Singapore bank OCBC posts record Q1 profit, beats expectations

SINGAPORE: Singapore's second-biggest lender Oversea-Chinese Banking Corp (OCBC) joined bigger rival DBS Group in flagging a peak in interest rates after reporting record quarterly profit on Wednesday (May 10) thanks to higher net interest margins.

OCBC Group Chief Executive Officer Helen Wong said the bank believed interest rates had peaked and "will go stable".

"We're looking at assumption that we do not see interest rate reduction the rest of the year," she told reporters.

OCBC's January-March net profit rose 39 per cent to S$1.88 billion (US$1.4 billion), beating the mean estimate of S$1.74 billion from five analysts polled by Refinitiv.

Its total net interest margin, a key gauge of profitability, rose to 2.30 per cent in the first quarter from 1.55 per cent in the same period a year earlier, but was down from 2.31 per cent in the fourth quarter.

OCBC, Southeast Asia's second-biggest bank by assets, forecast full-year net interest margin would edge up to 2.2 per cent from a previous guidance of 2.1 per cent.

Singapore's banks have been benefiting from strong inflows from wealthy customers amid global economic uncertainty because of the city-state's status as financial safe haven.

The first quarter was also strong for Singapore's other major banks, with larger peer DBS Group reporting last week a 43 per cent jump in first quarter net profit that was also a record. Smaller United Overseas Bank posted last month a 74 per cent surge in core net profit.

OCBC's shares rose 0.7 per cent on Wednesday in a flat broader market.

Jefferies Research said OCBC's revised net interest margin guidance was broadly in line with expectations and the broker expected "relatively muted share price reaction".

WEALTH MANAGEMENT

"Our loan portfolio was resilient and our wealth management business continued to attract net new money inflows," Wong said in a statement.

The lender said it was starting to see growth in cross border flows after China's reopening, but it was also closely monitoring volatility in developed markets and geopolitical tensions.

"Looking ahead, we are watchful of tighter financial conditions which may slow global economic growth and elevate overall risks," Wong said.

OCBC, which counts Singapore, greater China and Malaysia among its key markets, said net interest income rose 56 per cent to S$2.34 billion in the first quarter from a year earlier.

Return on equity rose to 14.7 per cent in the first quarter from 10.6 per cent in the same period of 2022.

Meanwhile, Wong said OCBC's clients' exposure to Additional Tier 1 (AT1) bonds of Credit Suisse was "very insignificant".

Investors have been rocked by a Swiss authorities' decision to wipe out US$17 billion of Credit Suisse's AT1 debt under its takeover by UBS Group, in a move that hit AT1 holders harder than shareholders.