OCBC Profit Jumps to Record on Sale of Tiger Brewer, F&N

Oversea-Chinese Banking Corp., Southeast Asia’s second-largest lender, posted record quarterly profit on a gain from the sale of stakes in a drinks manufacturer and a brewery.

Third-quarter net income more than tripled to S$1.85 billion ($1.51 billion) from S$513 million a year earlier, the Singapore-based bank said in a statement to the city’s stock exchange today. Excluding the one-time gain of S$1.13 billion, profit was S$724 million, which exceeded the S$615 million average of six analysts’ estimates adjusted by Bloomberg.

DBS Group Holdings Ltd. and United Overseas Bank Ltd. also posted third-quarter profit that beat estimates as Singapore’s banks withstand waning loan profitability in their home market, the lowest in the region. Seeking to focus on its financial business, OCBC in August sold its stakes in Fraser & Neave Ltd. and its Asia Pacific Breweries Ltd. unit, the drinks maker’s joint venture with Heineken NV that makes Tiger beer.

“We’re waiting for more color on what OCBC does with gains from the divestment,” said Ken Ang, a Singapore-based analyst at Phillip Securities Pte. “My expectation is that it will not be distributed as dividends; rather it will be kept to manage Basel III’s capital and liquidity requirements,” Ang said, referring to rules developed by global regulators to avoid another financial crisis.

Shares of OCBC advanced 0.2 percent to S$9.11 at 9:21 a.m. in Singapore trading, compared with the benchmark Straits Times Index’s 0.4 percent decline.

Interest Income

Net interest income, the difference between what a bank charges on loans and what it pays on deposits, advanced 8 percent from a year earlier to S$944 million.

The net interest margin, a measure of lending profitability, narrowed to 1.75 percent from 1.85 percent a year earlier. Banks in Singapore have the slimmest average margin in Southeast Asia, at 2 percent, data compiled by Bloomberg show.

Non-interest income excluding the gains from the divestment advanced 73 percent to S$754 million, led by insurance, trading and wealth management.

Great Eastern Holdings Ltd., OCBC’s insurance unit, said last week that third-quarter profit, excluding gains from selling its stakes in the drinks companies, rose fivefold to S$198 million from S$40.4 million a year ago.

Above Expectations

“The results were above expectations due to higher trading income and income from life assurance,” Ang said. “From first glance, there are no real areas of concern.”

OCBC set aside S$70 million for impairment of loans and other assets last quarter, up from S$38 million a year earlier.

DBS Group, Southeast Asia’s largest bank, last week posted third-quarter profit that rose 12 percent from a year earlier to S$856 million. United Overseas Bank, the third largest, on Nov. 7 reported the fastest quarterly profit growth in two years as income from dividends rose and losses on securities turned to gains. Net income advanced 36 percent to S$707 million.

Moody’s Investors Service has a stable outlook on Singapore’s banking system for the next 12 to 18 months, it said last week. Financial performance may “mildly deteriorate from the current cyclical peak against the backdrop of declining economic growth in Singapore and the region,” Beatrice Woo, an analyst at Moody’s, wrote in a Nov. 1 note.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE