---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 184415
conversation_id: ca1983ef-510d-4177-8d4a-1bc48596f53b
citations: 9
created: 2026-05-31 21:33:53Z
---

# What is OCBC’s core business franchise and the key components of its operating model?

# OCBC's Core Business Franchise and Operating Model

Internal research from CLSA frames OCBC (Oversea-Chinese Banking Corp, SGX: O39) as a Singapore-headquartered universal bank whose defining structural feature is that it is **the only one of the three Singapore local banks (DBS, UOB, OCBC) that owns a full suite of traditional banking, wealth management, asset management, and insurance under one roof, allowing cross-sell across its customer base** [1]. The corollary is that the franchise is built to monetise relationships through fee, trading and insurance flows alongside core lending — not lending alone.

## 1. Core Business Franchise

### 1.1 Universal-bank platform (the differentiator)
- **Four-pillar suite**: traditional banking + wealth management + asset management + insurance, integrated to drive cross-sell across the same customer base [1].
- **Conservative credit profile**: NPLs typically **sub-1.5%**, credit costs **15–20 bps**, NPA coverage **120–140%** over recent quarters — a structural asset-quality strength of the franchise [1].
- The non-interest income engine is broad-based: 1Q25 non-II strength was **driven by wealth, trading and insurance** (rather than a single fee category), confirming the multi-engine model in earnings prints [7][8].

### 1.2 Geographic franchise — four core markets
CLSA identifies OCBC's **core markets as Singapore, Greater China, Indonesia and Malaysia** [3][9]. Within Greater China, the **CEO has championed the opportunity set accessible through OCBC Wing Hang (the HK/PRC banking subsidiary) and partner tie-ups such as the relationship with Ping An Insurance** [2].

Concrete exposure to the Greater China leg of the franchise:

| Metric | OCBC exposure |
|---|---|
| Greater China loans (% of group loan book) | **23%** [4] |
| HK-dollar loans (% of group loan book) | **~11%** [4] |
| Greater China PBT (% of group PBT) | **14%** (HK not split out separately) [4] |

The Singapore home market remains the anchor (deposit franchise and SGD funding base), with Indonesia (via Bank OCBC NISP) and Malaysia (via OCBC Bank Malaysia) functioning as the ASEAN regional legs identified explicitly in CLSA's risk and thesis text [3][9].

### 1.3 Revenue mix — barbell of NII and capital-light fees
- **Net interest income (NII)** anchored by the Singapore deposit franchise and ASEAN/Greater China loan book.
- **Non-interest income** comprises three identifiable streams that CLSA tracks separately at each quarterly print: **(a) wealth management fees, (b) trading income, and (c) insurance income** (largely via the Great Eastern subsidiary's contribution) [7][8].
- **Trade-related loans ~10% of the book; SME loans ~9% of the book** — a meaningful but not dominant trade-finance exposure [5].

## 2. Key Components of the Operating Model

### 2.1 Balance-sheet shape (1Q25 reported metrics)
| Operating-model metric | 1Q25 value | Direction vs 4Q24 |
|---|---|---|
| NIM | **2.04%** | -11 bps QoQ (vs 2.15% in 4Q24, 2.27% in 1Q24) [6] |
| Loans | +0.9% QoQ [6] | In line with peers |
| Deposits | +3% QoQ [6] | Outpaced loans → liquidity build-up |
| Loan-to-deposit ratio (LDR) | **78.9%** [6] | Down from 80.7% prior |
| CASA ratio | **48.9%** [6] | +10 bps QoQ from 48.8% |

The CASA share near ~49% and a sub-80% LDR signal a **deposit-rich, liquidity-long balance sheet** — the operating model deploys surplus liquidity into lower-yielding HQLA, which is what compressed NIM by 11 bps in 1Q25 as **loan yields tightened faster than deposit costs** [6].

### 2.2 Management's operating-model guidance framework
CLSA records management's full-year operating envelope as follows [5]:

| Guidance axis | FY25 target |
|---|---|
| NIM | In the region of **2%** |
| NII / loan growth | **Mid-single-digit** loan growth |
| Cost-to-income ratio | **Low-40%** |
| Credit costs | **20–25 bps total** |
| Ordinary dividend payout | **50%** of earnings |
| Capital return programme | **S$2.5bn over two years** (of which **10% is special payout**) |

This is the explicit blueprint of the operating model: a ~2% NIM business with mid-single-digit asset growth, a low-40s cost ratio, contained credit costs, and a hard-wired capital-return programme on top of the ordinary 50% payout.

### 2.3 Trade / macro sensitivity built into the model
- Management's own first-order trade-tariff impact estimate is **~3% of book** — slightly higher than DBS (1–2%) and UOB (~2%) — reflecting OCBC's heavier Greater China and trade-finance tilt [5].
- Rate sensitivity has two channels: **SORA** (Singapore base rates) on the SGD book and **1M HIBOR** on the HK-dollar book; the latter is structurally larger for OCBC than for UOB [4].

### 2.4 Growth catalysts embedded in the model
The CLSA thesis identifies the two upside levers that are most franchise-specific to OCBC: **(i) execution on the Greater China expansion strategy through OCBC Wing Hang and the Ping An tie-up, and (ii) uptick in wealth management fees** — both of which are the non-NII levers in the universal-bank model [2][9].

## 3. Operating-Model Summary (one-screen view)

| Component | What it is | Why it matters |
|---|---|---|
| **Universal-bank suite** | Banking + wealth + asset mgmt + insurance under one group | Cross-sell engine; only one of the three Singapore banks with this configuration [1] |
| **Geographic legs** | Singapore (anchor) + Greater China (23% loans / 14% PBT) + Indonesia + Malaysia | Mix of developed-market funding + EM-ASEAN/Greater China growth [3][4] |
| **Non-II engine** | Wealth + trading + insurance | Smooths NII cyclicality at each quarterly print [7][8] |
| **Balance-sheet shape** | LDR ~79%, CASA ~49%, NIM ~2% | Deposit-rich, liquidity-long; rate-cycle sensitive on both SORA and HIBOR [4][6] |
| **Asset-quality posture** | NPL <1.5%, CoR 15–20 bps, NPA coverage 120–140% | Structurally conservative through-cycle [1] |
| **Capital-return policy** | 50% ordinary payout + S$2.5bn capital-return programme over two years (10% special) | Explicit shareholder-distribution channel layered onto the operating model [5] |
| **Core risk axes** | Geopolitics, regional NPL shocks (esp. HK/China CRE), inability to realise M&A synergies, rate disorderly moves | Defines the failure modes of the model [9] |

---

**Sources**
[1] Singapore banks (On the defensive) — CLSA (13 May 2025) — 607959041LinqAlpha.PDF — OCBC investment thesis: only Singapore bank with traditional banking + wealth + asset management + insurance suite; NPLs <1.5%, CoR 15–20 bps, NPA coverage 120–140%.
[2] Singapore banks (On the defensive) — CLSA (13 May 2025) — 607959041LinqAlpha.PDF — Greater China expansion via OCBC Wing Hang and Ping An Insurance tie-ups.
[3] Singapore banks (Stuck in neutral) — CLSA (20 May 2025) — 607959993LinqAlpha.PDF — Core markets defined as Singapore, Greater China, Indonesia, Malaysia.
[4] Singapore banks (On the defensive) — CLSA (13 May 2025) — 607959041LinqAlpha.PDF — Greater China loans 23%, HKD loans ~11%, Greater China PBT 14% of group.
[5] Singapore banks (On the defensive) — CLSA (13 May 2025) — 607959041LinqAlpha.PDF — OCBC FY25 guidance: NIM ~2%, mid-single-digit loan growth, C/I low-40%, CoR 20–25 bps, 50% payout, S$2.5bn capital return over two years; trade first-order impact ~3% of book; trade loans ~10%, SME ~9%.
[6] OCBC – HLD (Business update first thoughts) — CLSA (9 May 2025) — 607958690LinqAlpha.PDF — 1Q25 metrics: NIM 2.04% (-11 bps QoQ), loans +0.9% QoQ, deposits +3% QoQ, LDR 78.9%, CASA 48.9%.
[7] OCBC – HLD (Business update first thoughts) — CLSA (9 May 2025) — 607958690LinqAlpha.PDF — Non-II driven by wealth, trading and insurance in 1Q25.
[8] Singapore banks (On the defensive) — CLSA (13 May 2025) — 607959041LinqAlpha.PDF — Non-II strength from wealth, trading and insurance offsetting NIM weakness.
[9] Singapore banks (On the defensive) — CLSA (13 May 2025) — 607959041LinqAlpha.PDF — Risk framework: NPLs in Singapore, Greater China, Indonesia, Malaysia; upside from rate cycle, wealth fees, Greater China execution.

## Citations

- [1] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [2] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [3] **607959993LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959993LinqAlpha.PDF>
- [4] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [5] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [6] **607958690LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607958690LinqAlpha.PDF>
- [7] **607958690LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607958690LinqAlpha.PDF>
- [8] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [9] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>

