UPDATE: OCBC reports 1H21 net profit jumped 86 percent on income growth, allowance reduction

OCBC Bank branchOCBC Bank branch

This article was originally published on Wednesday, 4 August 2021 at 8:45 a.m. SGT; it has since been updated with more details. 

OCBC reported Wednesday its first half net profit jumped 86 percent on-year to S$2.66 billion on income growth and a substantial drop in allowances.

Net interest income for the January-to-June period fell 7 percent on-year to S$2.90 billion, the Singapore bank reported in a filing to SGX. The decline followed an 11 basis point drop in the net interest margin (NIM) to 1.57 percent as asset yields fell faster than the decline in funding costs amid a low interest rate environment, the bank said.

Allowances for the six-month period dropped 72 percent on-year to S$393 million, OCBC said, noting allowances for impaired assets dropped more than 50 percent on the year-earlier exposure to corporate customers in the oil trading and offshore support vessel sectors.

In addition, substantial allowances had been made on non-impaired assets in the year-earlier period to reflect uncertain economic conditions amid the pandemic, OCBC said.

Non-interest income, including fees and commissions, trading income and profit from life insurance, came in at S$2.58 billion, up 29 percent on-year, the bank said.

Wealth-management income, including income from insurance, premier and private banking, asset management and stockbroking, increased 25 percent on-year to S$2.14 billion, accounting for 39 percent of the bank’s total income.

The bank declared an interim dividend of 25 Singapore cents, compared with 15.9 Singapore cents in the year-ago period.

Second-quarter results

For the second quarter, OCBC reported net profit increased 59 percent on-year to S$1.16 billion, even as net interest income fell 2 percent on-year to S$1.46 billion as NIM fell 2 basis points to 1.58 percent. The results were broadly in-line with a forecast from Daiwa.

Non-interest income for the April-to-June period decreased 3 percent to S$1.11 billion, mainly on lower trading, investment and insurance income, OCBC said.

However, second-quarter’s share of results of associates increased 32 percent on-year to S$213 million, mainly on higher contribution by Bank of Ningbo, OCBC said.

Daiwa had forecast OCBC’s second quarter net profit would come in at S$1.14 billion, on net interest income of S$1.46 billion and non-interest income of S$1.09 billion, with a NIM of 1.56 percent.

Outlook

Helen Wong, OCBC’s CEO, issued a cautious outlook.

“While the long-term trajectory of global economic recovery is positive, we remain watchful on the current operating environment in view of the recent virus resurgence and heightened safety measures in our key markets,” she said in the statement. “We stay firmly committed to supporting our customers during this difficult period.”

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