Contracting interest margins worry OCBC
(7 August 2012 – Singapore) Singapore-based Overseas Chinese Banking Corporation (OCBC) faces a squeeze from contracting interest margins, although strong loan growth helped boost the banks profit by 12 percent in the second quarter.
OCBC reported that its net profit for the three months ended 30 June was US$519.5 million (A$491.6 million), up from US$464 million year-on-year.
It reported strong loan growth despite growing pressure on net interest margins.
Net interest income for the quarter was US$750 million, up 13 percent from US$666 million, while non-interest income rose 2 percent to US$480 million from US$472 million.
Net interest margins or the spread between the cost of borrowing and gains from lending, however, continued to shrink, falling to 1.77 percent in the second quarter from 1.86 percent in the first and 1.87 percent a year earlier.
OCBC chief executive Samuel Tsien said the bank’s asset quality also remained strong as a result of continued prudent risk management and active portfolio reviews.
'While the economic environment remains uncertain, we will continue to grow our customer franchise across all key markets with our strong capital and liquidity base," he said.
It reported strong loan growth despite growing pressure on net interest margins.
Net interest income for the quarter was US$750 million, up 13 percent from US$666 million, while non-interest income rose 2 percent to US$480 million from US$472 million.
Net interest margins or the spread between the cost of borrowing and gains from lending, however, continued to shrink, falling to 1.77 percent in the second quarter from 1.86 percent in the first and 1.87 percent a year earlier.
OCBC chief executive Samuel Tsien said the bank’s asset quality also remained strong as a result of continued prudent risk management and active portfolio reviews.
'While the economic environment remains uncertain, we will continue to grow our customer franchise across all key markets with our strong capital and liquidity base," he said.
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