OCBC Bank beat market expectations yesterday, with first-quarter earnings more than doubling on the strong performance of its wealth and insurance businesses, and lower bad loan allowances.
Singapore's second-biggest bank posted a record $1.5 billion net profit for the three months to March 31. That topped the $901.9 million average of analysts' estimates compiled by Refinitiv and was well up on the $698 million recorded a year earlier.
Non-interest income surged 70 per cent year on year to $1.47 billion, on higher fee, trading and insurance income.
Net interest income was $1.44 billion, 11 per cent lower than the $1.63 billion posted last year. This was due mainly to a 20 basis point compression in net interest margins amid low interest rates, said the bank.
Net interest margin, a key gauge of banks' profitability, stood at 1.56 per cent.
Annualised earnings per share came in at $1.35, up from 62 cents a year earlier.
Credit costs fell to 22 basis points from 86 a year ago, amid the improved economic outlook.
Allowances for the quarter, at $161 million - mostly for impaired assets - were 75 per cent lower than the $657 million last year.
Roughly half of the allowances for impaired assets were set aside for the bank's remaining oil and gas exposure on its book.
Net fees and commissions rose 7 per cent to a high of $585 million, driven by a record $321 million in wealth management fees.
Group CEO Helen Wong, delivering her first set of OCBC results, told a briefing: "We have had very strong earnings across key markets and businesses.
"We also see diversified earnings, and that rests on the strength and resilience of our three pillars - wealth, insurance and, of course, banking operations."
The bank is seeing strong recovery in global output and trade this year, led by the revival of economic activity in the United States amid monetary stimulus and fiscal spending.
China, another important economy, has seen accelerated pickup in exports and very strong domestic demand, said Ms Wong.
She added that economic recovery is also expected to be strong in the bank's core markets of Singapore, Malaysia, Indonesia and Greater China.
The chief executive warned, however, that recovery is not broad-based yet, saying: "This is very much due to emerging variants of Covid-19 and also slow roll-out of vaccination in certain countries.
"So a true return to normal will take time, and perhaps longer than we think in this year."
She added: "We'll look at our loan book as having momentum to lead to faster growth in the rest of the year, and I'm thinking about a mid to high single-digit growth in our loan book."
OCBC is already seeing higher demand for loans in infrastructure, logistics, transportation and real estate, as well as growing appetite from private funds managing the region's wealth.
Ms Wong said she does not expect huge allowances in the next three quarters, with relief programmes seeing healthy repayments as such schemes taper off.
Loans under relief made up 2 per cent of OCBC's total loans, unchanged from the last quarter, and their quantum fell from $5.7 billion to $5.1 billion.
OCBC shares closed 1.29 per cent higher at $12.56 yesterday.
