OCBC favours special dividends over buybacks for excess capital, says new CEO

[SINGAPORE] If there is excess capital to be returned, OCBC’s preference would be to do so through a special dividend rather than a share buyback scheme, group chief executive officer Tan Teck Long said on Wednesday (Feb 25).

“I think a special dividend actually rewards our shareholders in a broader way… we really want to reward our long-term shareholder base,” said Tan, in response to queries raised during the lender’s fourth-quarter results briefing on how OCBC intends to deploy surplus capital.

That said, he noted that capital would be needed to support growth under the bank’s new strategy, suggesting that accelerating shareholder returns may not be an immediate priority.

At the briefing – his first since taking over as group CEO in January – Tan reaffirmed his commitment to the bank’s ongoing two-year S$2.5 billion capital return plan. The programme, comprising special dividends and share buybacks, is scheduled to run through to the end of the 2026 financial year.

For FY2025, OCBC has proposed a special dividend of S$0.16 per share, equivalent to a 10 per cent payout ratio. This lifts its total dividend for the year to S$0.99 per share, representing 60 per cent of the group’s net profit.

The lender has S$780 million remaining under the S$2.5 billion commitment, group chief financial officer Goh Chin Yee said at the briefing.

“If we do not continue to execute our share buybacks for cancellation, we will return that in the form of dividends in FY2026,” she said.

A special dividend involves distributing excess capital directly to shareholders in cash, while a share buyback sees the bank repurchase and cancel its own shares, which can lift earnings per share by reducing the share count.

CET1 target

On Wednesday, management also outlined plans to deploy the bank’s other capital for growth, including potential mergers and acquisitions (M&A).

In the near term, OCBC is targeting a common equity tier 1 (CET1) ratio of 14 per cent, said Tan, though he acknowledged that a “concrete” timeline was difficult to specify.

“I think it really depends on how we execute our strategy and the market environment,” he said. “If we grow very fast, we actually will need more capital to support M&A opportunities.”

“We are committed to that 14 per cent (target) over the next few years, but we don’t have a concrete timeline for it,” he added.

As at end-December 2025, OCBC’s CET1 ratio stood at 16.9 per cent on a transitional basis and 15.1 per cent on a fully phased-in basis.

CET1 refers to a bank’s core capital expressed as a proportion of its risk-weighted assets under Basel III rules. A lower ratio, within regulatory buffers, can indicate that more capital is being deployed to support lending or acquisitions, while still meeting prudential requirements.

Asked about gaps the bank has identified for potential acquisitions, Tan said OCBC’s focus will be on Asean markets, in line with its refreshed growth strategy.

He added: “If the right portfolio comes along, we’ll be very keen in these markets, (and) to stay in this part of the world.”