SINGAPORE: Oversea-Chinese Banking Corp (OCBC) beat market estimates with a 16 per cent increase in its second-quarter net profit, as increased loan volumes and higher net interest margins drove up net interest income.
OCBC, Singapore's second-largest listed lender, said on Monday (Aug 6) its net profit for the three months ended Jun 30 came in at S$1.21 billion, versus S$1.04 billion a year ago.
Analysts polled by Bloomberg were expecting a lower net profit of S$1.11 billion for the quarter.
Analysts say an easing of Singapore's economic growth amid an international trade row, as well as new property curbs imposed last month, have clouded the outlook for banks after they reported record profits last year.
"The operating environment is increasingly challenging and we are watchful of the severe implications to the global economy and financial markets from the escalating trade and political tensions," OCBC CEO Samuel Tsien said in a statement.
OCBC's net interest margin - a key gauge of a bank’s profitability - came in at 1.67 per cent in the second quarter, 2 basis points higher than 1.65 per cent a year earlier.
The higher margin helped to push net interest income to S$1.45 billion, an 8 per cent increase from a year ago.
Mr Tsien said the strong net interest income was driven by robust loan growth and improved asset yields in Singapore and Malaysia.
The bank has declared an interim dividend of S$0.20 per share for the first half of 2018, up from S$0.18 a year ago.
With its second-quarter numbers, OCBC posted net earnings of S$2.32 billion for the first half of the year, up 22 per cent from a year ago.
In view of the recently announced property cooling measures, OCBC’s management said it is confident of maintaining a high single digit growth in its overall loans portfolio in the quarters ahead – citing that its pipeline of loans and housing loans outstanding is enough to carry the bank forward.
It does not expect an especially significant impact in the near term, but the impact could become more severe “one or two years down the road”.
But for now, OCBC does not expect a complete collapse of the mortgage market, citing that there is also still significant interest from first time home buyers and that homeowners whose property have gone en bloc and will still have to come back into the property market to buy new homes.
The lender confirmed that it will not see the “same sort of exuberance” in the property market seen in the first half of this year.
Editor’s note: An earlier version of this story stated that OCBC is confident of maintaining growth in its “customer mortgage books”. OCBC has clarified that it was referring to its overall loans portfolio.