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OVERSEA-Chinese Banking Corp (OCBC) reported on Tuesday a 14 per cent rise in its first quarter 2017 net profit to S$973 million, compared to S$856 million a year ago.
The Singapore bank attributed its robust year-on-year performance to the sustained growth in wealth management income, higher profit from insurance operations as well as increased earnings in local currency terms from all of the group's overseas banking subsidiaries, particularly from Indonesia.
"We are pleased to report a rise in first quarter earnings. Our results reflect the underlying strength and diversity of our banking, wealth management and insurance franchise. We achieved broad-based loan growth, grew our private banking AUM (assets under management), and reported significantly higher fee income. Our Hong Kong, Malaysian and Indonesian banking subsidiaries saw higher year-on-year earnings growth in local currency terms and Great Eastern continued to deliver robust underlying total weighted new sales and new business embedded value growth,'' CEO Samuel Tsien said.
Net interest income of S$1.27 billion for the first quarter was 3 per cent lower as compared to S$1.31 billion a year ago, as higher asset growth was offset by net interest margin compression. Average customer loans grew 5 per cent year-on-year led by broad-based growth across most industry segments and key markets.
Net interest margin contracted 13 basis points from 1.75 per cent a year ago to 1.62 per cent, largely attributable to reduced customer loan yields and excess liquidity placed in high quality but lower yielding interbank placements.
The overall quality of the loan portfolio remained stable. OCBC said although the stress in the oil and gas support services sector is continuing, sufficient provisions have been made.
"We have a strong capital and liquidity position, and launched our maiden Covered Bond Programme which further diversified our funding base,'' the bank said. In March 2017, the bank launched its inaugural EUR 500 million 5-year covered bond under the US$10 billion Global Covered Bond Programme.
Non-interest income rose 30 per cent to S$977 million from S$753 million a year ago. Fee and commission income climbed 29 per cent to S$481 million, led by a 70 per cent rise in wealth management fee income, which got a boost from the acquisition of the former wealth and investment management business of Barclays PLC in Singapore and Hong Kong last November.
Profit from life assurance more than doubled from S$83 million in the preceding year to S$176 million, thanks largely to a positive performance by Great Eastern Holdings, its Singapore-listed insurance arm.
Wealth management income, comprising income from insurance, private banking, asset management, stockbroking and other wealth management products, grew 50 per cent to S$724 million, from S$482 million a year ago. As a result, it contributed 32 per cent to the group's total income, compared to 23 per cent in a year ago.
OCBC's private banking business saw a significant increase in AUM to US$85 billion (S$119 billion) on March 31, 2017, up 49 per cent from US$57 billion (S$77 billion) the previous year, partly contributed by the acquisition of Barclays WIM.
Overall non-performing loans ratio was 1.3 per cent, unchanged from the previous quarter.