OCBC reported first-half 2026 net profit of SGD 4.19 billion ($3.23 billion), up 13% year-on-year, while total income increased 11% to SGD 8.00 billion ($6.17 billion). Net interest income (NII) fell 3% and net interest margin (NIM) narrowed 25 basis points to 1.73%. Customer loans rose 11% year-on-year in constant-currency terms to SGD 364 billion ($281 billion), prompting the bank to raise its full-year loan-growth guidance to a high-single-digit to low-double-digit range. Tan Teck Long, group chief executive officer of OCBC, said the bank had decided to “identify the growth industries and be really very focused”. Technology, media and telecommunications (TMT) and digital infrastructure, energy, power and utilities, and transport were already leading corporate loan growth. However, Tan described the 5% quarter-on-quarter increase in customer loans as exceptional and said it was partly supported by merger and acquisition (M&A) transactions. OCBC did not identify the borrowers, sectors or geographies involved. Digital infrastructure, energy and supply chains drive OCBC’s lending strategy Overall loan growth came from Singapore and Malaysia as well as international markets including the United Kingdom, United States and Australia. Goh Chin Yee, group chief financial officer of OCBC, said growth was broad-based across corporate and consumer lending. Sustainable-financing loans rose 12% year-on-year to SGD 59.7 billion ($46.0 billion), equivalent to 16% of group loans. Total sustainable-financing commitments stood at SGD 84.2 billion ($64.9 billion). Tan linked prospective financing demand to three areas within OCBC’s Next Frontier strategy. He pointed to inbound investment into Asia and supply-chain restructuring, financing across the technology supply chain, and sustainable finance. Within technology, he singled out data centres and equipment manufacturers serving the sector. He also identified renewable energy and financing for small and medium-sized enterprises making a green transition. Tan expects these shifts to support OCBC’s loan growth over the next few years. Several of the sectors he identified were already leading reported corporate loan growth. However, OCBC did not disclose lending balances specifically for data centres, renewable energy or supply-chain investment in its first-half results materials. The bank also did not quantify its future loan pipeline by sector. Continued lending in these areas would provide a clearer indication of how much of OCBC’s growth is being supported by recurring corporate investment rather than the timing of large transactions. M&A financing lifts OCBC’s second-quarter loan growth Customer loan balances increased by SGD 17 billion ($13.1 billion) from March, while loans rose 5% quarter-on-quarter on a constant-currency basis. “Loan growth in the second quarter is exceptional, partly because of some M&A transactions which we are backing,” Tan said. He added that OCBC did not expect the exceptional rate to continue in the third and fourth quarters, although slower growth relative to the second quarter would not necessarily mean those quarters were weak. Tan described the loan pipeline as robust and anchored in growth industries. OCBC subsequently raised its full-year loan-growth guidance to a high-single-digit to low-double-digit range, indicating that the revised outlook does not depend on maintaining the second-quarter pace. OCBC did not link the M&A transactions to the industries leading corporate lending. As quarterly growth slows, continued lending in the identified sectors should provide a clearer indication of underlying corporate demand. Tan also said he did not favour acquiring corporate loan portfolios because OCBC believed it could grow the business itself. His acquisition preference tilted towards wealth portfolios. He said OCBC remained cautious about balancing risk and reward in loan-portfolio acquisitions given the potential for credit losses. Tan’s position places the burden of further corporate loan growth, including its credit quality, on OCBC’s own origination and underwriting. Group asset quality remained stable, with the non-performing loan ratio at 0.9%. First-half credit costs were 18 basis points on an annualised basis. Goh said new corporate non-performing asset formation in the second quarter mainly arose from the downgrade of two Greater China corporate real estate accounts. Tan said full-year credit costs were likely to come in at the lower end of OCBC’s previous guidance of 20 to 25 basis points. OCBC balances commercial lending, treasury assets and CET1 capital OCBC continued adding high-quality treasury assets in the first half as interest rates declined, with average balances rising by about SGD 10 billion ($7.71 billion) in the second quarter. Goh said these assets were accretive to NII and remained “an important lever” in sustaining income in a declining rate environment. She expects the pace of expansion to slow. Growth in treasury-market assets should be “significantly lower compared to the first half” as OCBC balances further investment against commercial lending opportunities and capital deployment. Wholesale funding supported both second-quarter loan growth and treasury investment. Goh said the associated funding requirement could decline as treasury-asset growth slows. OCBC is therefore moderating treasury-asset accumulation as it weighs further investment against commercial lending opportunities and capital deployment. Customer deposits increased 13% year-on-year to SGD 459 billion ($354 billion), while the loans-to-deposits ratio stood at 78.4%. Goh said close to 80% of funding came from customer deposits and described the deposit base as providing flexibility to support loan growth. The loan expansion coincided with higher risk-weighted assets and a lower fully phased-in common equity tier 1 (CET1) ratio. The fully phased-in ratio stood at 14.0% at the end of June, down from 15.2% in March, while risk-weighted assets increased to SGD 270 billion ($208 billion) from SGD 254 billion ($196 billion). OCBC’s reported CET1 ratio was 15.7%. Goh attributed the quarter-on-quarter decline in the fully phased-in ratio to dividend payments and growth in risk-weighted assets, which offset profit accretion. Tan said OCBC was comfortable operating at CET1 of around 14% and did not anticipate raising equity. The ratio could move slightly below or above 14% depending on the types of loans originated in a given quarter. He added that the bank had balance-sheet management techniques available if it needed to rebalance its position. Tan also said OCBC would continue to focus on return on equity (ROE). Annualised ROE rose to 13.7% in the first half from 12.6% a year earlier. With fully phased-in CET1 already around OCBC’s preferred operating level, the mix and returns of additional lending will become increasingly relevant. First-half customer-flow income rose 47% year-on-year, supported by wealth-related activity and corporate hedging. Tan cited interest-rate swaps and foreign-exchange activity associated with corporate transactions. OCBC did not disclose how much of this activity came from the sectors leading corporate loan growth, leaving the broader income generated by those relationships unquantified. OCBC’s growth sectors face a second-half test As margins narrow, the significance of OCBC’s loan growth will depend increasingly on whether it can convert structural financing demand into adequately priced, capital-efficient relationships. Digital infrastructure, energy, utilities and supply-chain restructuring offer potentially recurring financing needs, but OCBC has not disclosed sector-level pipelines or shown how much associated hedging and transaction income these relationships generate. The test is whether OCBC can sustain lending in those areas while keeping credit costs contained, operating with a fully phased-in CET1 ratio around 14% and generating adequate returns from the capital and broader client relationships. OCBC has identified the sectors it wants to pursue. The second half should begin to show whether they can support returns as well as loan growth.
