OCBC Q4 profit up 3% while full-year dips 2%; bank cautious on outlook

SINGAPORE - OCBC Bank on Feb 25 posted a rise in fourth-quarter profit as non-interest income offset the impact from declining interest rates and allowances were lowered.

Earnings for the quarter ended December 2025 were $1.75 billion, up 3 per cent from a year ago, and beating analysts’ estimate of $1.72 billion in a Bloomberg poll.

The bank recommended a final dividend of 42 cents and a special dividend of 16 cents for 2025, as part of its previously announced capital return plan.

The total payout for 2025 amounts to 99 cents, down from 101 cents in 2024.

OCBC group chief executive Tan Teck Long, in his first earnings briefing since taking the helm in January, said that the bank will continue with its 50 per cent ordinary dividend payout policy in 2026 and complete its $2.5 billion capital return plan by the year end.

For its 2026 outlook, the bank sees stable to growing total income and slight to moderate decline in net interest income. OCBC also expects credit costs in the range of 20 to 25 basis points and mid-single digit loan growth.

Mr Tan said that the conservative outlook stemmed from uncertain market conditions and continued pressure from softening interest rates.

“Currently, the bank’s still digesting the effect of NIM (net interest margin) compression, so that is a big uncertainty,” he said. “So that’s why we are a little bit cautious.”

“If we grow our revenue, if we grow our profit, that 50 per cent (payout policy) could actually translate to a higher dividend,” he added.

In a statement, he said that the results reflect the strength of the bank’s fundamentals and disciplined execution amid a challenging operating environment.

Mr Tan also said that OCBC has launched a new corporate strategy, as the bank closes out its previous three-year strategy of unifying its brand across core markets and realising stronger synergies under the group.

Its new strategy involves “capturing rising Asia flows, deepening our core market franchise, advancing technology-led and customer-centric capabilities through artificial intelligence, digital and data, and continuing our support for green transition”, he added.

The new corporate strategy is expected to drive stable to improving return on equity, with a stronger focus on higher-returning businesses.

It will also maintain cost discipline with cost-to-income ratio – a key banking efficiency metric – at low- to mid-40 per cent.

“We are forging ahead to our new frontier growth strategy. We are going to focus quite a lot on higher-returning businesses,” said Mr Tan.

To do so, OCBC will capture rising Asian wealth flows through its Singapore-Hong Kong twin wealth hubs approach. It will also continue leveraging OCBC’s regional network to capture Asean-Greater China flows.

On the bank’s tech shift, Mr Tan said that some AI technologies are more mature and the bank has already created business synergies with them.

However, agentic AI technologies, while promising, may not be ready today, he noted.

“Our focus on customer journeys supported with an AI, digital and data strategy makes us AI-ready, so that when the AI technology is mature, we will plug it into our system,” he said.

OCBC’s private banking arm, Bank of Singapore, in October 2025 made inroads into agentic AI, rolling out a tool to shorten the time it takes to generate source-of-wealth reports from 10 days to as little as an hour.

OCBC also wants to continue leveraging its edge to serve customers across banking, wealth and insurance, said Mr Tan, referring to subsidiaries Bank of Singapore and Great Eastern.

“Under the whole wealth initiative, we want to have a much more integrated and coordinated effort in delivering our services to the whole wealth continuum,” he said.

The bank sees opportunities such as growing its affluent segment in Hong Kong, working with Great Eastern Malaysia to better serve customers there and enabling wealth customers in Indonesia to move to the higher end of the wealth spectrum.

Mr Tan also noted that high-net-worth families are very concerned about preservation of wealth and inter-generation transfer of wealth, thereby building demand for succession planning and wealth transfer services.

OCBC’s net interest income in the fourth quarter fell 6 per cent to $2.3 billion, as NIM – a key profitability gauge – fell to 1.86 per cent from 2.15 per cent a year ago.

Non-interest income rose 37 per cent to $1.32 billion, driven by strong broad-based growth across fee, trading and insurance income.

Net fee income grew 16 per cent to $602 million, from $517 million a year ago, largely driven by a 26 per cent increase in wealth management fees, coupled with higher loan-related, brokerage, fund management and credit card fees.

Net trading income rose 30 per cent to $395 million, lifted by higher customer flow income from both wealth and corporate segments.

Insurance income from Great Eastern more than doubled to $226 million from $101 million a year ago, driven by improved insurance and investment performance, and in part due to the negative adjustment arising from changes in the medical insurance environment reported in the previous year.

Total allowances in the quarter were $200 million, 4 per cent lower than $208 million a year ago. Credit costs were at 20 basis points of loans on an annualised basis, compared with 21 basis points a year earlier.

For 2025, net profit was 2 per cent lower at $7.42 billion, after tax expenses rose 27 per cent.

Net interest income for the year fell 6 per cent to $9.15 billion as asset yields fell faster than funding costs due to steep declines in key benchmark rates. NIM in 2025 fell to 1.91 per cent from 2.2 per cent a year ago.

Non-interest income rose 16 per cent to $5.46 billion, driven by double-digit growth across fee, trading and insurance income.

Total allowances for 2025 declined 4 per cent to $665 million, mainly due to lower allowances for non-impaired assets. Credit costs were lower at 17 basis points of loans, compared with 19 basis points a year ago.

As at end-2025, total non-performing assets were $3.24 billion, up 13 per cent from a year ago.

OCBC is the last of the three local banks to report fourth-quarter and 2025 earnings. DBS Bank and UOB reported drops in both as sharply lower interest rates hit margins.

OCBC’s shares closed 0.14 per cent lower at $21.40. DBS dipped 0.29 per cent to $57.69, while UOB declined 0.59 per cent to $36.98.