(27 October 2016 – Singapore) Oversea-Chinese Banking (OCBC) said its net profit rose by five percent year on year to S$943 million (A$891 million) for the third quarter ending in September
Despite a drop in the bank's net interest margin and higher provisions for bad loans, its bottom line was lifted by better performance in its wealth-management business and its Indonesian unit.
The bank’s net interest income for the quarter dropped six percent to S$1.23 billion, pressured by weak loan demand and a tighter net interest margin, which fell to 1.62 percent from 1.66 percent in 2015. Loan volume was down two percent at S$208.6 billion, mainly due to weaker trade-related lending to greater China.
Non-interest income grew 25 percent to S$970 million. The bank's wealth-management business accounted for 28 percent of total income, with its fee income hitting a record-high S$155 million. The Indonesian unit's contribution to overall net profit grew 34 percent on year to S$36 million.
CEO Samuel Tsien said: “The market environment continues to be difficult.”
OCBC reported S$2.47 billion of non-performing loans as of September, up from S$1.86 billion a year ago. That represented an increase in its bad loan ratio from 0.9 percent to 1.2 percent. The bank booked S$421 million in loan-loss provisions and impairments in the first nine months of the year, up 43 percent from S$294 million for the same period in 2015.
The bank said it expects loan growth for the full year and 2017 to be in the “low single digits.”
To compensate for the weak domestic economy, it plans to use its international franchise to provide capital for businesses expanding in Southeast Asia and China.
Tsien added that OCBC's ability to compete against its peers is “strengthened rather than weakened” when the domestic economy is sluggish, as it can service more companies venturing overseas for growth.