CFA Society Singapore
SINGAPORE (Nov 1): Oversea-Chinese Banking Corporation (OCBC Bank) reported earnings of $1.25 billion for 3Q18, an increase of 12% from a year ago, driven by a 23% rise in profit from banking operations.
This is slightly higher than the average estimate of $1.15 billion from three analysts, according to data from Refinitiv, formerly known as Thomson Reuters. The higher 3Q18 bottomline also brings earnings for the first nine months of 2018 (9M18) to $3.57 billion, an increase of 18% from a year ago.
Net interest income in the third quarter grew 9% to $1.51 billion from $1.38 billion a year ago, led by broad-based growth in customer loans of 10% and a 6 basis points rise in net interest margin (NIM) to 1.72%. The increase in NIM was driven by improved margins in Singapore, Malaysia and Greater China, and a higher average loans-to-deposits ratio.
Non-interest income for 3Q18 ended at $1.04 billion, relatively unchanged from a year ago. Fee and commission income grew 3% to $502 million, supported by higher wealth management, loan and trade-related fees.
Profit from life assurance of $184 million was lower than $253 million reported in 3Q17 as the prior year’s results included higher mark-to-market gains from a more favourable market condition a year ago.
Operating expenses of $1.07 billion were 7% higher than the $1 billion in 3Q17, mainly from an increase in staff costs associated with annual base salary increments and a rise in expenses linked to business volume growth.
The group’s share of results of associates increased 6% to $134 million.
3Q18 total allowances for loans and other assets of $49 million were higher than the low base of $21 million in the previous quarter. This was substantially lower as compared to $156 million in 3Q17, which was mainly related to corporate accounts in the oil and gas support vessels and services sector.
Total non-performing assets were $3.59 billion as at Sept 30 as compared to $3.51 billion in the previous quarter, and the non-performing loans ratio was flat quarter-on-quarter at 1.4%.
Based on Basel III rules which came into full effect on Jan 1, the group’s Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR and Total CAR as at Sept 30 were 13.6%, 14.4% and 16.1% respectively. The group’s leverage ratio was 7.1% as at Sept 30.
OCBC Bank CEO Samuel Tsien says, “Despite the weakened regional market sentiments as a result of global trade tensions, the growth in our wealth management franchise continued, with sustained net new money inflows that drove our assets under management to an all-time high. The overall quality of the loan portfolio remained stable and sound, while our capital ratios were further strengthened. As we remain alert to developments in the global economy and financial markets, our strong liquidity and capital base will position us well for prudent and sustainable growth.”
Year to date, shares in OCBC are down 14% to $10.74.