OCBC Bank is pursuing the idea of a "digital bank" in Indonesia, said its chief executive officer Samuel Tsien yesterday at its results briefing, as Singapore's second-largest bank looks to join its peers in launching banking for mobile-savvy customers in this region.

The bank said it was unable to share more details at this early stage, though it is likely that this digital bank will not be a standalone unit, which is the model used by DBS Bank.

OCBC yesterday reported a net profit of $1.21 billion for the second quarter, up 16 per cent, even as Mr Tsien warned that the operating environment was becoming "increasingly challenging and we are watchful of the severe implications to the global economy and financial markets from the escalating trade and political tensions".

The higher earnings were driven by the strong performance across each of its banking, wealth management and insurance businesses.

Strong loan growth and higher net interest margin (NIM) drove second-quarter net interest income to a new high of $1.45 billion, which was 8 per cent above the $1.35 billion a year ago.

Average customer loans grew 11 per cent, driven by broad-based growth across most industries and geographical segments.

NIM expanded to 1.67 per cent from 1.65 per cent a year ago, boosted by higher asset yields here and in Malaysia that saw higher NIMs in both markets, more than offsetting higher funding costs in the rising interest rate environment.

Non-interest income in the second quarter was $1.02 billion, an increase of 2 per cent year-on-year.

Led by growth in wealth management, trade-related and investment banking fees, income from fees and commissions rose 5 per cent to $518 million.

Net trading income, mainly comprising treasury-related income from customer flows, increased 37 per cent to $192 million.

Total income was 5 per cent higher at $2.47 billion.

Profit from life assurance was $191 million against $195 million a year ago. Subsidiary Great Eastern Holdings' total weighted new sales grew 28 per cent to $327 million, driven by higher sales in Singapore, and new business embedded value was up 8 per cent to $140 million.

Operating expenses rose 4 per cent to $1.04 billion from $993 million, reflecting an increase in staff and technology-related expenses.

Total allowances for loans and other assets for the second quarter were $21 million - $9 million higher quarter-on-quarter - but significantly lower than the $169 million a year ago, when allowances were set aside for corporate accounts in the oil and gas support vessels and services sector.

The asset quality of the loan portfolio was stable. Total non-performing assets of $3.51 billion as of end-June were slightly higher than the $3.45 billion for the previous quarter, and the non-performing loans ratio remained stable quarter-on-quarter at 1.4 per cent.

An interim dividend of 20 cents per share was declared, two cents higher than the 18 cents declared a year ago.

The scrip dividend scheme will be applicable for this payout, which gives shareholders the option to receive the dividend in the form of shares at a 10 per cent discount to the average of the daily volume-weighted average prices from Aug 15 to 17.

OCBC shares yesterday climbed 2 per cent to $11.58.