OCBC beats forecast with 5% rise in Q1 profit to $1.98 billion
SINGAPORE – OCBC Bank started the year strong as its earnings rose on the back of higher non-interest income and a pickup in loan growth, even as its net interest margin fell.
Net profit for the first quarter rose 5 per cent to a new high of $1.98 billion, up from $1.88 billion a year ago, it said on May 10.
The results beat the $1.85 billion consensus estimate of analysts in a Bloomberg poll.
The bank expects net interest margin (NIM), an important measure of profitability, to be at the higher end of a previously forecast range of 2.2 per cent to 2.25 per cent, from the possibility of fewer interest rate cuts than originally expected.
The US Federal Reserve is expected to keep rates higher for longer to fight stubborn price increases.
OCBC group chief executive Helen Wong said that while some recent economic indicators look more favourable, near-term risks remain, such as heightening geopolitical volatility arising from ongoing wars and the outcome of a number of key elections in 2024
“Our key markets in Asia are expected to be resilient, benefitting from increasing capital flows and supply chain diversification,” she added.
Net interest income rose 4 per cent to $2.44 billion, led by a 5 per cent growth in average assets. This more than compensated for a decline in NIM, which dropped by three basis points as rising funding costs offset higher asset yields, said the bank.
Loans grew 2 per cent from a year ago and 1 per cent from the fourth quarter on constant currency terms. The growth of $4 billion was supported by an increase in both corporate and consumer loans, with the expansion led by the bank’s home market of Singapore.
Sustainable financing loans grew 34 per cent from a year ago to $43.1 billion, against a total loan commitment of $60.5 billion.
Meanwhile, non-interest income jumped 17 per cent to $1.19 billion, buoyed by improvement in fee, trading and insurance income.
Operating expenses grew 8 per cent to $1.35 billion, while total allowances set aside for potential bad loans rose to $169 million, up from $110 million a year ago, mainly due to increased allowances for impaired assets.
The bank’s non-performing loan ratio stood at 1 per cent, improving from 1.1 per cent a year ago and unchanged from the fourth quarter.
Compared with the previous quarter, the earnings of Singapore’s second-largest bank rose 22 per cent, up from $1.62 billion.