China's One Belt, One Road initiative, meant to lift trade from Asia to Europe, offers so much more than just prospects in infrastructure, said OCBC Bank group chief executive Samuel Tsien yesterday .
"There are different kinds of banking opportunities created. People mostly talk about infrastructure... It could be projects for power plants," he said. "We have a project finance team already set up, and have been able to get quite a number of businesses there," he said at OCBC's second-quarter results briefing.
The bank, the first of the three local lenders to release results, put in a good set of figures, said Mr Tsien.
Net profit surged 22 per cent to $1.08 billion for the three months ended June 30 - way above the $923.5 million average forecast in a Bloomberg survey of analysts. This could point to a strong quarter for the other two banks as well.
OCBC shares jumped 24 cents to $11.49 after the results briefing.
Mr Tsien said over the past 18 months, OCBC has worked on four power plant projects - one in Vietnam, the rest in Indonesia - and projects involving bauxite and alumina in Indonesia for sale to China.
"The initiative creates new opportunities for us and we've been able to capture more activities. In future, I expect One Belt, One Road to move beyond infrastructure and project financing into certain other capital investments, and we'll be involved in that as well."
AT A GLANCE
Q2 TOTAL INCOME:
$2.4 billion (+17%)
Q2 NET PROFIT:
$1.08 billion (+22%)
DIVIDEND PER SHARE:
18 cents (unchanged)
Second-quarter total income rose 17 per cent to $2.4 billion. Mr Tsien said its three core businesses - banking, insurance and wealth management - have performed well.
Quarterly net interest income grew 7 per cent to $1.35 billion, driven by strong lending growth across the group's corporate and consumer businesses.
Net interest margins - the difference between interest income generated and the amount of interest paid to lenders - was 1.65 per cent, down from 1.68 per cent, owing to a fall in loan yields. Fee and commission income climbed 18 per cent to $492 million, from higher income related to loan and trade-related activities, wealth and fund management, among others.
Quarterly wealth management fee income rose 45 per cent to $215 million, partly owing to the inclusion of the former wealth and investment management business of Barclays here and in Hong Kong. That was bolstered by organic growth from the private banking unit Bank of Singapore and the Barclays acquisition, and "in that sense, the growth is quite impressive", said Mr Tsien.
The initiative creates new opportunities for us and we've been able to capture more activities. In future, I expect One Belt, One Road to move beyond infrastructure and project financing into certain other capital investments, and we'll be involved in that as well.
'' MR SAMUEL TSIEN, OCBC group CEO, on China's One Belt, One Road project.
He added: "Assets under management have risen to US$89 billion, from US$79 billion as of December. If you take a broader definition of wealth management fees, which includes our structured deposits fee income, securities and such, it represents 33 per cent of our total income - a high proportion."
Quarterly loans grew 11 per cent to $228 billion as at June 30. Second-quarter non-performing loan ratio was 1.3 per cent.
Quarterly earnings per share was 24.5 cents, compared with 21 cents a year ago, while net asset value was $8.73 a share as at June 30, compared with $8.49 as at Dec 31.
An interim dividend of 18 cents per share has been declared.