OCBC posts smaller-than-expected fall in Q3 net profit to S$1.03b

OCBC does not expect a fresh wave of loan moratorium requests amid the extension of targeted debt holidays in Singapore, even as it continues to chalk up provisions to buffer against bad loans.

The bank's net profit for the third quarter fell by a smaller-than-expected 12 per cent to S$1.03 billion, from S$1.17 billion a year ago, on lower interest income and higher allowances. This beats the S$864.9 million average estimate from four analysts, according to Refinitiv data.

OCBC chief executive officer Samuel Tsien said the bank is working on an extension of the relief support scheme for affected customers, though it will not be "on a blanket basis" as compared with earlier measures introduced in the second quarter.

The Monetary Authority of Singapore last month rolled out more support for those still struggling with the fallout from the Covid-19 pandemic, which includes the extension of the debt moratorium expiry from end of the year to 2021.

"We do not expect that there will be blanket moratorium requests that will come out of this, because it's very targeted this time. Neither do we think that the local economy requires a blanket moratorium because it's all sector-based," said Mr Tsien at a media briefing on Thursday.

As at end-October, OCBC's moratorium relief across the group fell to about S$13.6 billion - or 5 per cent of total loan book compared with 10 per cent in Q2 - following the exit of the debt-relief programme in Malaysia.

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This comes as most of the bank's customers there did not reapply for the continuation of relief measures. About 90 per cent were able to revert back to their original repayment schedules, said Mr Tsien, noting that this outcome was better than expected.

But he cautioned that the sustainability of repayments could be impacted down the road due to continued movement restrictions in Malaysia, with the pandemic showing no signs of ending.

OCBC had set aside allowances of S$350 million in the third quarter, 8 per cent higher than a year ago. Credit costs on total loans rose to 47 basis points (bps), from 24 bps a year ago.

The lender maintained its 100-130 bps credit cost guidance and peak gross non-performing loan ratio estimates of 2.5-3.5 per cent through to 2021.

Total non-performing asset (NPA) coverage ratio stood at 109 per cent in the third quarter. Total NPAs came in at S$4.25 billion in the quarter, 2 per cent lower than a quarter ago as recoveries, upgrades and write-offs more than offset new NPA formation.

"What we currently see as challenges in the economic environment will continue, but it will stabilise," said Mr Tsien.

OCBC's net interest income in the third quarter fell 11 per cent to S$1.42 billion year on year, while net interest margin tumbled 23 basis points to 1.54 per cent amid a sustained low interest rate environment.

Non-interest income in Q3 rose 6 per cent to S$1.12 billion from the previous year, lifted by higher trading income and insurance profit.

Mr Tsien said while Q3 saw a recovery from the trough of the previous quarter, "we may not have seen the full extent of the lagging economic impact of the crisis yet, which will have more visibility next year".