OCBC’s net profit drops 27% to $902m in 3Q

On back of a one-off gain realised last year.

A 25% increase in the bank’s earnings this quarter may have boosted its net profit by 7% yoy, but it wasn’t enough to post a better performance compared to last year’s 3Q, which featured a big boost from a S$391 million one-off gain.

The increase, however, more than overshadowed the group’s glaring weakness in insurance contributions.

According to a statement by OCBC, a robust asset growth drove the its net interest income up by 6% to $1.32b, compared to $1.25b last year.

Customer loans also saw a modest growth of 4% to $213b across most industry segments and geographies. OCBC says the loans primarily stemmed from the building and construction sector and housing loans.

“Net interest margin of 1.66% was 2 basis points lower than 1.68% in 3Q14, as improved customer loan spreads in Singapore were more than offset by a lower loan-to-deposit ratio and a decline in money market gapping income,” OCBC said.

Meanwhile, operating expenses of the banking group rose by 3% to $900m, aggravated by higher staff-related costs associated with headcount growth as a result of business expansion and salary increments.

“The Group’s cost-to-income ratio was 43.0% for the quarter and 42.5% a year ago. Net allowances for loans and other assets were S$150 million, an increase from S$97 million in 3Q14,” OCBC added.

“Against a more uncertain and challenging operating environment, we will continue to be focused and prudent as we grow our franchise across our key markets. We will maintain our strong capital position, remain disciplined in our cost management and set aside an adequate level of allowances,” said Samuel Tsien, CEO of OCBC.