By BLOOMBERG
Oversea-Chinese Banking Corp, Southeast Asia’s second-largest lender, reported a 7% increase in core net profit for the third quarter as interest income offset a decline at its insurance business.
Excluding one-time items, earnings for the three months ended Sept 30 rose to S$902 million (RM2.76 million) from S$841 million a year earlier, the Singaporean bank said in an exchange statement Wednesday. The average of six analysts’ estimates compiled by Bloomberg was S$885 million.
“I’m surprised,” said Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. The results are “pretty reasonable despite the drop in insurance and much higher credit costs.”
Net interest income gained 6%, the bank said. While rising borrowing costs have supported Singaporean banks’ interest margins, they still have to contend with weaker lending growth as economies slow in Asia. Domestic banks’ loans grew 1% in the first eight months, preliminary data from Singapore’s central bank show, down from 5% in the same period last year.
OCBC shares lost 0.9% to S$9.20 as of 9:06 am Singapore time as the benchmark Straits Times Index dropped 0.1%. The lender has slumped 12% this year, poised to end three straight years of gains.
Customer loans
Net income for the third quarter was 27% lower than a year ago, when the bank booked a one-time gain from an investment in a Chinese bank.
OCBC’s customer loans increased 4% to S$213 billion, driven by advances to the building and housing industries, the bank said. Chief executive officer Samuel Tsien forecast in July that the bank would grow its loans in the “mid-single digit” percentage range for 2015.
The lender’s net interest margin, a measure of lending profitability, fell to 1.66% in the third quarter from 1.67% as of June.
OCBC’s non-interest income before one-time gains dropped 3% to S$775 million due to lower insurance income.
The company’s insurance unit, Great Eastern Holdings Ltd, reported last week a 65% slump in third-quarter earnings. The business was hurt by widening credit spreads, lower equity prices and long-term interest rates, as well as a weaker Malaysian ringgit, Great Eastern said in an Oct 23 statement.
The bank is the first of Singapore’s three lenders to report third-quarter profit. United Overseas Bank Ltd is due to announce results Friday, followed by DBS Group Holdings Ltd, Southeast Asia’s largest bank, on Nov 2.
— by Chanyaporn Chanjaroen
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