UPDATE: OCBC reports 3Q19 net profit fell 6 percent on one-off charge at Indonesian subsidiary

OCBC Bank branchOCBC Bank branch

This article was originally published on Tuesday, 5 November 2019 at 7:28 A.M. SGT; it has since been updated with more details.

OCBC reported Tuesday its third-quarter net profit fell 6 percent on-year to S$1.17 billion due to a one-time charge, even as both net interest income and non-interest income rose.

Excluding the one-time charge, net profit would have been S$1.26 billion, compared with S$1.25 billion a year earlier, the bank said.

Net interest income increased 6 percent on-year to S$1.60 billion, the bank said in a filing to SGX.

The net interest margin (NIM), or the difference between the interest rate banks charge to lend and their cost of funds, increased 5 basis points on-year to 1.77 percent from improved asset yields and a 2 percent increase in customer loans.

Non-interest income rose 2 percent on-year to S$1.06 billion, the bank said.

Daiwa had forecast net profit of S$1.19 billion, with net interest income of S$1.61 billion and non-interest income of S$1.03 billion, with NIM of 1.78 percent.

“Balanced growth across our banking, wealth management and insurance businesses allowed us to deliver a quarter-on-quarter and year-on-year increase in core earnings amid a challenging operating environment,” Samuel Tsien, OCBC’s CEO, said in the statement.

But he pointed to risks ahead.

“Global and regional economic growth continued to slow, and geo-political event risks have increased. We shall remain vigilant and will maintain prudent risk management practices while exercising disciplined cost management,” Tsien said.

The bank said the results included a one-time charge of S$91 million due to changes in its expected credit loss modelling approach for its Indonesian banking subsidiary, Bank OCBC NISP, for allowances to non-impaired assets in preparation for accounting changes.

Net fees and commissions grew 10 percent on-year to a record S$550 million, on higher fees from wealth management, investment banking and remittance services, the filing said. Daiwa had forecast S$539 in net fees and commission income.

Net trading income of S$182 million was down from S$213 million in the year-ago period as a decline in treasury income offset a rise in consumer-related flow income, OCBC said.

Great Eastern posted operating profit rose 24 percent on-year, but income from life and general insurance fell to S$204 million from S$225 million in the year-ago period on fair value movements due to lower interest rates used to value contract liabilities.

No interim dividend was declared, unchanged on-year.

For the nine-month period, OCBC reported net profit increased 2 percent on-year to S$3.63 billion, with net interest income up 8 percent on-year to S$4.72 billion and non-interest income growing 8 percent on-year to S$3.23 billion.

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