OCBC Q1 net profit up by 24% to S$676m

Channelnewsasia    By Chris Howells | Posted: 05 May 2010 1429 hrs

SINGAPORE: OCBC has reported a 24 per cent on-year increase in net profit to S$676 million for the first quarter, beating analyst forecasts.

The bank says the strong performance was driven by broad based growth in non-interest income, and a significant reduction in allowances.

Non-interest income surged 68 per cent to S$681 million, accounting for nearly half of the group's revenue.

Analysts had forecast roughly S$500 million in earnings for the bank's first quarter.

Allowances for loans and other assets were S$25 million, versus S$197 million dollars in the first quarter of 2009.

During the period, loans grew by 12 per cent on-year to S$90.4 billion, driven by general commerce, housing, individual and manufacturing sector lending.

The bank's non-performing loans ratio also improved to 1.5 per cent, versus 1.8 per cent a year ago.

Net interest income fell, however, by 5 per cent on-year to S$704 million.

The bank said growth in interest earning assets was more than offset by a lower interest margin.

OCBC says the bank's net interest margin fell to 2.03 per cent from 2.42 per cent a year ago.

This is largely due to lower gapping income and a fall in average asset yields as local interest rates remained low.

On a quarter-on-quarter basis, net profit rose 35 per cent, while non-interest income grew 37 per cent.

The first quarter earnings included two months consolidated results of the former ING Private Bank, which became a wholly owned subsidiary of OCBC, renamed Bank of Singapore in January.

Operating expenses increased 21 per cent from a year ago, and eight per cent from the previous quarter, to S$502 million, mainly due to the consolidation of the Bank of Singapore.