New funds are finally coming into the struggling offshore and marine (O&M) sector in the hope of riding on a recovery, but there are risks for inexperienced players, said OCBC Bank chief executive Samuel Tsien yesterday.
He told a results briefing: "It's whether the people who are coming in also bring in expertise knowledge to be able to run the fleet as a productive asset, rather than treat it as a financial investment and look for another time to get a financial return and leave the industry."
Marco Polo Marine is one O&M firm that has attracted investment recently, including a $20 million equity investment by Super Group's founding Teo family.
The reduced concerns surrounding the O&M sector may have helped OCBC post fourth-quarter results that beat forecasts.
Net profit hit $1.03 billion, up 31 per cent from the $789 million recorded a year earlier. Analysts polled by Bloomberg had tipped an average forecast of $956 million.
Net profit for the full year rose 19 per cent to $4.15 billion, cracking the $4 billion mark for the first time.
Earnings per share for the year was an annualised 97.6 cents, up from 82.2 cents a year earlier.
AT A GLANCE
$9.6 billion (+14%)
$4.15 billion (+19%)
Dividends per share:
37 cents (+2.8%)
Mr Tsien said the risks in the bank's O&M portfolio are now "very comfortably contained".
The bank took more provisions for bad loans in this segment in the fourth quarter compared with the third, noting that charter rates have yet to pick up despite higher oil prices. But demand should increase amid greater activity in the deep-sea drilling space.
Net specific allowances jumped to $1.06 billion in the fourth quarter, more than fourfold the $235 million reaped a year ago, driven by exposure to offshore support firms.
But that was offset for the most part by the one-off excess portfolio allowance of $887 million released in the fourth quarter. This was in response to regulatory changes that took effect from Jan 1 this year.
OCBC shares closed down 31 cents to $12.26, likely due to some investors taking money off the table after the bank proposed a dividend payout lower than its peers'. The bank proposed a final dividend of 19 cents a share, up from 18 cents last year. This brings its total dividend in the 2017 financial year to 37 cents a share, up from 36 cents in 2016. The divided payout represented 37 per cent of its net profit.
OCBC posted broad-based growth across its business segments, lifted as well by strong performance in its investment portfolio.
Its net interest income grew 14 per cent to $1.42 billion in the fourth quarter, contributed by an 11 per cent rise in average interest earning assets, and a four-basis-point increase in net interest margins to 1.67 per cent. Non-interest income rose 30 per cent to $1.21 billion year-on-year, while fees and commissions increased 17 per cent.
Operating expenses grew 9 per cent to $1.07 billion, in line with increased business volumes.