Stock market disruptions and slower loans growth sent earnings sliding at OCBC in the third quarter, it reported yesterday.
Net profit for the three months to Sept 30 fell 27 per cent to $902 million compared with the same period last year. Revenue gained 2 per cent to $2.09 billion.
The year-on-year profit drop was partly due to a higher base last year when a $391 million one-off gain was recognised through OCBC's shareholding in the Bank of Ningbo.
The quarterly profit was still higher than the $885 million forecast by Bloomberg.
Excluding the one-off gain, core net profit grew 7 per cent, despite a 64 per cent drop in life assurance earnings due to losses incurred by Great Eastern's investments in the third quarter when Asian markets were rocked by an extended selldown.
AT A GLANCE
REVENUE: $2.09 billion (+2%)
NET PROFIT: $902 million (-27%)
LOANS: $213 billion (+4%)
Chief executive Samuel Tsien told a results briefing yesterday: "Our results were quite significantly impacted by equity market price and interest rate movements, which affected our insurance operations.
"Without those movements, our group results would have been much better."
He added that Great Eastern's losses were an unrealised accounting entry instead of actual losses.
The net profit from core banking operations - which excludes Great Eastern - grew 25 per cent year on year.
"We expect the conditions that we saw in the third quarter to improve in the fourth quarter. If you take away the mark-to-market elements, you'll see that our underlying fundamental momentum continues to be very strong," said Mr Tsien.
Still, the lower insurance income led to a 3 per cent year-on-year drop in non-interest income to $775 million in the third quarter.
Fee income of $408 million was on a par with last year's $406 million, while wealth management income was down 12.7 per cent year on year to $467 million amid market volatility.
Net interest income rose by 6 per cent to $1.32 billion on the back of a 4 per cent rise in customer loans to $213 billion. The net interest margin fell to 1.66 per cent from 1.68 per cent a year ago, as the improvement in loan spreads was offset by a lower loan-to-deposit ratio.
Third-quarter loans growth was tepid compared with an 18 per cent increase in the second quarter.
Mr Tsien cautioned that loan demand will remain weak against the choppy economic backdrop, with full-year growth likely to be in the low single digit.
But he noted there was no cause for concern over the higher non-performing loan (NPL) ratio, which gained two basis points to 0.9 per cent in the third quarter as non-performing assets shot up 41 per cent year on year to $1.93 billion.
The NPL ratio rose because OCBC proactively restructured the loans extended to struggling oil and gas companies in Singapore, primarily in the support segment. The restructured loans were classified as non-performing.
Meanwhile, OCBC Wing Hang was a highlight for the third quarter with the Hong Kong unit contributing $72 million in net profit - a 92 per cent year-on-year increase.
One year after Wing Hang's acquisition, its business integration with the group is at "100 per cent" level, Mr Tsien noted, but operation and systems integration may need two to three years.
Annualised earnings per share was 86.8 cents, down from 91.3 cents a year earlier, while net asset value stood at $7.78 per share at the end of the third quarter.