OCBC Q2 profit falls 8%, hit by poor insurance unit results

SINGAPORE — Oversea-Chinese Banking Corporation, Singapore’s second-biggest bank, posted an 8 per cent drop in quarterly profit, a below-forecast result after it was hit by lower contributions from its insurance unit, the group reported today (Aug 2). OCBC earned S$597 million in the three months ending in June, compared with S$648 million a year earlier. The profit was below the S$643 million average forecast of six analysts polled by Reuters. The poll was taken before OCBC’s insurance unit Great Eastern Holdings (GEH) posted a 77 percent drop in quarterly profit after it was hit by the second-quarter market volatility that drove its non-operating business to a loss of S$155.6 million. OCBC underperformed its domestic rivals DBS Group Holdings and United Overseas Bank, which both beat market expectations by posting net profit growth of 10 per cent and 9.9 per cent, respectively. “Despite the partial erosion to our earnings in the second quarter from the unrealised mark-to-market losses at our subsidiary Great Eastern, the momentum in our customer flow business remains strong,” chief executive Samuel Tsien said in a statement. OCBC’s core customer businesses continued to deliver strong performance during the quarter, the bank said in a release this morning. Strong loan growth and a stable net interest margin drove net interest income to a new quarterly high. Fees and commissions also achieved a new quarterly record. Profits of our Malaysian and Indonesian banking subsidiaries increased 8 per cent and 40 per cent year-on-year, respectively, in local currency terms. New insurance business sales were up 34 per cent and new business embedded value was up 20 per cent. The strong core customer business results were however offset by significantly reduced profit contribution from subsidiary GEH arising from unrealised mark-to-market losses in its Non-Participating Fund. As a result, the Group’s net profit declined 8 per cent, from S$648 million in Q2 of 2012.