OCBC Q3 net profit down 27%, but core bank earnings robust

OCBC beat expectations with a 7 per cent increase in core third-quarter net profit, as loans growth pushed up interest income by 6 per cent.
OCBC beat expectations with a 7 per cent increase in core third-quarter net profit, as loans growth pushed up interest income by 6 per cent.PHOTO: REUTERS

SINGAPORE - Oversea-Chinese Banking Corporation reported a drop in its third quarter net profit compared to the same period a year ago, when the bank's earnings were higher due to a one-off gain.

As a result, net profit for the July-September period was down 27 per cent year-on-year to $902 million, OCBC said in its results announcement on Wednesday (Oct 28).

Leaving off the $391 million one-off gain realized last year, third quarter core net profit rose 7 per cent to $902 million from $841 million a year earlier, as OCBC continued to see growth in banking operations.

This was above the $885 million expected the analysts in a Bloomberg poll.

Net interest income grew 6 per cent year-on-year to $1.32 billion, driven by the 4 per cent customer loans growth to $213 billion in the period. The increases were largely from loans to the building and construction sector and housing loans.

"Net interest margin of 1.66 per cent was 2 basis points lower than 1.68 per cent in third quarter 2014, as improved customer loan spreads in Singapore were more than offset by a lower loan-to-deposit ratio and a decline in money market grapping income," OCBC added.

Non-performing loan ratio stood at 0.9 per cent, up slightly from 0.7 per cent a year ago.

Non-interest income dropped 3 per cent year-on-year to $775 million, due partly to a 64 per cent drop in life assurance profit to $62 million as the bank booked unrealized mark-to-market losses from Great Eastern's investments.

Stripping out Great Eastern's impact, OCBC's non-interest income from banking operations managed to grow 17 per cent to $634 million. Fee and commission income was $408 million for the quarter, leveled with $406 million a year ago.

Chief executive Samuel Tsien noted a "more uncertain and challenging operating environment", but stressed that the bank is benefitting from its regional franchise.

"It is evident that the OCBC Wing Hang Bank addition to our Greater China franchise has further strengthened and diversified the group's earnings," he said.

Net profit contributed to the OCBC group from the Hong Kong unit was up 92 per cent to $72 million. In other regions, OCBC Malaysia's net profit was up 4 per cent, but in Singapore dollar terms the contribution to the group was down 17 per cent year-on-year to $73 million.