UPDATE: OCBC reports 2Q net profit rose 1 percent, beating forecasts despite lower Great Eastern income

OCBC Bank branchOCBC Bank branch

This article was originally published on Friday, 2 August 2019 at 7:27 A.M. SGT; it has since been updated with more details.

OCBC reported Friday its second quarter net profit rose 1 percent on-year to S$1.22 billion as record earnings from the bank offset lower income contributions from insurance subsidiary Great Eastern. That topped forecasts from CGS-CIMB and Daiwa.

Net interest income for the quarter ended 30 June increased 10 percent on-year to S$1.59 billion, the bank said in a filing to SGX before the market open. That was due largely to a 4 percent increase in customer loans, the filing said.

Net interest margin, or the difference between the interest rate banks charge to lend and their cost of funds, jumped to 1.79 percent, up 12 basis points on-year on increased asset yields in Singapore, Hong Kong and China.

Non-interest income rose 1 percent on-year to S$1.03 billion, the bank said. That was despite a 26 percent drop in life insurance profit from Great Eastern on a decline in the discount rate used to value long-term insurance contract liabilities, partly offset by better investment performance, OCBC said.

Net fees and commissions rose 1 percent on-year to S$522 million for the quarter on an 8 percent increase in wealth management fees to their highest in five quarters, OCBC said. Net realized gains from the sale of investment securities came in at S$48 million, up from S$2 million in the year-ago quarter.

“We are pleased to report another strong quarterly performance. Loan growth was sustained and NIM continued to improve. Fee income rose quarter-on-quarter, led by higher wealth management fees, with our private banking assets under management climbing to new levels,” Samuel Tsien, OCBC’s CEO, said in the statement.

“While economic growth in our key markets is slowing, our healthy capital, funding and liquidity position will allow us to comfortably navigate the challenging operating environment and pursue our long-term growth strategy. This also gives us the flexibility to capitalise on market expansion opportunities as they arise,” Tsien said.

CGS-CIMB forecast second-quarter net profit of S$1.20 billion, with net interest income of S$1.59 billion and non-interest income of S$978 million, with NIM of 1.78 percent.

Daiwa forecast OCBC’s net profit at S$1.18 billion, with net interest income at S$1.57 billion and non-interest income at S$1.01 billion, with NIM of 1.75 percent.

OCBC declared an interim dividend of 25 Singapore cents a share, up from the year-ago level of 20 Singapore cents.

For the first half, OCBC reported net profit rose 6 percent on-year to S$2.45 billion, on net interest income of S$3.12 billion, up 9 percent on-year, and non-interest income of S$2.17 billion, up 12 percent on-year.


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