Oversea-Chinese Banking Corp, Singapore's second-largest lender, posted a 12% rise in second-quarter net profit on Thursday, helped by strong loan growth and a surge in trading income.

OCBC earned $648 million in the three months ended June, compared to $577 million a year earlier. Its profit was higher than the $606 million average forecast of six analysts polled by Reuters.

The beat was largely due to strong rise in net trading income to $75 million, an increase of 84 percent from a year earlier, led by higher securities and derivatives trading income.

Trade finance and housing helped fuel strong loan growth for Singapore banks this year, but analysts expect the pace of credit expansion to slacken in the second half of 2012 as Asian economies slow.

Bank loans in the wealthy city-state grew nearly 21% in June from a year earlier, central bank data shows.

Analysts expect higher dividends from OCBC in the months ahead after it agreed to sell its stakes in Fraser and Neave and Asia Pacific Breweries to a group of companies linked to Thai billionaire Charoen Sirivadhanabhakdi.

OCBC said on July 18 the banking group would make a post-tax gain of about $1.15 billion from the deal.



In 2011 it paid a total dividend of 30 cents per share, unchanged from 2010. 

OCBC Q1 net profit up better-than-expected 32 pct y/y

SINGAPORE, May 11 (Reuters) - Oversea-Chinese Banking Corp , Singapore's second largest lender, on Friday posted a 32 percent rise in first quarter net profit, helped by stronger loans, trading and investment income as well as an increase in contributions from its insurance arm.

OCBC earned S$832 million ($665.7 million)in the three months ended March, up from S$628 million a year ago. Its profit exceeded the S$619 million average forecast of six analysts polled by Reuters.

" While the global economic outlook is still mixed, we expect the strength and further expansion of our customer franchise in our key markets will continue to provide us with significant growth opportunities," CEO Samuel Tsien said in a statement.

OCBC said its net interest income grew 21 percent year-on-year to S$951 million, with robust loan growth partly offset by lower net interest margin.

The Singapore bank's net interest income was 1.86 percent in the first quarter, down 4 basis points from 1.90 a year ago but up from 1.85 in the last quarter of 2011.

OCBC's insurance arm Great Eastern Holdings last week reported a 65 percent rise in net profit to S$262.5 million, helped by higher underwriting profit and gains on investments. ($1 = 1.2498 Singapore dollars) (Reporting by Kevin Lim and Leonard How) 

Oversea-Chinese Banking Corp, Singapore’s second-biggest lender, posted a 10% fall in quarterly profit, missing expectations due to losses in trading  and a drop in profit from its insurance arm, reported Reuters.

Two of Singapore’s three listed banks have missed earnings forecasts for the quarter, and with the economy stalling, analysts expect the lenders to face tougher times in the quarters ahead.

OCBC posted a net profit of $513 million for July-September, down from $570 million a year earlier. 

That compared with the $538 million average forecast from four analysts surveyed by Reuters.



Contributions from its 87%-owned insurance arm Great Eastern fell 51% from a year earlier, while volatile markets caused a $68 million loss in trading activities. 

Oversea-Chinese Banking Corp., Singapore’s second-biggest bank by stock market value, said its fourth-quarter profit rose 1% from the previous year, missing analysts’ estimates. The stock fell to a 15-week low.

Net income increased to $505 million in the three months ended Dec. 31 from $502 million a year earlier, the bank, which owns Singapore’s biggest life insurer, said in a statement today. Net profit excluding amortization gained 1% to $521 million from $514 million. The earnings fell short of the $558.3 million average estimate of seven analysts surveyed by Bloomberg.

Oversea-Chinese Chief Executive Officer David Conner boosted profit last year with the purchase of ING Groep NV’s private banking assets in Asia, which allowed the company to tap into a surge in wealth among the region’s richest people. The increase in headcount also drove up salaries and staffing costs by 27% to $336 million, while demand for loans helped compensate for narrower profit margins on lending, it said.



“Generally, it is still a rocky road ahead for the Singapore banking sector, my view is net interest margin probably may flatten,” said Magdalene Choong, an analyst at Singapore-based Phillip Securities Pte, who rates the stock a “hold.” “What can really make us change the rating for the banking sector will be an increase in interest rates.” 

Oversea-Chinese Banking Corporation (OCBC Bank) today reported a net profit of $570 million for the third quarter of 2010 (3Q10), an increase of 27% from $450 million a year ago. 

Earnings growth was underpinned by higher net interest income, strong fee and commission income, and lower credit losses. The 3Q10 results included the consolidation of Bank of Singapore, acquired in January this year.

Net interest income increased 10% year-on-year to $754 million, driven by asset growth which more than offset the impact of lower interest margins.

Loans grew by 29% year-on-year, and 7% from the previous quarter, with broad-based increases across all geographies and segments. Non-interest income was $621 million, an increase of 59% as the prior year period included a one-time loss of $213 million ($154 million after tax and non-controlling interests) from the redemption of the GreatLink Choice (GLC) policies by Great Eastern Holdings (GEH), which was reflected under “other income”. 

Fee and commission income surged 37% to a record $260 million, led by wealth management income, which more than doubled, investment banking, loan-related and trade-related income. Insurance income, trading income and investment gains were lower, as the prior year results were boosted by the strong market recovery from the global financial crisis. 

Operating expenses increased 23%, reflecting the consolidation of Bank of Singapore, the stepping up of business expansion in key markets following a period of cost restraint during the financial crisis, and higher business volumes. Allowances for loans and other assets fell from $52 million to $43 million, with a significant reduction in specific allowances partly offset by higher portfolio allowances set aside for loan growth. The non-performing loans (NPL) ratio improved further during the quarter from 1.3% to 1.1%.

Compared to 2Q10, net profit increased by a robust 13%. Net interest income grew 5% on higher asset volumes and stable margins. Growth in loan-related, trade-related and wealth management income lifted fee and commission income by 3% compared to the previous quarter. Insurance and trading income also improved as the unstable market conditions in the previous quarter receded. Expenses rose 3%, while allowances were higher than in the previous quarter as a result of increased portfolio allowances.

GEH made significant contributions to the group’s improved results for the quarter as well as the nine months period. Net profit contribution from GEH increased 146% quarter-on-quarter to $137 million in 3Q10, and 16% year-on-year to $340 million in 9M10. For the nine months, GEH accounted for 19% of the Group’s net profit. GEH also achieved robust growth in new business premiums and embedded value. Total weighted new business premiums rose 12% year-on-year for the quarter and 19% for the nine months, while new business embedded value increased 29% year-on-year for the quarter and 31% for the nine months.

Net Interest Income
Net interest income in 3Q10 grew 10% year-on-year to $754 million, driven by a 20% growth in average interest-earning assets, which more than offset a decline in net interest margin. Customer loans grew 29% from a year ago, and 7% from the previous quarter, to $102 billion. Excluding the consolidation effect of Bank of Singapore, loan growth would have been 23% year-on-year. The growth was broad-based across all geographies and across the consumer, corporate and SME loan segments. By industry, the biggest increases came from the housing and general commerce sectors, and lending to non-bank financial institutions, investment and holding companies.

Net interest margin declined 18 basis points year-on-year, from 2.16% to 1.98%. The decline was partly due to the inclusion of Bank of Singapore’s lower-yielding, well collateralised assets. Excluding the consolidation effect, net interest margin would have recorded a smaller year-on-year decline of 12 basis points, attributable mainly to reduced average asset yields in a sustained low interest rate environment.

Compared with 2Q10, net interest income grew a robust 5%, contributed mainly by higher asset volumes. Net interest margin improved marginally by 2 basis points from the previous quarter, helped by better margins in Malaysia.

Non-Interest Income
Non-interest income increased 59% year-on-year to $621 million. Excluding the $213 million GLC loss in 3Q09, the year-on-year increase in non-interest income was 3%.

Fee and commission income surged 37% to $260 million, partly a result of contributions from Bank of Singapore. Wealth management income more than doubled to $50 million, while investment banking, loan-related and trade-related activities also grew strongly. Profit from life assurance fell 26% to $156 million, as the investment performance of the Singapore non-participating fund was exceptionally strong in the prior year period. Net trading income fell from $94 million to $82 million, and gains from sale of investment securities declined from $35 million to $23 million.

Compared to 2Q10, non-interest income grew strongly by 20%. Profit from life assurance and net trading income recovered as the unstable market conditions in the previous quarter, caused by the European sovereign debt crisis, receded. In particular, the investment performance of GEH’s Singapore non-participating fund improved as credit spreads narrowed and equity prices rose during the third quarter. Fee and commission income rose 3% over the previous quarter, led by higher loan- related and trade-related income and wealth management income.

The group’s NPL and coverage ratios improved further. The level of NPLs fell 12% from the previous quarter to $1,115 million, while the NPL ratio improved to 1.1%, below the pre-financial crisis low of 1.3%. Cumulative allowances amounted to 126% of total NPAs and 350% of unsecured NPAs, up from 112% and 288%, respectively, in the previous quarter.

Capital Ratios


The group remains strongly capitalised, with a Tier 1 ratio of 15.2% and total capital adequacy ratio of 15.5% as at 30 September 2010, well above the corresponding regulatory minimums of 6% and 10%. Core Tier 1 ratio, excluding perpetual and innovative preference shares, was 11.5%.