OCBC profit beats estimates on lending, lower allowances

A man walks past Oversea-Chinese Banking Corp. (OCBC) signage displayed outside of the company’s branch in the central business district of Singapore, on Friday, Feb. 10, 2017. (Bloomberg pic)

SINGAPORE: Oversea-Chinese Banking Corp.’s second-quarter profit rose more than analysts estimated as lending income increased and loan allowances fell.

Net income climbed 16% to S$1.21 billion ($884 million) in the three months ended June from a year earlier, the Singapore-based bank said Monday. That beat the S$1.12 billion average forecast in a Bloomberg survey of four analysts.

Southeast Asia’s second-largest bank joins its two Singapore rivals in boosting lending income, thanks in part to rising interest rates in the region. United Overseas Bank Ltd. also posted a better-than-expected profit, while DBS Group Holdings Ltd. missed estimates after being hit by losses at its treasury and markets division.

OCBC Chief Executive Officer Samuel Tsien joined his counterparts at UOB and DBS in sounding a cautious note about the impact of global trade tensions, while remaining positive about the long-term outlook for his bank. “The operating environment is increasingly challenging and we are watchful of the severe implications to the global economy and financial markets from the escalating trade and political tensions,” Tsien said.

Higher margins and loan growth pushed up OCBC’s net interest income by 8% to S$1.45 billion. Non-interest income increased 2%, as growth in trading and wealth management was offset by a 97% drop in net gains from the sale of investment securities.

“Nothing major to complain about overall as diversification in businesses is helping the bank,” said Kevin Kwek, an analyst at Sanford C. Bernstein.

Other key figures
Allowances for loans and other assets shrank 87% to S$21 million.

Wealth management fees rose 5% to S$225 million.

Return on equity was 12.6% versus 11.4%.

Net interest margin rose 2 basis points to 1.67%.

Nonperforming loan ratio rose to 1.4%.

Operating expenses increased 4% to S$1.04 billion.

Customer loans grew 10%. Interim dividend up 2 Singapore cents to 20 cents

OCBC shares have lost 8.4% this year, compared with a 4% drop in the benchmark Straits Times Index.