OCBC's Quarterly Net Profit Gains 12% on Lending, Wealth, InsuranceBy
First Singapore bank to post third-quarter earnings results
CEO warns of geopolitical and oil risks despite income growth
Oversea-Chinese Banking Corp., Southeast Asia’s second-largest lender, reported higher third-quarter profit on increased revenue from its lending, wealth management and life-insurance businesses.
Net income rose 12 percent to S$1.06 billion ($780 million) in the three months ended Sept. 30, the Singaporean bank said in a filing on Thursday. That compares with the S$1.01 billion average forecast in a Bloomberg survey of seven analysts.
Rising income from wealth management and healthier lending margins have allowed OCBC to cushion the effect of continued problems in the regional offshore oil and gas services sector, where several local companies have defaulted on their debt. OCBC is the first of Singapore’s three large banks to report third-quarter results.
“Our key markets of Singapore, Malaysia, Indonesia and Greater China have all contributed to our broad-based income growth,” Chief Executive Officer Samuel Tsien said in the filing. “However, we will remain watchful of ongoing geopolitical risks and the continuing stress observed in the oil and gas industry.”
OCBC’s results were helped by a 12 percent increase in net interest income to S$1.38 billion, as lending grew and its net interest margin rose by four basis points.
Net income at Great Eastern Holdings Ltd. rose 21 percent to S$235.5 million in the quarter, driven by higher gross written premiums, the OCBC insurance unit said earlier this week.
OCBC completed its $227.5 million purchase of Barclays Plc’s wealth-management units in Singapore and Hong Kong last year, bolstering the assets at its private-banking unit, Bank of Singapore. Wealth management fee income rose 32 percent in the quarter, partly because of the acquisition, the bank said.
Recent problems in the energy services sector have been exacerbated by falling collateral values for oil vessels, forcing the banks to add to their bad-loan buffers, according to Bloomberg Industry analyst Diksha Gera. Excess capacity from idled ships triggered the decline in valuations, Gera said in a report last month.
OCBC’s nonperforming assets rose 15 percent to S$2.98 billion in the quarter from a year earlier, because of the downgrade of corporate accounts in the oil and gas support services sector, which remained under stress, the bank said.
Shares of OCBC have rallied 29 percent this year, the most among the three major Singapore banks and more than the 19 percent increase in the Bloomberg Asia Pacific Banks Index.
Key figures reported by OCBC:
- Allowances for loans and asset impairments fell to S$156 million from S$166 million a year earlier
- Net interest income grew 12 percent to S$1.38 billion
- Net interest margin was 1.66 percent versus 1.62 percent a year ago
- Net trading income dropped 27 percent to S$118 million
- Nonperforming loan ratio was 1.3 percent versus 1.2 percent a year ago
United Overseas Bank Ltd. is scheduled to report quarterly earnings on Nov. 3, and DBS Group Holdings Ltd. will post its results on Nov. 6.
— With assistance by Darren Boey