OCBC Group profit soars to $676 million

Profit up 24% year-on-year and 35% over the previous quarter behind non-interest income growth, low credit losses.

Oversea-Chinese Banking Corporation Limited (OCBC) posted a net profit attributable to shareholders of S$676 million for the first quarter of 2010 (1Q10), a 24% increase from the S$545 million profit a year ago. Excluding a non-recurring insurance gain of S$175 million1 in 1Q09, earnings growth in 1Q10 would have been 83%.

The strong performance was driven by broad-based growth in non-interest income, including healthy insurance revenue from Great Eastern Holdings, and a significant reduction in allowances. The first quarter performance marked a new quarterly record for the Group in terms of core net profit, according to an OCBC report on Wednesday.

The first quarter results included two months consolidated results of the former ING Asia Private Bank, which became a wholly-owned subsidiary on 29 January 2010 and was renamed Bank of Singapore Limited. Bank of Singapore's two months' profit contribution was not material relative to the Group's record earnings for the quarter.

Excluding the non-recurring gains in 1Q09, non-interest income in the first quarter surged by 68% to S$681 million, accounting for nearly half of the Group's revenue. All major segments – fees and commissions, insurance, trading and investment income – registered strong growth, benefiting from the economic recovery and more favourable market conditions as compared to a year ago. Net interest income was 5% lower than a year ago at S$704 million, as margins were impacted by reduced gapping income and a sustained low interest rate environment. Operating expenses rose 21%, largely from higher staff costs. Allowances for loans and other assets were S$25 million, well below the S$197 million in 1Q09. The Group's non-performing loans (“NPL”) ratio improved to 1.5%, from 1.8% a year ago and 1.7% at the end of 2009.

Compared to the fourth quarter of 2009 (4Q09), net profit was 35% higher. Non-interest income grew 37%, while net interest income increased 2%. Operating expenses grew 8%, while allowances were lower than the fourth quarter’s S$77 million.

Annualised return on equity improved to 15.3% from 14.9% in 1Q09 and 11.6% in 4Q09, while annualised earnings per share rose 20% year-on-year to 82.1 cents.