OCBC net profit surged 24% in 1Q11

OCBC reported a net profit of S$628 million for the first quarter.

According to OCBC, core net profit, which excludes gains from the divestment of non-core assets, was S$596 million, up 18% quarter-on-quarter. The results were underpinned by continued loan growth, robust fee income and a rebound in insurance income. Compared to the record quarterly earnings of S$676 million a year ago, core net profit was 12% lower, reflecting lower trading and investment income as well as increased expenses.

Net interest income grew 11% year-on-year to S$784 million, driven by higher asset volumes which more than offset a decline in net interest margin. Loan growth of 23% was broad-based across the consumer, corporate and SME segments in Singapore and key overseas markets. Fee income grew 23%, led by continued strong performance of the Group’s wealth management franchise. Insurance income from Great Eastern Holdings (“GEH”) remained healthy, underpinned by strong underwriting profits and new business sales growth of 33%. However, trading income and investment gains fell 51% and 64% respectively from their quarterly record levels achieved a year ago. As a result, core non-interest income, which excludes a S$39 million (S$32 million post-tax) property divestment gain, declined 9% year-on-year to S$618 million. Operating expenses increased 16% to S$581 million, attributable mainly to higher staff costs. Allowances for loans and other assets were S$49 million, compared to S$25 million in 1Q10.

Compared to the previous quarter, net interest income increased 2% on higher asset volumes. Core non-interest income grew 10%, contributed mainly by higher fees and commissions and a recovery in life assurance profit, and partly offset by lower trading income. Operating expenses fell 6% quarter-on-quarter, while allowances were similar to the previous quarter’s S$48 million.

The Group’s revenue from various wealth management activities, comprising revenue from insurance, private banking, asset management, stockbroking and sale of wealth management products, grew to S$378 million, up 21% from the previous quarter and 5% from a year ago. As a share of total revenue, wealth management contributed 27.0%, up from 23.5% in the previous quarter and 26.1% a year ago.

Annualised return on equity, based on core earnings, was 12.2%, compared with 15.3% in 1Q10 and 10.3% in 4Q10. Annualised core earnings per share declined 15% year-on-year to 69.7 cents.

Commenting on the Group’s performance, CEO David Conner remarked: “Strong economic growth in our key markets and our growing regional customer franchise underpinned our first quarter results. While inflationary pressures persist, the business outlook continues to be positive for the year.”