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OCBC's share price dip 1.05% after its banking arm brought Q2 profits to $1.22b

Net profit for OCBC’s second quarter came mostly from contributions from the group’s banking franchise, which offset the lower income contributions from its insurance subsidiary Great Eastern Holdings.

OCBC bank posted a 1% rise in net profit for the second quarter, at S$1.22 billion from S$1.21 billion a year ago, the group said in its earnings statement on Friday morning. Shares of the group eased by 1.05% or S$0.12, to S$11.30 in early trading following the announcement.

The dip in share price was also partly due to the surprise new round of tariffs announced by United States (US) president Donald Trump on Chinese goods which rattled markets.

Net profit for OCBC’s second quarter came mostly from contributions from the group’s banking franchise, which offset the lower income contributions from its insurance subsidiary Great Eastern Holdings (GEH).

The group had posted an 11% increase in net profit for the first quarter, at S$1.23 billion, from S$1.11 billion a year ago.

The expectations of a slower second half of the year is the likely outlook for Singapore banks going forward, as the local economy struggles to keep its growth afloat. The Singapore economy fell below expectations for the second quarter with a mere 0.1% increase year-on-year.

OCBC's annualised earnings per share (EPS) rose to S$1.15, up from S$1.06 a year ago.

The board has declared an interim dividend of 25 Singapore cents per share for the first half of this year, compared with 20 Singapore cents in the same year-ago period.

Before the group’s earnings release this morning, OCBC’s shares last closed at S$11.42 on Thursday, 1.04% or S$0.12 lower.

Loan growth sustained, NIM continues to improve

The group made S$2.62 billion for total income in the second quarter, a 6% increase from S$2.47 billion a year ago.

Net-interest income grew 10% to S$1.59 billion, from S$1.45 billion a year ago, supported by a 4% rise in customer loans and an increase in net interest margin (NIM) of 12 basis points to 1.79%, from 1.67% a year ago.

Non-interest income rose by 1% to S$1.03 billion, from S$1.02 billion a year ago. The 26% decline in life insurance profit from GEH was a contributor which damped overall growth in this segment.

Operating expenses rose by 11% to S$1.15 billion, from S$1.04 billion a year ago, due to increased staff costs.

OCBC Bank’s chief executive Samuel Tsien said that loan growth was sustained and NIM continued to improve for the quarter. Fee income rose quarter-on-quarter, led by higher wealth management fees, with private banking assets under management climbing to new levels.

Tsien added that while economic growth in OCBC's key markets is slowing, the bank’s ‘healthy capital, funding and liquidity position’ will allow it to ‘comfortably navigate the challenging operating environment and pursue’ its long-term growth strategy.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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