OCBC posts 5% rise in Q3 profit

Oversea-Chinese Banking Corporation Limited (OCBC) reported a 5 per cent rise in net profit after tax for the third quarter ended September 30, 2016 to S$943 million, underpinned by better non-interest income, particularly fees from wealth management and profit from life assurance.

Non-interest income grew 25 per cent to S$970 million. As a share of the group's total income, wealth management contributions were 28 per cent for the quarter, compared to 22 per cent in the prior year. Fee and commission income increased 5 per cent to S$428 million, boosted by continued growth in wealth management fee income.

But net interest income of S$1.32 billion during the quarter was 6 per cent lower than a year ago due to lower loan volumes and net interest margin.

OCBC also made greater allowances of S$166 million for loans and other assets, 10 per cent higher than a year ago. The group's non-performing loans ratio inched up to 1.2 per cent as at Sept 30 from 0.9 per cent previously.

As at Sept 30, customer loans were S$209 billion or 2 per cent lower than the year before, led by a decline in trade-related lending to Greater China, which offset an increase in housing loans and other consumer loans.

"The operating environment for the group remains challenging amidst weak economic conditions," group CEO Samuel Tsien conceded. "We continue to keep a firm grip on cost, maintain strong liquidity and capital, and ensure prudent levels of provisioning."

He noted that the yearly and quarterly rise in third quarter earnings came from a combination of higher wealth management and insurance income, as well as increased contributions from Indonesia. "This clearly demonstrates the strength of the Group's diversified franchise across geographies and businesses," he added.

Customer loans and deposits stood at S$209 billion and S$247 billion respectively as at Sept 30. The loans-to-deposit ratio was 83.1 per cent, compared to 83.5 per cent a year ago. Current and savings deposits accounted for more than half of total non-bank deposits, with the ratio at 50.2 per cent, up from 47.5 per cent a year ago.