OCBC reports 1Q22 net profit fell 10 percent, but beat some analysts’ forecasts

OCBC building in Signapore’s central business districtOCBC building in Signapore’s central business district. Photo taken pre-Covid.

OCBC reported Friday its net profit for the first quarter fell 10 percent on-year to S$1.36 billion, hit by a drop wealth management fees amid global market turmoil. The results beat forecasts from Daiwa and CGS-CIMB.

Banks globally have seen their earnings dented in the first quarter due to market volatility over the January-to-March period – driven by Russia’s invasion of Ukraine and higher interest rates.

OCBC said non-interest income for the first quarter tumbled 23 percent on-year to S$1.14 billion, hit by lower wealth management fees, trading income and life insurance profit. The bank noted the year-ago quarter comparison is from a high base.

Trading income declined 29 percent on-year to S$225 million and fees and commissions fell 11 percent on-year to S$522 million, while life insurance profit dropped 34 percent on-year to S$277 million, the filing said.

“The prior year’s non-interest income was underpinned by robust customer and investment activities arising from favourable market conditions,” OCBC said.

Net interest income for the January-to-March period increased 4 percent on-year to S$1.50 billion, on asset growth of 5 percent, partly offset by a decline in net interest margin (NIM), the bank said in a filing to SGX.

The NIM, or the difference between the interest rate banks charge to lend and their cost of funds, came in at 1.55 percent, down from 1.56 percent in the year-ago quarter, but up from 1.52 percent in the fourth quarter of 2021, OCBC said. NIM got a boost from higher loan yields, which outpaced deposit costs, the filing said.

Daiwa had forecast net profit of S$1.21 billion, net interest income of S$1.52 billion and NIM of 1.53 percent, compared with 1.52 percent in the fourth quarter. CGS-CIMB had forecast net profit of S$1.20 billion, net interest income of S$1.46 billion and NIM of 1.53 percent.

Customer loans grew 8 percent on-year, OCBC said.

On Thursday, OCBC’s 87 percent-owned insurance subsidiary Great Eastern reported its first quarter net profit tumbled 50 percent from the year-earlier quarter to S$220 million due to its investments being marked to market amid global market turmoil.