OCBC sees loan growth slowing in 2025, unveils US$1.9 billion capital return

SINGAPORE: Singapore's second-largest bank, Oversea-Chinese Banking Corp, said it expects loan growth to moderate in 2025 after posting a smaller-than-expected rise in fourth quarter profit and unveiling a S$2.5 billion (US$1.87 billion) capital return.

OCBC was the only bank to miss forecasts in an otherwise strong fourth quarter earnings season for Singapore banks, which declared multi-billion capital return packages alongside their financial results, sending their shares to record-highs.

Shares of OCBC dropped as much as 2.8 per cent in early trade on Wednesday (Feb 26), underperforming the domestic benchmark index and peers that were relatively flat or slightly lower.

"As we enter the new year, we remain cautiously optimistic on the regional growth outlook and are poised to seize growth opportunities as they arise," OCBC's Group CEO Helen Wong said in a statement.

"We will remain agile in navigating the increasingly complex geopolitical landscape, and volatile macroeconomic environment," she added.

The lender projected 2025 percentage loan growth in mid-single digits, according to presentation slides accompanying the earnings results. This compares with loan growth of 8 per cent achieved in 2024, which exceeded its target of low single-digit growth.

The bank also expected its 2025 net interest margin, a key profitability gauge, to weaken to around 2 per cent, the slides showed, from 2.2 per cent in 2024.

OCBC said the capital return comprises special dividends amounting to 10 per cent of its 2024 and 2025 net profit, with the balance via share buybacks over two years, subject to market conditions and regulatory approvals.

OCBC, which is also Southeast Asia's second-largest lender, said October-December net profit climbed to S$1.69 billion from S$1.62 billion a year earlier, mainly on higher non-interest income boosted by better fee, trading and insurance income.

The better performance, however, missed the mean estimate of nearly S$1.81 billion from five analysts polled by LSEG.

Larger peer DBS Group posted on Feb 10 a 10 per cent year-on-year jump in fourth-quarter net profit that met expectations and announced a dividend capital return plan.

Smaller rival United Overseas Bank posted on Feb 19 a 9 per cent rise in fourth-quarter net profit that beat expectations and announced a S$3 billion package to return surplus capital to investors.

Shares of both banks touched record highs following their earnings releases.

Growth could take a hit this year as US President Donald Trump's trade tariffs and other policies threaten to undermine the global economy, analysts said.

OCBC, which counts Singapore, greater China, Indonesia and Malaysia among its key markets, said return on equity fell to 11.8 per cent in the fourth quarter from 12.4 per cent in the same period of 2023.

Its net interest margin declined to 2.15 per cent during the quarter from 2.29 per cent a year earlier.