SINGAPORE (Feb 14): Oversea-Chinese Banking Corporation reported a 18% fall in earnings to $789 million for the 4Q16 ended Dec from a year ago.
This brings full-year earnings to $3.47 billion, 11% lower than the previous year.
In 4Q, OCBC Bank reported a 7% fall in net interest income to $1.25 billion, mainly due to lower net interest margin from the continued compression in customer loan yields.
Non-interest income was down 4% against 4Q15 at $926 million, as fee income growth was more than offset by lower net trading income and life assurance profit.
Operating expenses grew 1% to $981 million, primarily from costs associated with the consolidation of Barclays WIM.
Net allowances for loans and other assets of $305 million for the quarter were 57% above $193 million in 4Q15.
See also: Trump wins Republican nomination, setting up rematch with Biden
OCBC Bank said the operating environment in 2016 continued to be challenging and the group remained vigilant in closely monitoring the portfolio for early signs of weakness.
While the overall credit quality of the portfolio remained sound, the uncertain outlook and depressed oil prices particularly impacted the oil and gas support services sector.
The group said it undertook steps to pro-actively classify several related accounts for close monitoring, and assisted customers to reschedule and restructure their loans.
Total net allowances for loans and other assets were $726 million in FY16, as compared to $488 million a year ago.
Net specific allowances for loans rose to $484 million from $232 million in FY15, mainly from the oil and gas support services sector related accounts.
Given the weaker operating outlook, portfolio allowances of $172 million were set aside.
Total cumulative allowances covered 303% of unsecured non-performing assets (NPAs) and 100% of total NPAs.
As at Dec 31, the absolute NPAs were $2.89 billion, up from $2.59 billion a quarter ago and $2.04 billion in FY15.
Non-performing loans (NPL) ratio rose to 1.3%, from 1.2% the previous quarter, and 0.9% a year ago.
CEO Samuel Tsien said, “The overall quality of our portfolio remained sound. Against the weak operating environment, however, there continued to be stresses in parts of the portfolio, particularly within the oil & gas support services sector which drove increases in non-performing loans and allowances.
For more stories about where money flows, click here for Capital Section
“Looking ahead, while headwinds facing broad economy are likely to persist, we are confident that we are well-positioned to support our valued customers through this difficult period,” he adds.
The board has proposed a final tax-exempt dividend of 18 cents per share, bringing FY16 total dividend to 36 cents per share.
Shares of OCBC closed at $9.75 on Monday.
