OCBC posts 4Q net profit of S$502m, up 67% on-year

Written by Joseph Chin The Edge Malaysia    Friday, 19 February 2010 13:47

KUALA LUMPUR: Oversea-Chinese Banking Corporation Ltd (OCBC) posted net profit of S$502 million in the fourth quarter of 2009, up 67% year-on-year but it was cautiously optimistic for a gradual recovery in Asia's economy and in its key markets.

The Singapore-headquartered bank said on Friday, Feb 19 that excluding the S$51 million tax refunds in 4Q08, core net profit grew 101%, contributed by significantly stronger non-interest income and reduced allowances.

Compared to 3Q09, net profit was 12% higher, as the previous quarter included the effect of a S$213 million loss (S$154 million after tax and minority interests) from the redemption offer of GreatLink Choice (GLC) policies by subsidiary Great Eastern Holdings (GEH). The non-recurrence of this item was partly offset by lower underlying insurance income following an exceptionally strong performance in the third quarter.

"Return on equity, based on core earnings, improved to 12.2% in 2009, from 9.9% in 2008. Core earnings per share for the year rose 29% to 59.4 cents," it said.

For FY09, group net profit grew by 12% to S$1.96 billion, while growth in terms of core earnings was significantly higher at 32%, after adjusting for the one-off divestment gains and tax refunds of S$263 million in the 2008 reported earnings.

Operating profit before allowances increased 26% to S$3,019 million, underpinned by a recovery in insurance income and strong trading results which lifted non-interest income by 37%, as well as a 3% reduction in operating expenses as a result of disciplined cost management. The group's non-performing loans ("NPL") ratio peaked in the second quarter, and improved to 1.7% by year-end.

CEO David Conner said given the challenging conditions throughout the year, OCBC delivered strong results for 2009, exceeding its previous high for core earnings in 2007.

"For the year ahead, while we remain watchful of developments in Europe, the US and China, we are cautiously optimistic for a gradual recovery in Asia's economy and in our key markets," he said.

OCBC Bank (Malaysia) Bhd's operating profit before allowances increased by 6%, led by higher net interest income and Islamic Banking income.

Net profit fell by 1% to RM608 million (S$250 million), as allowances were higher than in 2008, which had the benefit of higher recoveries and writebacks. Its loans grew by 5% for the year, and its NPL ratio was largely unchanged at 3.8%.