quarter profit and said it was confident of preventing further declines in its net interest margin.

OCBC's return on equity was 14.7% in the first quarter, unchanged from the same period of 2023.

($1 = 1.3526 Singapore dollars)

(Reporting by Yantoultra Ngui and Poonam Behura; Editing by Jamie Freed & Shri Navaratnam)