(Bloomberg) -- Oversea-Chinese Banking Corp.’s fourth-quarter profit missed estimates on lower income from insurance while analysts said the lender’s dividend outlook likely disappointed investors.

Net income rose 12% to S$1.62 billion ($1.2 billion) in the three months ended Dec. 31 from a year earlier, Southeast Asia’s second-largest lender said Wednesday. That missed the S$1.71 billion average estimate of four analysts surveyed by Bloomberg.

Shares of the lender fell as much as 3% in Singapore, the most in more than six months.

With full-year earnings hitting an all-time high of S$7 billion, OCBC raised its 2023 dividend by 21% and said it’ll maintain a 50% target for its dividend payout ratio. The guidance for this year’s number is “slightly disappointing” given a continued capital buildup, said Goldman Sachs Group Inc. analysts led by Melissa Kuang.

OCBC’s Dividend Announcement May Disappoint Market: Citi

The miss in non-lending income, largely due to lower insurance income, is a “major” one, according to Morgan Stanley’s analyst Nick Lord.

“We anticipate challenges in the global macro environment,” OCBC’s Chief Executive Officer Helen Wong said in a statement, citing changes in monetary policies, persistent inflationary pressures, major elections and rising geopolitical tensions. She said however that “Asia holds immense growth potential.”

Wong also expects a dip in this year’s net interest margin, a profitability gauge for banks’ lending. The figure is seen to be in the range of 2.2% to 2.25%, according to the bank, from 2.28% in 2023. 

Rival United Overseas Bank Ltd. had also signaled that the uncertain global economic outlook is clouding its loan growth projection for this year, even though it posted record annual earnings on the heels of its purchase of Citigroup Inc.’s retail assets in Southeast Asia. DBS Group Holdings Ltd. saw interest rates softening, though cheered the market with a bonus share issue with room to return more to shareholders this year. 

Here are more details of OCBC’s earnings:

  • Net interest margin at 2.29% shrank by two basis points from a year ago, though was slightly higher than in the third quarter
  • Net fee income including credit cards and wealth rose 16% to S$460 million
  • Allowances were down 41% to S$187 million
  • Wealth clients’ assets under management rose 2% to S$263 billion as of Dec. 31
  • Loans stood at S$297 billion at end-2023, barely changed from S$295 billion a year ago


(Adds analyst comment and updates with earnings details throughout)

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