OCBC has announced a strategic shift in response to declining interest rates and an escalating trade war environment, as revealed in its Q2 2025 financial update. The bank’s net profit for the quarter was S$1.816 billion, a 7% year-on-year decrease, largely due to a 12 basis point drop in net interest margin (NIM) to 1.92%. This decline was attributed to falling benchmark rates in Singapore and Hong Kong. Consequently, OCBC has revised its full-year NIM guidance to between 1.90% and 1.95%, down from the previous 2%.
The bank’s refreshed strategy focuses on four growth pillars: capturing rising Asian wealth, supporting trade and investment flows, leveraging digitisation, and driving sustainability. OCBC aims to achieve an incremental S$3 billion in cumulative revenue by 2025, targeting a return on equity (ROE) of 13% to 14%.
Despite the challenging environment, OCBC maintains a robust capital position with a Common Equity Tier 1 (CET1) ratio of 17%. The bank has also declared an interim dividend of 41 Singapore cents per share, reflecting a 50% payout ratio for the first half of 2025.
Analysts from DBS Group Research have maintained a “HOLD” recommendation on OCBC shares, with a target price of S$15.80, citing potential downside risks from asset quality and faster-than-expected Federal Reserve rate cuts. The bank’s management remains cautious, with plans for further capital management on hold, although they are open to inorganic acquisitions that align with OCBC’s strategic goals.
As OCBC navigates these economic headwinds, its focus on strategic growth and maintaining strong capital ratios will be critical in sustaining its financial health and shareholder returns.
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