OCBC beats expectations with 21% jump in Q4 profit on insurance, trading gains

The OCBC Bank outlet at Marina Bay Financial Centre.
The OCBC Bank outlet at Marina Bay Financial Centre. ST PHOTO: JAMIE KOH

SINGAPORE - Oversea-Chinese Banking Corp, Singapore's second-biggest lender, announced on Wednesday (Feb 17) a 21 per cent rise in quarterly net profit, beating expectations, on higher trading income and gains from its insurance unit.

OCBC's net profit for the three months to Dec 31 rose to S$960 million from S$791 million a year earlier - above an average forecast of S$872 million from six analysts polled by Reuters.

OCBC's bad debt charges for loans and other assets in the fourth quarter rose 25 per cent to S$193 million from a year earlier.

For the year, non-performing loans rose 54 per cent to S$1.97 billion in 2015, mostly because of "a few large corporate accounts associated with the oil and gas services sector," OCBC bank said. Its bad-loan ratio climbed to 0.9 per cent as of Dec 31 from 0.6 per cent a year earlier.

But OCBC said its loan portfolio remained "sound" with a "comfortable" allowance coverage.

A day earlier, rival United Overseas Bank (UOB) reported flat earnings for the fourth quarter on a rise in bad debt provisions, mainly from its exposure to China and the oil and gas sector..

OCBC'S full-year earnings inched up 2 per cent from a year ago to S$3.9 billion. Excluding a one-off gain of S$391 million in FY14, core net profit grew 13 per cent, which OCBC said was a new record. It was boosted by higher net interest income, fee and commission income growth, and better trading and investment income.

The one-off gain of S$391 million was the group's increased stake in Bank of Ningbo, which became a 20 per cent-owned associated company on Sept 30, 2014.

The group's results also included the full year earnings contribution of OCBC Wing Hang, which became a subsidiary in the third quarter of 2014.

Net interest income grew 10 per cent to a new high ofS$5.19 billion, from S$4.74 billion a year ago, mainly owing to an 11 per cent increase in average balances of customer loans, which included the full year consolidation of OCBC Wing Hang.

The past year has been a challenging one for most industries," OCBC CEO Samuel Tsien said in the earnings statement, citing the economic downturn, volatility in financial markets and higher regulatory requirements for capital.

"Looking ahead, we are positive on OCBC's continued ability to deliver sustainable growth," he said.

OCBC shares rose as much as 4 per cent after the earnings report, the biggest intraday gain since Aug 25, according to Bloomberg. The stock was up 2.2 per cent to S$7.94 as of 9:36 am. The benchmark Straits Times Index (STI) fell 0.3 per cent.

OCBC shares have dropped about 12 per cent this year through Tuesday, exceeding an 8.3 per cent decline in the STI.