SINGAPORE (May 7): Oversea-Chinese Banking Corporation reported a earnings of $1.11 billion for 1Q18 ended March, an increase of 29% from a year ago on lower loan provisions and higher income from lending and wealth management.

This was slightly higher than the mean of five broker estimates of $1.09 billion compiled by Thomson Reuters.

Last week, DBS posted a 26% increase in earnings while UOB’s earnings rose 21%.

OCBC Bank says the robust year-on-year performance was underpinned by strong net interest income growth, higher wealth management income, lower allowances and higher contributions from the group’s overseas banking subsidiaries.

Net interest income for the first quarter grew 11% to $1.42 billion from $1.27 billion a year ago, underscored by strong asset growth and increased net interest margin.

Net interest margin rose 5 basis points to 1.67% from 1.62% a year ago. Non-interest income was 8% higher at $918 million as compared to $850 million a year ago.

The group’s overall wealth management income, comprising income from insurance, private banking, asset management, stockbroking and other wealth management products, grew 22% to $727 million, from $597 million a year ago.

Bank of Singapore’s assets under management increased 19% to US$102 billion ($133 billion) as at March 31 2018, from US$85 billion ($119 billion) of the previous year.

As a proportion of the group’s total income, wealth management income which included income from insurance operations, contributed 31%, up from 28% a year ago.

Total allowances for loans and other assets for 1Q18 were $12 million, significantly lower as compared to $178 million in the preceding quarter and $168 million a year ago, as the prior periods included allowances set aside for corporate accounts in the offshore support services and vessels sector.

As at March 31, total non-performing assets of $3.45 billion were slightly below $3.47 billion of the quarter before. The non-performing loans ratio fell to 1.4% from 1.5% as at Dec 31 2017.

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 March 31, were 13.1%, 14.2% and 15.8% respectively and well above the respective regulatory minimums.

In its outlook, CEO Samuel Tsien says business sentiments have been positive, but the bank remains vigilant to geo-political events including increased global trade tensions and the effects of higher interest rates on investment activities and the overall economy.

Lim & Tan says OCBC was the only Singapore bank that met expectations, while DBS and UOB both beat consensus expectations by about 5% for 1Q18.

Looking ahead, Lim & Tan expects OCBC’s earnings to grow 17% in 2018 to $4.8 billion while UOB is expected to grow 22% to $4 billion and DBS the fastest at 35% to $5.9 billion.

In PE terms, UOB and OCBC are trading around 12.3 times while DBS is trading at 12.6 times, according to Lim & Tan. Price to book, UOB is the most attractive at 1.4 times against DBS and OCBC’s 1.5 times.

Dividend-yield wise, Lim says DBS is the best at 4.1% against OCBC and UOB’s 2.8%.

“Our banking sector preference remains DBS, UOB followed by OCBC,” says Lim & Tan.

As at 2.18pm, shares in OCBC are trading 39 cents lower at $13.26.