OCBC Q2 loan growth to hit 10% as Indonesian and Chinese arms outperform

Banking fees are also expected to rise 13.8%.

OCBC is expected to book strong loan growth of 10% YoY and 2% QoQ in Q2 on the back of sustained business flow in trade finance and cross-border investments, according to UOB Kay Hian.

The bank’s net trading income is also forecast to grow from a dismal $94m in Q1 to $120m in Q2, said UOB analyst Jonathan Koh.

Also read: Here are two divestments that will lift OCBC's earnings in 2018

The bank’s wealth management segment is also expected to weather slumping stock markets as fees are expected to rise 20.9% YoY amidst steady expansion of assets under management.

“We also expect healthy growth from loans and trade related fees. Overall, we expect fees to increase 13.8% yoy,” Koh added.

Also read: OCBC profit up 29% to $1.11b in Q1

On a regional basis, OCBC’s operations in Indonesia and China performed strongly although it remains cautious in Malaysia. Bad loan ratios are expected to stabilise to 1.37% amidst a massive portfolio clean-up and provisionary measures taken in Q4 before the implementation of SFRS (I) 9.

“We expect cost-to-income ratio to be relatively unchanged at 43.5%, within the usual range of 40-45%. Staff cost is expected to increase 4.4% yoy along with the annual salary increment in 2Q18,” Koh added.

In terms of profitability, net interest margins (NIM) are expected to stay flat at 1.65% as the bank was hit by higher cost of fixed deposits in Singapore and stringent enforcement of single-digit lending rates in Indonesia.