OCBC’s Q1 profit falls 14% to lowest since Q4 2014

SINGAPORE — Oversea-Chinese Banking Corp yesterday posted a 14 per cent decline in first-quarter earnings to record the lowest net profit since the fourth quarter of 2014, due to lower insurance income and an increase in allowances.

In the midst of the current uncertain macroeconomic outlook, the group said it will remain focused on conservative growth in their core business and markets going forward.

The bank reported a profit of S$856 million for the first quarter, lower than S$993 million a year ago.

OCBC’s CEO Samuel Tsien said: “Given the weak economic environment and further stresses noted, especially in the oil and gas support services sector, we continued to adopt a conservative approach and this was reflected in the increased level of provisions set aside for the quarter. Meanwhile, financial market volatility in the first quarter resulted in unrealised mark-to-market losses in Great Eastern’s investment portfolios, which impacted its reported earnings, despite the strong underlying business growth evidenced by an increase in total weighted new sales.”

For the quarter, non-interest income fell 12 per cent to S$753 million. Fee and commission income fell by 5 per cent, largely from a decline in wealth-management income, trade-related and investment-banking fees. Profit from life assurance fell by a double-digit 58 per cent from a year ago to S$83 million, as volatility in financial markets resulted in unrealised mark-to-market losses in subsidiary Great Eastern Holdings’ non-participating Fund.

Meanwhile, net interest income was at S$1.31 billion, 5 per cent higher than the previous year, thanks to improved net interest margins, which climbed 13 basis points to 1.75 per cent from 1.62 per cent a year ago. The margin improvement was largely driven by improved customer loan yields in Singapore and Indonesia.

“Looking forward, near term economic visibility continues to be low. We will remain focused on conservative growth in our core businesses and markets, while supporting our customers and staying vigilant in the midst of the current uncertain macroeconomic outlook,” said Mr Tsien.

The bank’s shares closed 1.46 per cent or 13 cents lower at S$8.77 yesterday.

OCBC was the second local lender to release its earnings statement this week after rival UOB reported on Thursday a 4.4 per cent decline for the first quarter, due to lower wealth-management fees and trading income affecting its non-interest income. DBS Bank will release its report next Tuesday.

Yesterday, data from Singapore’s central bank showed bank lending in March fell to S$590.6 billion from S$596.2 billion in February, as business and consumer loans fell. Compared with a year ago, loans fell by 1.7 per cent.

Business loans declined 1.6 per cent compared with February, as loans to general commerce, transport storage and communication as well as financial institutions fell. Year-on-year, loans were down 4.3 per cent.

Consumer loans dipped slightly for last month by S$20.8 million compared with the previous month as professional and private individual loans in share financing, credit cards and cars fell, moderated by increases in housing and bridging loans. Year-on-year, consumer loans were up 1.9 per cent.