The critical team helping to drive OCBC’s 115% profit surge
It’s a good time to work in wealth management at a Singaporean bank. At DBS, Q1 fee income from wealth was up 24% year-on-year to a quarterly high of S$519m. Yesterday, UOB said it had experienced “strong momentum in wealth management fees boosted by a pick-up in the equity market” as fee income increased 19% to S$239m for the opening quarter.
Today it was OCBC’s turn. Its Q1 results reveal a 10% YoY jump in wealth fee income to a record S$321m. Compared with Q4, fees were up 28% “underpinned by increased customer and investment activities as market sentiments improved”. As a proportion of OCBC’s total income (including but not limited to fees), wealth management contributed 41%.
This performance comes as OCBC competes against global banks – notably Citi, HSBC and Standard Chartered – which have expansionist business plans in Asian wealth management. In January, Citi opened its largest wealth centre globally in Singapore’s Orchard Road.
While some of OCBC’s Q1 success in wealth was driven by units such as premier banking and asset management, private bankers at OCBC’s Bank of Singapore (BoS) franchise also played their part. Assets under management rose 18% year-on-year to US$123bn as at 31 March. Other big players in Asian private banking have registered similar upticks in AUM, so the rise will help keep BoS competitive amid the ongoing battle for relationship managers in Singapore and Hong Kong. Asian AUM at Credit Suisse was up 23% to US$265bn in Q1.
As at other banks in Asia, traders at OCBC enjoyed a strong first quarter. Trading income was S$316m, up from S$264m in Q4, and from just S$18m a year previously, although the latter figure was presumably impacted by market volatility at the time.
Overall profit at OCBC surged 115% to $1.5bn in the first quarter, but this was partly driven by a decline in allowances. Still, OCBC’s earnings exceeded analyst expectations. They also follow strong Q1 financial results for DBS and UOB, and for the regional units of some global banks, including Credit Suisse, Morgan Stanley and Goldman Sachs.
Like her counterparts at DBS and UOB, OCBC chief executive Helen Wong said her bank is benefiting from an economic recovery in Asia. “Earnings were up in our core markets and the momentum across our businesses is building up from renewed market optimism. While we remain watchful of the prevailing risks in the operating environment, our strong balance sheet and capital position will enable us to capitalise on opportunities arising from improved economic conditions, particularly in ASEAN and Greater China,” Wong said in a statement.
It’s not yet possible to determine whether OCBC’s recovery has led to higher average compensation for its employees. Staff expenses were up 6%, but OCBC will not release its latest headcount numbers until its half-year earnings are published, so we can’t calculate pay per head until then.
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