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OCBC CEO says a stronger Covid-19 recovery “likely to be a 2021 event”

If you were expecting working life in the Singapore banking sector to return to normal when the circuit breaker ends, OCBC’s 2019 annual report contains some pertinent statements about the potential longer-term impact of Covid-19.

OCBC’s annual report was published only this week – much later than those of most global banks – so it is one of the few bank reports to provide C-suite insights into Covid-19 since the virus was declared a global pandemic last month. As an annual report, it is also more detailed than the Q1 earnings statements that banks are posting this month.

CEO Samuel Tsien discussed Covid-19 within a Q&A section of the report and in a joint statement with chairman Ooi Sang Kuang. Here’s a summary of what the two men had to say.

This is still an emerging crisis, which is likely to be worse than Sars

“With the virus spreading worldwide, the economic effects are still emerging,” says Tsien in OCBC’s annual report. “The stresses to the global supply chains could be much larger than the 2003 Sars outbreak.”

Get set for more market volatility in equities and commodities

“The severity of the cascading negative multiplier impact on the global economy will depend on the scale and longevity of the outbreak,” say Ooi and Tsien. “Frequent volatilities in financial markets and large swings in commodity prices can be expected.”

No cap on customer-relief costs

Like other banks in Singapore, OCBC is providing a variety of support measures for customers impacted by Covid-19, including bridging loans and additional working capital lines. Interestingly, Tsien says these “relief solutions do not have a programme cap”.

Risk will be busy

In an indication of the workloads currently facing risk management professionals, Ooi and Tsien say OCBC will continue to exercise “heightened vigilance” over its credit portfolio, and “monitor for early signs of weaknesses”.

The first shoots of a recovery are only likely towards the end of the year

Back in February, Tsien estimated a 2% drop in 2020 revenue, based on the virus easing by June. Since then, however, Covid-19 has become a global pandemic. Ooi and Tsien now say they are “hopeful that a gradual recovery of consumer confidence and sentiments will start to set in towards the end of 2020”. “The authorities are responding with relief measures and fiscal plans, and central banks are reacting with interest rate cuts. With coordinated efforts, better hygiene discipline and the arrival of the warmer season, I am hopeful the virus will be contained later in the year, and gradual recovery of investment spending and consumer sentiments will commence soon thereafter, starting with China,” adds Tsien. OCBC’s annual report does not provide a revised revenue projection, although its Q1 results are likely to.

Things will get better in 2021

The CEO and chairman say a “stronger and steady economic recovery” is “likely to be a 2021 event”.  “The recovery will be slow in the beginning but will accelerate as it continues,” says Tsien, adding that a 2021 market recovery may come “stronger and sooner than most expect”, and that Covid-19 is “still only an event risk which will go away”.

OCBC is confident it can ride out the storm

OCBC’s confidence in its ability to “address the challenges ahead” is based on its “highly-interconnected franchise, solid capital base and stable funding and liquidity position”, say Ooi and Tsien.

Tsien has donated more than half his base salary to charity

Tsien’s total compensation increased by 3.5% to S$11.1m in 2019, according to OCBC’s report. Separately, the CEO announced yesterday that he has contributed more than half (S$650,600) of his 2019 base salary of $1.2 million to support community and environmental causes under an OCBC charity programme.

And some staff have been getting free lunches

As we’ve been reporting since February, banks in Asia have launched various measures to help protect their employees during the pandemic. However, OCBC’s annual report reveals one that you might not know about: in some locations it has “delivered packed meals to employees to avoid their exposure to lunch crowds”. Other more commonplace OCBC employee initiatives include distributing face masks and hand sanitisers, and re-arranging working hours to avoid peak travel periods.

Photo by Markus Spiske on Unsplash

Have a confidential story, tip, or comment you’d like to share? Email: smortlock@efinancialcareers.com or Telegram: @simonmortlock

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AUTHORSimon Mortlock Content Manager

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