OCBC's Q3 net profit down 27%, core net profit up 7%

OCBC Group reported on Wednesday a net profit after tax of S$902 million for the third quarter of 2015, 27 per cent lower than the S$1.23 billion a year ago.

Excluding a S$391 million one-off gain realised a year ago, the group's core net profit, however, grew 7 per cent year-on-year. This was driven by a 25 per cent increase in earnings from its banking operations, which more than offset a decline in insurance contributions from Great Eastern Holdings.

"This quarter marks the first year since we acquired OCBC Wing Hang Bank. It is evident that the OCBC Wing Hang Bank addition to our Greater China franchise has further strengthened and diversified the Group's earnings,'' OCBC's chief executive, Samuel Tsien, said.

"Our banking operations reported another quarter of strong growth, with core net profit increasing 25 per cent year-on-year and 4 per cent quarter-on-quarter. Our insurance operations, while recording strong underlying business growth as reflected by increased total weighted new sales and higher new business embedded value, was impacted by unrealised mark-to-market losses in its debt and equity investment portfolio as a result of the volatile financial markets," he added.

Net interest income rose 6 per cent to S$1.32 billion, as compared with S$1.25 billion a year ago, mainly attributable to strong asset growth. Customer loans grew 4 per cent to S$213 billion, mainly from loans to the building and construction sector as well as housing loans.

Core non-interest income was 3 per cent lower at S$775 million, from S$801 million a year ago, due to a decline in insurance income. Fee and commission income for Q3 was S$408 million. Net trading income of S$196 million was higher than S$113 million a year ago, while profit from life assurance of S$62 million was lower as compared with S$174 million a year ago.

Share of results of associates and joint ventures rose to S$99 million from S$14 million a year ago, largely attributable to the contribution from Bank of Ningbo which became a 20 per cent-owned associated company of the group on September 30, 2014.

Operating expenses increased 3 per cent to S$900 million from S$870 million a year ago, largely driven by higher staff-related costs. Allowances for loans and other assets were S$150 million in Q3, up 56 per cent from S$97 million a year ago.

The group's non-performing loans (NPL) ratio was 0.9 per cent, higher than the 0.7 per cent reported a year ago. Its Common Equity Tier 1 capital adequacy ratio (CAR) as at September 30, 2015, was 14.5 per cent and Tier 1 CAR and Total CAR were 14.5 per cent and 16.6 per cent, respectively - well above the respective regulatory minima of 6.5 per cent, 8 per cent and 10 per cent based on Basel III transitional arrangements.

Going forward, Mr Tsien said the group would continue to be focused and prudent as it grows its franchise across key markets.

"We will maintain our strong capital position, remain disciplined in our cost management and set aside an adequate level of allowances.'' he said.

The board has declared payment of semi-annual tax exempt dividends on its noncumulative non-convertible preference shares: Class G preference shares at 4.2 per cent (2014: 4.2 per cent) per annum and Class M at 4.0 per cent (2014: 4.0 per cent) per annum. These semi-annual dividends will be paid on December 21, 2015.