OCBC reported on Monday that its second quarter net profit rose 16 percent on-year to a record S$1.21 billion, beating some analysts’ forecasts.
However, the beat appeared to come largely from lower-than-expected expenses and allowances.
Net interest income for the quarter ended 30 June rose 8 percent on-year to S$1.45 billion, on strong loan growth and an improved net interest margin, OCBC said in a filing to SGX before the market open on Monday. The net interest margin (NIM) for the second quarter was 1.67 percent, up from 1.65 percent in the year-earlier quarter, but flat with the first quarter of 2018, it said.
Non-interest income increased 2 percent on-year to S$1.02 billion, while fee and commission income rose 5 percent on-year to S$518 million on growth in wealth management, trade-related and investment banking fees.
Net trading income rose 32 percent on-year in the quarter to S$192 million, it said. Profit from life assurance decreased 2 percent on-year in the quarter to S$191 million, OCBC said.
Daiwa had forecast net profit for the quarter would come in at S$1.114 billion, with net interest income of S$1.493 billion, non-interest income of S$1.055 billion and fee and commission income of S$529 million. Daiwa had forecast NIM of 1.69 percent.
Operating expenses rose 4 percent on-year in the quarter to S$1.04 billion, largely on higher staff costs and technology-related expenses, OCBC said. Daiwa had forecast operating expenses of S$1.070 billion.
Total allowances for loans and other assets were lower at S$21 million, compared with S$169 million a year earlier. Daiwa had forecast allowances of S$144 million.
For the first half, OCBC reported net profit rose 22 percent on-year to S$2.32 billion, saying the results were boosted by broad-based income growth, more than offsetting the increase in operating expenses.
OCBC declared an interim dividend of 20 Singapore cents a share, up by 2 Singapore cents from the year-earlier level.
The bank issued a cautious outlook.
“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,” CEO Samuel Tsien said in the statement.
But he added, “With our strong and diversified franchise, capital and balance sheet, we are well-positioned and committed to supporting our customers and pursuing long-term sustainable and stable growth for our shareholders.”