SINGAPORE – OCBC beat market expectations on Friday, May 7, as its first quarter profit more than doubled thanks to strong performance in its wealth management and insurance businesses and lower bad debt provisions.
Singapore’s second-largest local bank net profit hit a quarterly high of $ 1.5 billion for the three months ending March, beating the $ 901.9 million average of analyst estimates compiled by Refinitiv , and against $ 698 million for the quarter of last year.
Non-interest income jumped 70% year-on-year to $ 1.47 billion on higher fees, trading and insurance income, amid an improving operating environment and favorable market conditions, OCBC said.
Net interest income fell 11% to $ 1.44 billion from $ 1.63 billion last year. This is mainly due to a 20 basis point squeeze in the net interest margin in a still low interest rate environment, the bank said.
The net interest margin, a key indicator of bank profitability, stood at 1.56 percent. It was unchanged from the previous quarter and lower than the 1.76% in the first quarter of 2020.
Credit costs also fell to 22 basis points from 86 a year ago, amid improving economic prospects.
Provisions for the quarter of $ 161 million, primarily for impaired assets, were 75 percent lower than $ 657 million a year ago.
About half of the provisions for impaired assets were set aside for the bank’s remaining oil and gas exposure in its portfolio.
Net fees and commissions rose 7% to a record high of $ 585 million, driven by a record $ 321 million in wealth management fees.
The net interest margin stood at 1.56%, unchanged from the previous quarter, and below 1.76% in the first quarter of 2020.
Group CEO Helen Wong, who delivered her first set of OCBC results, said earnings were exceptional due to favorable market conditions.
“We made very strong profits in key markets and businesses. We are also seeing diversified profits, and that relies on the strength and resilience of our three pillars – wealth, insurance and of course, banking, ”she said at a press briefing on Friday.
Ms. Wong said the bank is witnessing a strong recovery in global production and trade this year, spurred by the resumption of economic activity in the United States amidst monetary stimulus and fiscal spending.
China, another important economy, has seen an acceleration in the recovery of exports and very strong domestic demand, said Ms Wong, who added that the economic recovery is also expected to be strong in the bank’s main markets of Singapore. , Malaysia, Indonesia and Greater China.
She warned, however, that the recovery was not yet widespread. “This is largely due to the emerging variants of Covid-19 and the slow roll-out of vaccination in some countries. So a real return to normal will take time, and maybe longer than we realize this year. ”
The bank will focus on deepening its network to support its clients and capitalize on signs of sector recovery, Wong added. “We will see our loan portfolio as having momentum to drive faster growth the rest of the year, and I am thinking of mid to high single-digit growth in our loan portfolio.”
OCBC is already seeing increased demand for loans in infrastructure, logistics, transportation and real estate, as well as a growing appetite for private funds managing the region’s wealth, she said.
Ms Wong said she did not expect huge allocations over the next three quarters, with relief programs seeing healthy paybacks as such programs dwindle.
Loans under relief represented 2 percent of total OCBC loans, unchanged from last quarter, and their amount increased from $ 5.7 billion to $ 5.1 billion.
OCBS peers, DBS and UOB, also reported strong first quarter results.
Globally, bank profits rebounded after their Covid-19 collapse, boosted by a return to revenue growth, surging business profits and lower loss provisions that hurt their profits the last year.
OCBC shares were up 15 cents or 1.2% to $ 12.55 at 11:16 a.m. Friday.