OCBC (OCBC.SI), Singapore’s second-biggest lender, beat expectations with a 27% jump in quarterly profit as its private bank drove loans and fees higher, offsetting rock-bottom interest rates.

Overall, loans grew 29% from a year earlier, with help from the banking unit which it acquired earlier this year from ING (ING.AS), OCBC said.

 

OCBC, or Oversea-Chinese Bannking Corp, also saw a 17% drop in bad debt charges, less than rival United Overseas Bank’s (UOBH.SI) 43% decline, as lenders across Asia benefit from an economic recovery.

 

But interest rate margins remain the Achilles’ heel for Singapore banks as domestic rates are linked to the United States, where the Federal Reserve is set to announce a new easing programme this week.

 

OCBC said its interest rate margins dropped 18 basis points from a year earlier, even though it fared better than UOB which saw a drop of 32 basis points.

 

“We intend to continue investing in our regional franchise, positioning for growth opportunities in our key markets,” said CEO David Conner in a statement.

 

OCBC posted a net profit of $570 million in July-September, compared to $450 million a year earlier.

 

That compared with an average forecast of $516 million, according to seven analysts polled by Reuters.

 

Smaller rival UOB last week posted an almost 38% jump in quarterly profit, firmly beating expectations as bad debts slumped while fees from loans and investments rose.

 

DBS (DBSM.SI), Singapore’s and Southeast Asia’s biggest bank, will announce earnings on Thursday.

 

OCBC, which bought ING’s Asian private bank earlier this year, said the private bank and its insurance unit Great Eastern (GELA.SI) showed strong revenue monmentum.

 

OCBC’s net interest income rose about 10% to $754 million as loans grew 29% compared to UOB’s 8.7% growth.

 

Fee and commission income climbed 37%, partly because of contributions from the private bank.

 

Singapore bank shares have underperformed the broader market for the year as investors are concerned about weak margins as well as an economic slowdown in the next few quarters after a strong first half.

 

OCBC shares are up 0.7% so far this year, compared to an 8.6% decline in shares of rival DBS’s (DBSM.SI) while UOB (UOBH.SI) shares are down about 5%.

 

The overall Singapore index <.FTSTI> has climbed about 10% since the start of the year.