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OCBC posts 18% drop in Q4 profit
OCBC Group on Tuesday reported an 18 per cent drop in net profit to S$789 million for the fourth quarter ended Dec 31, 2016, dragged down by both net interest income and non-interest income, as well as higher allowances for loans and impairment.
Net interest income was 7 per cent lower from a year ago at S$1.25 billion, attributed mainly to lower net interest margin from the continued compression in customer loan yields.
Non-interest income was down 4 per cent from a year ago at S$926 million, as fee income growth was more than offset by lower net trading income and life assurance profit.
Net allowances for loans and other assets of S$305 million for the quarter were 57 per cent above S$193 million in the year-ago period.
For the full year, OCBC's net profit was 11 per cent lower than in 2015 at S$3.47 billion, due to a rise in net allowances and lower trading and insurance income, which more than offset the impact of strong wealth management fee income growth and increased contributions from the Indonesia and Hong Kong banking subsidiaries.
Allowances for loans and other assets in 2016 amounted to S$726 million, 49 per cent higher than S$488 million a year ago, mainly led by an increase in specific allowances for corporate accounts in the oil and gas support services sector.
"The overall quality of our portfolio remained sound," said group CEO Samuel Tsien.
"Against the weak operating environment, however, there continued to be stresses in parts of the portfolio, particularly within the oil & gas support services sector which drove increases in non-performing loans and allowances," he added.
"We shall remain vigilant and will continue to help our clients in the impacted sectors to de-leverage and restructure their debts while being prudent in our risk management processes. At the same time, we have tightly controlled our cost base and further strengthened our strong liquidity and capital positions."