OCBC earnings may disappoint after strong showings by UOB, DBS

OCBC branch in SingaporeOCBC branch in Singapore. Photo taken pre-Covid.

OCBC’s earnings may disappoint the market after its Singapore peers, UOB and DBS, posted solid beats.

The stock had ended Friday down 0.73 percent at S$13.65 as all three banks sold off in the latter part of last week amid market disappointment with UOB earnings, at least in comparison with DBS, which handily beat expectations.

Singapore’s second-largest bank after DBS and the last of the three to report earnings said its first-quarter net profit climbed 29 percent on-year to S$1.11 billion, with strong net interest income growth, higher wealth management income, lower allowances and increased contributions from overseas banking subsidiaries.

The net interest margin rose 5 basis points to 1.67 percent, the bank said in a filing to SGX before the market open.

Consensus net profit forecasts were for S$1.12 billion, according to Bloomberg. Nomura had forecast net profit of S$1.271 billion, Daiwa had forecast net profit of S$1.072 billion and CIMB had forecast S$1.16 billion. Both CIMB and Daiwa had forecast OCBC would report NIM of 1.68 percent.

The bank appeared to put some of the concerns about its exposure to the troubled oil and gas sector behind it. Allowances fell to S$12 million in the first quarter, from S$176 million in the fourth quarter. Its non-performing loan ratio fell to 1.38 percent in the first quarter, from 1.45 percent in the fourth quarter. OCBC said that on-balance sheet oil and gas exposure was 5 percent of total consumer loans at the end of the first quarter, largely unchanged on-quarter.

OCBC said that profit from life assurance rose to S$166 million in the quarter, up from S$49 million in the year-earlier quarter.

CEO Samuel Tsien said in the statement that the bank was pleased with the results, but he also sounded a note of caution.

“The group’s income growth was broad-based, loan growth was sustained, assets under management growth continued and allowances were much lower. Our Hong Kong, Malaysian and Indonesian banking subsidiaries also reported higher year-on-year earnings,” he noted.

But he added, “we remain vigilant to geo-political events including increased global trade tensions and the effects of higher interest rates on investment activities and the overall economy.”