OCBC Q3 profit rises on Wing Hang contribution

SINGAPORE — OCBC’s efforts to expand its presence in Greater China are beginning to pay off as the Singapore bank received the first boost to earnings from Wing Hang Bank in the third quarter, after completing the acquisition of the Hong Kong lender on July 29.

Wing Hang’s net profit contribution in the quarter was S$38 million. The relatively small sum was not a full-quarter contribution and was adjusted for merger-related provisions, OCBC chief executive Mr Samuel Tsien said yesterday when announcing the group’s results.

“When normalised, the contribution would have been S$70 – S$75 million for the third quarter,” he said. “If you look at the impact of the consolidation — (Wing Hang) increased the group’s loans outstanding by 12 per cent, and contributed to group-wide deposits by 14 per cent.”

OCBC’s S$6.23 billion acquisition of Wing Hang Bank has expanded the group’s regional franchise, with 70 new outlets across Hong Kong and the Pearl River Delta region. It forms the centerpiece of Mr Tsien’s plans to drive OCBC’s pan-Asia growth.

With its Greater China franchise in place, OCBC reported a 62 per cent on-year jump in third quarter net profit to S$1.23 billion, which included a one-off, S$391 million gain from its investments in Bank of Ning Bo.

Excluding the gain, core net profit from banking operations went up 11 per cent to S$841 million, driven by broad-based growth from net interest income and fee income while margin was stable at 1.68 per cent.

Closer at home, demand for mortgage loans continues to weaken amid the slew of property cooling measures. In the third quarter, OCBC only saw 4 per cent growth in Singapore housing loans.

“Compared to the peak two years ago, year-to-date new origination of housing loans are down by about 40 per cent,” Mr Tsien said. “Current outstanding housing loans do not reflect that yet as they’re still being drawn down … but we expect to see the impact (of the origination slowdown) in the second half of next year.” Non-performing assets – essentially bad loans – grew S$60 million in Singapore. But Mr Tsien stressed that these were only isolated cases, and OCBC’s third quarter non-performing loan ratio remained unchanged at 0.7 per cent.