SINGAPORE - Oversea-Chinese Banking Corp, Singapore's second-biggest lender, posted on Thursday an 11 per cent rise in first-quarter net profit, beating market forecasts, as 20 per cent loan growth underpinned strong net interest income.
OCBC earned a record $993 million in the three months ended in March, compared with S$899 million a year earlier. This is also 26 per cent higher compared to the previous quarter.
The profit figure was better than the $883 million average forecast of six analysts polled by Reuters.
DBS Group Holdings, Singapore's biggest bank, on Monday posted a 10 per cent jump in core first-quarter net profit, above analysts' estimates, helped by a double-digit rise in loan growth and strong wealth management fees.
United Overseas Bank, the third-biggest lender here, posted a 1.6 per cent rise in quarterly profit, but the earnings were slightly below analysts' average forecast as the bank reported slower loan growth than its two rivals.
1. Broad-based growth
OCBC said its sterling results were due to strong growth in OCBC's "customer-related businesses accross a more diversified earnings base", with all the key markets of Singapore, Malaysia, Indonesia and Greater China delivering positive profit growth, said the bank.
The results also included the consolidation of OCBC Wing Hang Bank, which became a subsidiary in the third quarter of last year.
2. Net interest income up on higher loans & deposits
Net interest income rose 15 per cent year-on-year to $1.25 billion from $1.09 billion a year ago, which OCBC credited mainly to robust asset growth.
Customer loans grew 20 per cent from a year ago to S$210 billion, and the bank grew customer deposits by 26 per cent to $250 billion from $199 billion last quarter. Thus, the bank's loans-to-deposits ratio (LDR) was 83 per cent, compared to 87 per cent a year ago.
However, the lower LDR and weaker income from money market gapping activities contributed to an eight basis points decline in OCBC's net interest margin from 1.7 per cent to 1.62 per cent, said the bank.
Excluding the consolidation of OCBC Wing Hang, customer loans and deposits grew 4 per cent and 8 per cent year-on-year respectively.
3. Non-interest income up
Non-interest income rose 7 per cent to $859 million from $800 million a year ago, said OCBC. Fee and commission income increased 12 per cent to $395 million due to strong growth in wealth management, brokerage, fund management and trade fees.
Net trading income grew 25 per cent to $123 million from $99 million in the last quarter.
Profit from life assurance grew 9 per cent year-on-year to $199 million, lifted by higher operating profit from Great Eastern Holdings (GEH) and mark-to-market gains in its Non-participating Fund.
Income from associates and joint ventures increased to $89 million from $17 million, largely from Bank of Ningbo's contribution. Bank of Ningbo became a 20-per-cent-owned associated company of the group on Sept 30, 2014.
4. Income from wealth management hits quarterly high
The Group's overall income from wealth management activities grew from $572 million a year ago to a new quarterly high of $583 million. As a share of the Group's total income, wealth management activities contributed 28 per cent as compared with 30 per cent in 1Q14. OCBC's private banking business continued to expand, with assets under management increasing 4 per cent to US$51 billion (S$70 billion) as at March 31, 2015, up from US$49 billion (S$62 billion) the previous year.
5. Operating expenses up
Operating expenses for the quarter rose by 24 per cent to $873 million compared to $706 million a year ago, after the consolidation of OCBC Wing Hang. Excluding OCBC Wing Hang, operating expenses increased 9 per cent, largely from higher staff costs and a 3 per cent rise in headcount to support the expansion of the bank's franchise in key markets, said OCBC.
"We are pleased with our strong start to 2015. The solid set of results demonstrates the increased diversity of our earnings base, and the progress that we are making in deepening our presence in our key markets," said CEO Samuel Tsien.
"We will further invest in our businesses and leverage synergies across the expanded OCBC franchise to better serve our customers," he added. "Supported by our strong capital and funding position, we will continue to pursue a disciplined and prudent strategy of sustainable growth in our key markets."