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Issuer Flash: OCBC 1Q2026 Results

Issuer Flash: OCBC 1Q2026 Results

Report date: 2026-05-08 Event date: 2026-05-08 Event title: 1Q 2026 Results

1. Flash Conclusion

OCBC's 1Q2026 results are mildly positive from a credit perspective. Net interest income (NII) and net interest margin (NIM) declined notably due to lower interest rates, but non-interest income—driven by wealth management, fees, trading, and insurance—reached record levels, resulting in group net profit of S$1.974bn, up 5% year-on-year and 13% quarter-on-quarter. For bond investors, the takeaway is not that "there is no NIM decline," but rather that "the decline in NIM is being absorbed by diversified income, asset growth, low credit costs, and robust capital."

However, interpreting this as a straightforward earnings upgrade would be excessive. NII fell 5% year-on-year to S$2.222bn, and NIM declined 28bps from a year ago to 1.76%. OCBC offset this through non-interest income, but quarterly fluctuations exist in insurance and trading income. Additionally, the bank set aside S$191m in provisions for non-impaired assets as a buffer against macro uncertainties. Therefore, the conclusion is: "Credit durability confirmed for a high-quality issuer, though the 2026 revenue composition and credit cost warrant continued monitoring."

2. What Was Announced

On May 8, 2026, OCBC announced its 1Q2026 results. Total income reached S$3.828bn, up 5% year-on-year and 6% quarter-on-quarter, setting a new high. Operating expenses were S$1.505bn, and the cost-to-income ratio remained below 40% at 39.3%, reflecting continued growth investment while maintaining efficiency.

Revenue composition highlighted a clear shift: declining NII versus expanding non-interest income. NII was S$2.222bn, down 5% year-on-year and 3% quarter-on-quarter. NIM declined to 1.76%, from 2.04% a year ago and 1.86% in the prior quarter. Non-interest income rose 23% year-on-year and 22% quarter-on-quarter to S$1.606bn, accounting for 41.9% of total income. Net fee income was S$675m, trading income S$434m, and insurance income S$409m.

Wealth management income reached S$1.483bn, up 11% year-on-year, representing 39% of total income. Banking wealth management assets under management (AUM) were S$342bn, up 12% year-on-year. This underscores OCBC's role as a comprehensive financial group encompassing private banking, premier banking, insurance, asset management, and stockbroking, beyond traditional lending.

On the balance sheet, customer loans were S$347bn, up 9% year-on-year, and customer deposits S$444bn, up 10% year-on-year. CASA deposits were S$223bn, with a CASA ratio of 50.2%, and the loans-to-deposits ratio was 77.2%, indicating a stable funding profile.

Asset quality remains stable. The NPL ratio held at 0.9% for the eighth consecutive quarter, with NPAs declining 4% quarter-on-quarter to S$3.120bn. Total NPA coverage rose to 163% from 151% at end-2025. Total provisions were S$216m, of which S$25m was for impaired assets and S$191m for non-impaired assets. The latter reflects a management overlay for macro uncertainties rather than a spike in actual losses.

Capital and liquidity remain strong. CET1 ratio at end-March 2026 was 17.0% on a transitional basis and 15.2% fully phased-in. Tier 1 ratio was 17.7%, and total capital ratio 19.7%. All-currency LCR was 138%, Singapore dollar LCR 333%, and NSFR 113%, providing ample cushion for senior bondholders.

3. Credit Read-Through

First, the results confirm OCBC's credit floor. Maintaining profit growth despite NIM declining to 1.76% demonstrates earnings absorption capacity in a falling rate environment. Notably, a 34% increase in wealth management fees and 12% growth in banking wealth management AUM confirm the functionality of non-interest income pillars.

Second, asset quality remains strong. The NPL ratio of 0.9% was stable, NPAs declined quarter-on-quarter, and new corporate NPA formation dropped from S$399m in 4Q25 to S$123m in 1Q26. Previously noted concerns around selective real estate and corporate exposures did not broaden into widespread deterioration in 1Q26.

Third, provisions are conservative. Credit costs were low at 23bps, yet S$191m was allocated to non-impaired assets. This anticipates uncertainties from geopolitical tensions, inflation, tariffs, and energy prices, which weighs on near-term P&L but enhances coverage to 163%, positive from a credit perspective.

Fourth, capital adequacy remains ample. Fully phased-in CET1 at 15.2% is comfortable even under the finalized Basel III framework. OCBC is simultaneously generating profits, growing assets, and managing dividends and investment while maintaining a safe capital buffer. AT1 and Tier 2 instruments may carry product-specific risks, but the issuer's credit quality is strong.

Overall, OCBC continues to be a defensive, high-grade Singapore bank credit. No major shift in view is warranted, but three areas merit monitoring through 2026: NIM decline, reproducibility of non-interest income, and whether the overlay converts into actual losses.

4. What To Watch Next

First, NIM. 1Q26 NIM fell to 1.76%, down 10bps from the prior quarter. It will be important to observe whether NII declines further in 2Q26 and beyond, or stabilizes via asset growth and deposit repricing.

Second, the sustainability of non-interest income. Wealth management income of S$1.483bn and banking wealth management AUM of S$342bn are strong, but trading and insurance incomes are subject to quarterly volatility. The stability of a structure where non-interest income accounts for over 40% of total income warrants attention.

Third, asset quality and the overlay. While the NPL ratio remained stable in 1Q26, the S$191m provision for non-impaired assets signals management's caution regarding future risks. Monitoring whether this remains a conservative overlay or translates into actual NPA formation is key.

Fourth, capital management. The acquisition of HSBC's Indonesia wealth business aligns with the Next Frontier strategy, but in a context of simultaneous acquisitions, dividends, and risk asset growth, maintaining fully phased-in CET1 in the mid-15% range requires attention.

5. Sources

Primary sources used in this flash:

6. Unverified / Pending