OCBC ANNUAL GENERAL MEETING HELD ON APRIL 22, 2022
POST-GA RESPONSES TO SUBSTANTIAL AND RELEVANT QUESTIONS
Singapore, Monday April 25, 2022 – Overseas-Chinese Banking Corporation Limited (“OCBC Bank”) thank the shareholders for their presence and participation in the 85and Annual general meeting (“AGM 2022“), which was convened electronically on Friday, April 22, 2022 at 2 p.m.
Due to time constraints, we have not been able to answer all the important and relevant questions that have been submitted “live” at the 2022 GA. Therefore, we provide our answers to these questions below.
Thank you for supporting OCBC Bank.
By order of the council
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POST-GA RESPONSES TO SUBSTANTIAL AND RELEVANT QUESTIONS
It is observed that most of the board members are quite old as far as age is concerned. Is there a renewal/succession process to maintain the dynamism of the company?
All members of our Board of Directors bring a wealth of knowledge derived from their many years of experience over several economic cycles. The most important factors for board members are the right mix of diversity, skills, knowledge, experience and skills, not age per se. In Singapore, there is no upper age limit for directors. Under the Bank’s Constitution, one-third of the members of the Board of Directors retire at each annual general meeting and, if eligible, may be re-elected. The Bank continually reviews the composition of its Board and seeks qualified directors as part of its Board renewal process.
Can OCBC quantify 3-year goals for revenue, net profit and assets under management?
To drive growth and deliver sustained performance, we have refined our strategic priorities and updated our corporate strategy, as outlined in our 2021 Annual Report and CEO presentation at the AGM.
Our strategic priorities to achieve our growth objectives are:
• Seizing opportunities and unlocking the value of Asian growth
• Accelerate digital transformation
• Forge an integrated “One Group” approach to further improve the customer experience, stimulate efficiency, capture synergies and manage risks prudently
• Foster sustainability and embed ESG across the Group
What are OCBC’s plans for Great Eastern Holdings?
Insurance is one of the three main business pillars of OCBC diversified commercial franchise, and our insurance business is carried on by Great Eastern Holdings (“GEH”). GEH is an established market leader and trusted brand in Singapore and Malaysia, and has a broad base of over 10 million policyholders.
Our strategic priorities include creating an integrated “One Group” approach to further elevate the customer experience, increase efficiency, capture synergies and manage risk prudently. We will continue to leverage collaborative business models across the Group – banking, wealth management and insurance – leverage the unique strengths of our diverse franchise to drive long-term growth.
I would like to ask the following question: China’s easing monetary policies are different from global tightening policies.
China is easing its monetary policy settings as most developed economies are expected to see more aggressive interest rate tightening to fight inflation. Liquidity injections into China continue to support growth and the PBOC unveiled more than 20 measures to provide financial support to the real economy.
Going forward, however, China’s room for monetary easing may be relatively constrained by the US Federal Reserve’s aggressive monetary policy.icy clamping trajectory.
OCBC Bank received stock dividends at a price below the market price. Is it necessary to have a dividend reinvestment plan at a discounted price to incentivize shareholders or will the Bank consider issuing at market price? Issuance of shares results in dilution.
Decisions on stock dividend regime and application of discount rate are reviewed for each dividend payment, taking into account the operational environment and the capital position of the Bank and business growth requirements.
a)Comparing 2021 total revenue to 2019 (pre-Covid-19), OCBC (excluding GEH) underperformed DBS and UOB. What explains the underperformance? How do management and the board intend to improve OCBC performance?
Total OCBC revenue (excludinguding GEH) in 2021 was S$9.00 billion, compared to S$9.40 billion in 2019 before the pandemic. This decrease is largely attributable to a decline in net interest income, which more than offset the increase in non-interest income.
• Net interest income was S$5.76 billion in 2021 compared to S$6.22 billion in 2019. The decline was largely attributed to a more than 20 basis point drop in the net interest margin due to the low interest rate environment, which offset a 9% growth in customer loans between 2021 and 2019.
• Non-interest income of S$3.25 billion in 2021 was higher than S$3.18 billion in 2019 as the gradual reopening of the economy and an increase in customer activity led to higher commission income and trading income in 2021.
In terms of performance, our 3-year business strategy was defined in our 2021 annual report and clarified during our 2022 annual general meeting.
b) Compared to DBS and UOB, OCBC does not seem to manage its credit well with higher depreciation costs and higher formation of new NPAs. For example, OCBC incurred higher impairment costs in 2019 and 2021. OCBC added S$2.89 billion of new NPAs in 2021, compared to S$1.59 billion in 2020, which was affected by Covid -19. What explains this poor performance? How do the board and management intend to improve in this area?
Overall, OCBC’s NPL ratio has remained stable at 1.5% for the past four years.
The increase in the formation of new NPAs in 2021 came mainly from Malaysia and Indonesia – largely regulatory guidelines to provide relief loans to certain groups of borrowers – as well as Greater China.
• Malaysia: Primarily driven by secured consumer loan downgrades, largely due to relief loans provided to support customers amid Covid-19.
• Indonesia: mainly from certain corporate accounts affected by Covid-19, without specific sector concentration.
• Greater China: mainly syndicated project finance loans due to delays in a few large-scale projects, caused by Covid-19.
In 2021, OCBC also recorded higher recoveries, upgrades and write-offs than in 2020.
We will continue to manage our business and associated risks in a way that delivers sustainable value to our customers, employees, shareholders and the community over the long term. This is further described in our risk management framework in our 2021 Annual Report.
c) With respect to the impairment of syndicated project finance loans in Greater China, what is the total amount of the loan and the specific allowance?
Due to customer confidentiality, we are unable to disclose the total loan amount and allowance balances for this item. However, the total loan exposure is not significant relative to our overall loan portfolio.
d) Can management explain why the NPAs have increased but the NPA coverage rate has fallen from 115% in 2020 to 90% in 2021, and provide more light on the rise in NPLs in home loans?
The coverage rate of NPAs is calculated as the total of the cumulative allowances over the total of NPAs. Compared to 2020, a greater proportion of our new NPAs in 2021 were consumer secured loans that required lower provisions to be set aside. The increase in non-performing loans for housing was mainly due to downgrades in Malaysia, largely driven by regulatory directives to expand relief loans to support customers amid Covid-19.
It was mentioned that the impairment charges were largely due to the delay in the completion of projects in Greater China. Can I know if the delay of the projects has caused a delay in the repayment schedule or a reduction in the repayment of the loans? If it is the first case, why is there a need for provision if it is only temporary?
The need for provisions for depreciation is assessed in detail for each project. The valuations considered various risk factors including (but not limited to) the risks of non-completion of these projects which impact their ability to generate future cash flows to meet their repayment obligations. on loans.