OCBC Q4 profit up 11%, misses forecast on Wing Hang Bank-linked charges

SINGAPORE - Oversea-Chinese Banking Corp (OCBC), Singapore's second-biggest lender, announced on Wednesday (Feb 11) an 11 per cent rise in fourth quarter profit to $791 million from a year ago on strong loan growth and fee income, but missed analysts' estimates due to higher costs linked to its newly acquired Hong Kong unit and lower trading income.

OCBC said operating expenses rose 29 per cent from a year earlier, while provisions for non-performing loans and other assets doubled, in part due to the consolidation of Wing Hang Bank, which became a wholly-owned subsidiary of the group in October 2014.

OCBC's net profit for the three months to Dec 31, 2014, of $791 million was below an average forecast of $862 million from six analysts polled by Reuters. It reported a net profit of $715 million for the year-ago quarter.

On Tuesday (Feb 10), Singapore's biggest bank DBS posted a 4.5 per cent rise in core fourth-quarter net profit, but also missed analysts' estimates after bad debt provisions linked to trade finance loans in China quadrupled.

OCBC said its net allowances for loans and other assets in the quarter more than doubled to $154 million compared to $68 million a year ago, with the increase partly contributed by the consolidation of OCBC Wing Hang.

Compared to the previous quarter, core net profit for Q4 was 6 per cent lower, as higher net interest income and increased share of results of associates and joint ventures were more than offset by lower trading income and a rise in allowances.

OCBC said the group's asset quality and coverage ratios remained strong. Its non-performing loan ratio improved to 0.6 per cent from 0.7 per cent a year ago.

Net interest income rose 24 per cent year-on-year to $1.28 billion, spurred by healthy asset growth and higher net interest margin. Non-interest income grew 12 per cent to $762 million from $679 million a year ago, largely driven by a 12 per cent increase in fee and commission income and a 16 per cent rise in profit from life assurance.

Operating expenses of $922 million were 29 per cent higher than the previous year. Excluding OCBC Wing Hang, operating expenses rose 14 per cent year-onyear mainly from higher staff costs and business promotion expenses.

For the full year, OCBC reported a 39 per cent increase in net profit after tax of $3.84 billion from $2.77 billion for 2013.

Excluding a one-off gain of $391 million related to the Group's increased ownership in Bank of Ningbo in 2014, core net profit after tax grew 25 per cent year-on-year.

OCBC said the strong momentum across its customer-related businesses drove robust growth in net interest income - which hit a record $4.74 billion - fees and commissions, trading income and profit from life assurance.

The full year results included the progressive consolidation of OCBC Wing Hang from July 2014 when the group first acquired a majority stake. Before the one-off gain and the consolidation of OCBC Wing Hang, the group's core net profit after tax grew 22 per cent year-on-year.