OCBC profit down 11% to S$926m for Q4; to pay out 23 Singapore cents/share

OCBC Bank posted an 11 per cent decline in net profit to S$926 million for its fourth quarter ended Dec 31, 2018 from S$1.03 billion for the year-ago period. The group said results were dragged down by a fall in earnings contribution from Great Eastern Holdings (GEH), OCBC's insurance arm.

The bank has proposed a final dividend of 23 Singapore cents per share, up from 19 Singapore cents a year ago. The estimated total dividend payout will amount to S$1.82 billion, representing a dividend payout ratio of 40 per cent of the group's core net profit in fiscal 2018.

GEH net profit contribution was down 70 per cent year on year to S$109 million mainly due to unrealised mark-to-market losses in its investment portfolio; the prior year also included substantially higher realised gains from the divestment of investment securities.

Net profit after tax from banking operations grew 22 per cent from a year ago to S$817 million. The group's net interest income climbed 7 per cent to S$1.52 billion, driven by loan growth and a five basis point rise in net interest margin (NIM) to 1.72 per cent.

Non-interest income fell 32 per cent to S$830 million, led by a drop in investment and insurance income from GEH. Net fees and commissions also declined 4 per cent from a year ago to S$474 million.

Higher credit card, loan and trade-related fees were more than offset by a fall in wealth management fees attributable to subdued investment sentiments in the current market environment, said OCBC.

But the group's wholly owned subsidiary Bank of Singapore continued to report strong net new money inflows, which increased private banking assets under management to US$102 billion as at Dec 31, up 3 per cent.

Net trading income was lower at S$9 million compared with S$99 million a year ago, largely attributable to unrealised mark-to-market losses in GEH's investment portfolio as a result of unfavourable market conditions. Excluding GEH, trading income from banking operations was 5 per cent higher.

Operating expenses of S$1.08 billion were unchanged from the previous year. Allowances of S$205 million for the quarter were 14 per cent higher than the S$178 million a year ago.

For the full year, the bank posted a S$4.49 billion net profit, up 11 per cent from S$4.05 billion a year ago . This was driven by record earnings from the group's banking operations which rose 22 per cent year on year, led by income growth, disciplined cost control and lower allowances, said OCBC.

Return on equity increased to 11.5 per cent from 11 per cent a year ago. The group's total income climbed to a new high of S$9.70 billion from S$9.53 billion in the previous year.

Group CEO Samuel Tsien said: "Looking ahead, global economic growth is expected to slow on concerns of continued trade and geopolitical tensions, subdued market and investment sentiments and rising policy risks in the advanced economies.

"In spite of the uncertain outlook, we are confident that our focused strategy, strong capital and funding base, and disciplined cost control will allow us to continue to prudently expand our franchise in our key markets and support our customers."