OCBC's Q4 net profit jumps 21% on higher trading income and gains from insurance

Oversea-Chinese Banking Corporation (OCBC) posted on Wednesday a 21 percent jump in its fourth quarter net profit, which boosted its full year core earnings to a new record high.

Net profit for the quarter ended Dec 31, 2015 came in at S$960 million, up from S$791 million a year ago. A Reuters poll of 6 analysts had an average forecast of S$872 million.

Net interest income was up 5 per cent at S$1.34 billion on the back of interest earning assets growth and a 7 basis point rise in net interest margin to 1.74 per cent, which was lifted by higher loan yields.

Non-interest income climbed 26 per cent to S$960 million, driven by a 5 per cent rise in fee and commission income, a 24 per cent increase in profit from life assurance and significantly higher net trading income.

Operating expenses rose 6 per cent to S$974 million, largely from higher staff and premises costs. Net allowances for loans and other assets for the quarter of S$193 million were up 25 per cent from S$154 million a year ago.

Compared to the preceding quarter, core net profit for Q4 rose 6 per cent, largely due to higher net interest income and non-interest income, primarily from an increase in life assurance profit.

For the full year 2015, net profit was S$3.90 billion. Excluding a one-off gain of S$391 million in FY2014, core net profit after tax rose 13 per cent to a new record, underpinned by higher net interest income, fee and commission income growth, as well as improved trading and investment income.

The group's results also included the full year earnings contribution of OCBC Wing Hang, which became a subsidiary in the third quarter of 2014. Non-performing loan (NPL) ratio was 0.9 per cent on Dec 31, 2015.

Looking ahead, CEO Samuel Tsien said "we are positive on OCBC's continued ability to deliver sustainable growth, and will be conservative, prudent and focused on our long-term strategic priorities in the context of the current operating environment".

The board has recommended a final dividend of 18 Singapore cents per share, bringing the FY2015 total dividend to 36 cents per share, unchanged from FY2014.