OCBC beats forecasts with 22% jump in Q2 profit to $1.08b

Office workers shelter themselves from the rain as they walk past the OCBC Bank Centre at Raffles Place.
Office workers shelter themselves from the rain as they walk past the OCBC Bank Centre at Raffles Place.PHOTO: ST FILE

SINGAPORE - Oversea-Chinese Banking Corporation reported on Thursday (July 27) a net profit of S$1.08 billion for the second quarter of 2017, an increase of 22 per cent from S$885 million a year ago, and 11 per cent above S$973 million in the previous quarter.

This blew past the forecast of S$923.5 million by analysts in a Bloomberg poll. OCBC is the first of Singapore's Big Three banks to report quarterly results.

Its net profit after tax for the first half of 2017 grew 18 per cent to S$2.06 billion from S$1.74 billion a year ago.

An interim dividend of 18 cents per share was declared for the first half-year, unchanged from a year ago.

For the second quarter, the group's banking, wealth management and insurance operations delivered a strong year-on-year performance, driven by growth in net interest income, fees and commissions, net trading income and profit from life assurance, OCBC said.

Said CEO Samuel Tsien: "Strong business momentum was achieved across all three business pillars - banking, wealth management and insurance. Income growth was broad-based, lending activities were up, assets under management continued to rise, and underlying insurance business growth continued. OCBC Group maintained its healthy capital, funding and liquidity positions, and the overall loan portfolio remained sound, with the non performing loan ratio stable over the last three quarters.

"Stronger consumer sentiments were noted in key economies, but overall economic growth in the region is expected to only be moderate and event risks remain. We will pursue prudent business growth, focusing on our key markets and core business lines."

OCBC's net interest income for the quarter rose 7 per cent to S$1.35 billion in 2Q17 from S$1.26 billion a year ago, largely driven by strong lending growth across the group's corporate and consumer businesses. Customer loans growth was broad-based and rose 11 per cent from the previous year.

Non-interest income rose 34 per cent to S$1.05 billion from S$788 million a year ago. Fees and commissions climbed 18 per cent to S$492 million, driven by a 45 per cent surge in fee income from wealth management, partly attributable to the inclusion of the former wealth and investment management business of Barclays in Singapore and Hong Kong acquired in November 2016.

Net trading income, comprising predominantly treasury-related income from customer flows, grew 14 per cent year-on-year to S$140 million.

Profit from life assurance was significantly higher at S$240 million, as compared with S$108 million in the preceding year, driven by higher operating profit and positive performance from Great Eastern Holdings' investment portfolio as a result of narrowing of credit spreads and gains from favourable interest rate movements.

The group's share of results of associates also rose 17 per cent to S$119 million from S$103 million in 2Q16.

Total net allowances for loans and other assets were S$169 million, flat as compared to S$168 million the previous quarter but higher than S$88 million a year ago. Specific provisions of S$105 million were slightly below S$108 million a quarter ago.

As at June 30, the level of total non-performing assets of S$2.92 billion was relatively stable against S$2.87 billion in the previous quarter, OCBC said. Compared to S$2.49 billion a year ago, the increase was mainly attributable to the downgrade of corporate accounts in the oil and gas support services sector which remained under stress, it added.

The overall non-performing loans ratio of 1.3 per cent was unchanged from a quarter ago.