SINGAPORE - Oversea-Chinese Banking Corp (OCBC) reported a 34 per cent jump in its net profit for the fourth quarter to $1.24 billion, compared with $926 million from a year ago.
The increase comes on the back of stronger trading income, sale of investment securities and its wealth management business, the bank said on Friday (Feb 21).
Annualised earnings per share was $1.11 for the quarter, an increase from 85 cents a year ago. Directors proposed a dividend of 28 cents per share, up from 23 cents a year ago.
Group chief executive Samuel Tsien said the bank had performed well last year (2019), but warned that the road ahead will be rocky. "OCBC achieved a strong performance in 2019 which marked another consecutive year of record earnings," he said.
He added that the bank's income growth was broad-based across its banking, wealth management and insurance franchise. "We achieved our loan target and saw improved margins for the full year," he said.
But "the global economic outlook (for 2020) is expected to be weaker than originally expected," he said. "We are watchful of the impact to our business and customers from the continuing trade tensions, heightened geo-political risks and the Covid-19 outbreak."
A bank spokesman confirmed that Mr Tsien said during a briefing on Friday that the coronavirus outbreak will cause the bank's revenue growth to dip by about 2 per cent this year, assuming that the impact can be contained by June.
A slight uptick is expected for its non-performing loan ratio, though it "won't be significant", and credit costs are projected to go up by a few basis points, Mr Tsien had said.
For the fourth quarter, net interest income grew 6 per cent from a year ago to $1.61 billion because of loan growth and improved margins, the bank said.
Average customer loans increased 3 per cent from a year ago, mainly from lending to corporate customers, it noted.
The bank's net interest margin rose five basis points to 1.77 per cent from 1.72 per cent, compared with a year ago, largely due to the management of funding costs, it added.
Net interest margin is a key gauge of profitability for banks, measuring the difference between income earned from loans and the interest paid to depositors.
OCBC reported that non-interest income between October and December last year climbed 58 per cent to $1.31 billion from $830 million in 2018.
Income from net fees and commissions grew 17 per cent to $556 million, led by higher fees from wealth management, credit card, loan and transaction banking activities, the bank said.
Net trading income increased to $316 million from $9 million a year ago, driven by higher gains from treasury activities, a rise in customer flow income, and mark-to-market gains, it reported.
The bank added that net gains from the sale of investment securities were also higher at $35 million, as compared to the $2 million reported for the fourth quarter in 2018.
Income from life and general insurance also grew, by 25 per cent to $308 million, up from $247 million in the previous year, on better investment performances and and higher year-on-year sales.
For the full year, OCBC reported a net profit of $4.87 billion, an 8 per cent jump from $4.49 billion in 2018.
Non-interest income for the year climbed 19 per cent to $4.54 billion, from the $3.81 billion a year ago, driven by broad-based income growth, the bank said.
It added that net fee income rose 5 per cent from a year ago to a record S$2.12 billion because of higher wealth management and credit card fees as well as increased fees from loan, trade and investment banking activities.
Net trading income grew substantially to $977 million from $508 million a year ago, which the bank attributed to an 18 per cent increase in customer flow income and mark-to-market gains in subsidiary Great Eastern Holdings' investment portfolio.
Net gains from the sale of investment securities were higher at $171 million as compared to $16 million a year ago, while income from life and general insurance rose 7 per cent to $976 million.