Weak loan growth to hit OCBC's Q3 profits

Loan growth could moderate to 3.2% over higher credit costs.

OCBC’s net profit is expected to fall 9.1% YoY and 7.5% QoQ to $1.13b for Q3 2019, underpinned by higher credit costs in the quarter, according to UOB Kay Hian.

Loan growth is also projected to moderate to 3.2% YoY in light of the government cutting its 2019 GDP growth forecast to 0-1.0% from 1.5-2.5% due to a decline in manufacturing output, which can translate into higher general provision.

On the other hand, its credit cost to rise to 22bp in the same quarter and the ratio of nonperforming loans is estimated to rise marginally by 1bp to 1.48%.

Also read: OCBC H1 profits up 6% to $2.45b

However, its wealth management fees are expected to be stable at $240m with continued growth in AUM. Net trading income is estimated to normalise to $120m in Q3. Operating expense is projected to rise 2.5% YoY, with cost-to-income ratio to keep within management guidance of 40-45% at 43.5%.

Its insurance business at Great Eastern is projected to contribute $205m of income, with $165m coming from life insurance.