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OCBC tops forecasts with 12% rise in Q3 profit; shares jump

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OCBC Bank turned a record net profit of S$1.25 billion for its third fiscal quarter in 2018, rising 12 per cent from the S$1.11 billion last year for the same period.

OCBC Bank turned a record net profit of S$1.25 billion for its third fiscal quarter in 2018, rising 12 per cent from the S$1.11 billion last year for the same period.

The earnings beat the S$1.13 billion consensus forecast in a Bloomberg survey of seven analysts.

The bank's net interest income for the third quarter grew 9 per cent to S$1.51 billion from S$1.38 billion a year ago. This was led by broad-based growth in customer loans of 10 per cent and a six basis point rise in net interest margin (NIM) to 1.72 per cent. The increase in NIM was driven by improved margins in Singapore, Malaysia and Greater China, and a higher average loans-to-deposits ratio, OCBC said.

Loans-to-deposits ratio was higher at 88.5 per cent as compared with 85.3 per cent a year ago.

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OCBC's shares reflected its stellar quarter on Thursday, jumping 3.35 per cent or 36 Singapore cents to S$11.10 as at 10.40am. UOB, which posted a net profit increase of 17 per cent to S$1.04 billion for Q3 but a decline in net interest margin, gained 0.12 per cent or three Singapore cents to S$24.41.

DBS, which will report its Q3 earnings on Nov 5, climbed 1.36 per cent or 32 Singapore cents to S$23.78.

"Record quarterly and year to date net profit were achieved through improved NIM, continued loan growth, higher non-interest income, and continued cost management discipline. Profit contributions from our key markets of Singapore, Malaysia, Indonesia and Greater China were higher than the prior year," said OCBC's chief executive Samuel Tsien in a statement

"Despite the weakened regional market sentiments as a result of global trade tensions, the growth in our wealth management franchise continued, with sustained net new money inflows that drove our assets under management to an all-time high. The overall quality of the loan portfolio remained stable and sound, while our capital ratios were further strengthened," he said.

"As we remain alert to developments in the global economy and financial markets, our strong liquidity and capital base will position us well for prudent and sustainable growth," he added.

For the third quarter, OCBC's non-interest income was about the same from a year ago at S$1.04 billion. Fee and commission income grew 3 per cent to S$502 million, lifted by higher wealth management, loan and trade-related fees.

The bank's net trading income, mainly comprising treasury-related income from customer flows, climbed 80 per cent to S$213 million, but net realised gains from the sale of investment securities of S$4 million were below S$64 million reported in the last year.

The bank saw lower profit from life assurance, which at S$184 million was lower than the S$253 million reported in the previous corresponding period as last year's results included higher mark-to-market gains from more favourable market conditions.

Great Eastern Holdings' - OCBC's insurance arm - total weighted new sales rose 14 per cent year on year to S$347 million, mainly driven by a higher proportion of sales in single premium products in Singapore. New business embedded value (NBEV) came in lower at S$121 million as compared with S$125 million in the previous year, as single premium products typically carry a lower NBEV margin.

Operating expenses of S$1.07 billion were up 7  per cent from S$1 billion for Q3 2017, mainly from an increase in staff costs associated with annual base salary increments and a rise in expenses linked to business volume growth.

Total allowances for loans and other assets of S$49 million were higher than the low base of S$21 million quarter on quarter. This was substantially lower compared with S$156 million last year, which was mainly related to corporate accounts in the oil and gas support vessels and services sector.

OCBC noted that the overall asset quality of the loan portfolio remained sound. Total non-performing assets were S$3.59 billion as at Sept 30, 2018 as compared with S$3.51 billion in the previous quarter, and its non-performing loans ratio was flat quarter on quarter at 1.4 per cent.

As at Sept 30, 2018, OCBC's customer loans were 10 per cent higher from last year at S$257 billion, while customer deposits rose 7 per cent year on year to S$287 billion.