OCBC Q4 profit falls 17.8%, worse than expected, on more bad loan provisions, lower interest income

A woman walking past an Oversea-Chinese Banking Corporation (OCBC) branch in Singapore.
A woman walking past an Oversea-Chinese Banking Corporation (OCBC) branch in Singapore.PHOTO: REUTERS

SINGAPORE - No 2 lender OCBC reported a 17.8 per cent fall in fourth-quarter net profit, worse than analysts expected, as provisions for bad loans jumped and interest income fell.

Net income fell to S$789 million in the three months to December from S$960 million a year earlier, OCBC said on Tuesday (Feb 14) in filing with the Singapore Exchange. That missed the S$864 million average forecast in a Bloomberg survey of six analysts.

OCBC is the first of Singapore's Big Three banks to report this week their final quarter results, expected to show the damage wrought by soured loans for a battered oil services sector and slowing loan growth due to weaker regional trade.

OCBC's net allowances for loans and other assets jumped 57 per cent to S$305 million in the fourth quarter from S$193 million a year earlier.

For the full year, the charges swelled 49 per cent to S$726 million from S$488 million a year ago, mainly due to allowances for corporate accounts in the oil and gas (O&G) support services sector which OCBC said it has been "closely monitoring".

OCBC CEO Samuel Tsien said the bank's overall portfolio quality remained sound, but there "continued to be stresses ... particularly within the oil and gas support services sector which drove increases in non-performing loans and allowances."


Net specific allowances for loans for the whole of 2016, mainly to the O&G support services sector, more than doubled to S$484 million from S$232 million a year ago.

OCBC said it "continued to retain a healthy coverage ratio", with total cumulative allowances covering 303 per cent of unsecured non-performing assets (NPAs) and 100 per cent of total NPAs.

Full-year net profit fell 11 per cent to S$3.47 billion from S$4 billion a year ago, when there was a substantial investment gain from OCBC's insurance unit Great Eastern Holdings.

For the fourth quarter, net interest income dropped 7 per cent to S$1.25 billion, blamed on "lower net interest margin from the continued compression in customer loan yields."

For the full year, net interest income fell 3 per cent from the previous year to S$5.05 billion, "mainly from a decline in average interest earning assets, led by a drop in interbank placements." Net interest margin was unchanged at 1.67 per cent.

DBS, Singapore's biggest bank, reports results on Thursday while UOB will do so on Friday.