SINGAPORE: Oversea-Chinese Banking Corp (OCBC), Singapore’s second-biggest lender, on Tuesday (Feb 14) reported a bigger-than-expected 18 per cent drop in quarterly net profit, weighed down by a 57 per cent jump in net allowances for loans and other assets.
OCBC's net profit after tax came in at S$789 million in the three months ending December, versus S$960 million a year earlier and an average forecast of S$856 million from six analysts polled by Reuters.
Net allowances for loans and other assets rose to S$305 million from S$105 million the quarter before.
Net interest income for the quarter was 7 per cent lower at S$1.25 billion, the bank said, citing the “continued compression” in customer loan yields. Non-interest income was down 4 per cent at S$926 million, as fee income growth was more than offset by lower net trading income and life assurance profit.
Net profit after tax for the year was S$3.47 billion, down 11 per cent from the previous year. Against a record-performing prior year, the OCBC statement added that the decline in overall earnings for the year was driven by a rise in net allowances and lower trading and insurance income.
Total net allowances for loans and other assets rose to S$726 million, compared to S$488 million a year ago, with increases coming mainly from the oil and gas support services sector corporate accounts.
"Despite difficult business conditions that prevailed throughout the year, the Group delivered a resilient performance. Our results were underscored by the strength of our well-diversified franchise that continues to drive consistent and balanced long-term growth," said OCBC CEO Samuel Tsien.
Tsien also said "there continue(s) to be stresses in parts of the portfolios particularly within the oil and gas support services sector, which drove increases in non-performing loans and allowances".
"Looking ahead, while the headwinds facing the broad economy are likely to persist, we are confident that we are well-positioned to support our valued customers through this difficult period," he said.
The bank has proposed a final dividend of S$0.18 a share, bringing the FY16's total to 36 cents a share, unchanged from the previous year.