SINGAPORE (July 27): Oversea-Chinese Banking Corporation (OCBC Bank) has posted earnings of $1.08 billion for the second quarter ended June, growing 22% from earnings of $885 million a year ago.
That compares with the $938 million average forecast in a Bloomberg survey of six analysts.
Earnings for the first half of 1H17 ended at $2.06 billion, 18% higher than earnings of $1.74 billion in 1H16.
In a filing to SGX on Thursday, OCBC says the improvement came on the back of strong performance from OCBC’s banking, wealth management, and insurance operations, which were driven by growth in net interest income, fees and commissions, net trading income, and profit from life assurance.
Net interest income rose 7% to $1.35 billion in 2Q, from $1.26 billion a year ago. This was mainly attributable to strong lending growth across the group’s corporate and consumer businesses.
Customer loans growth was broad-based and grew 11% y-o-y.
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However, net interest margin fell 3 basis points y-o-y to 1.65% in 2Q17, mainly due a fall in loan yields. This was partly mitigated by higher gapping income and a drop in funding costs.
Non-interest income rose 34% to $1.05 billion in 2Q, from S$788 million a year ago.
Fees and commissions climbed 18% to $492 million during the quarter, led by a 45% increase in wealth management fee income. This was partly attributable to the inclusion of the former wealth and investment management business of Barclays PLC in Singapore and Hong Kong, which was acquired in November 2016.
Net trading income, comprising predominantly treasury-related income from customer flows grew 14% to $140 million in 2Q.
Profit from life assurance more than doubled to $240 million n 2Q, from $108 million a year ago.
This was driven by higher operating profit and positive performance from Great Eastern Holdings’ investment portfolio as a result of narrowing of credit spreads and gains from favourable interest rate movements.
As at June 30, 2017, the level of total non-performing assets grew to 2.92 billion, from $2.49 billion a year ago. Overall non-performing loans ratio rose to 1.3%, from 1.1% a year ago.
The increase was mainly attributable to the downgrade of corporate accounts in the oil and gas support services sector which remained under stress.
As at June 30, OCBC’s Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR, and Total CAR were 13.0%, 13.9%, and 16.1% respectively.
Cash and cash equivalents stood at $9.7 billion as at June 30, 2017.
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OCBC has declared an interim dividend of 18 cents per share for the first half of 2017.
“Strong business momentum was achieved across all three business pillars – banking, wealth management and insurance,” says OCBC CEO Samuel Tsien.
“Stronger consumer sentiments were noted in key economies, but overall economic growth in the region is expected to only be moderate and event risks remain. We will pursue prudent business growth, focusing on our key markets and core business lines,” he adds.
In a flash note on Thursday, RHB Research analyst Leng Seng Choon says OCBC’s 2Q17 results were slightly above expectations. The bank’s 1H17 net profit accounted 56% of RHB’s full-year forecast.
“Looking forward, our view is that the strong 2Q17 life assurance income is unlikely to recur as it is very dependent on the investment portfolio,” says Leng.
Shares of OCBC closed 7 cents higher at $11.25 on Wednesday.
