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OCBC net profit slides 11% to S$926 million for Q4

The profit slide was due to a decline in earnings contribution from the bank’s insurance arm Great Eastern Holdings, the bank’s earnings results revealed.

OCBC Bank posted an 11% fall in net profit for the fourth quarter due to a decline in earnings contribution from the bank’s insurance arm Great Eastern Holdings (GEH), the bank’s earnings results revealed on Friday. For the full-year, net profit rose as income growth, disciplined cost control and lower allowances boosted earnings for the group’s banking operations.

Net profit fell to S$926 million for the fourth quarter, compared to S$1.0 billion a year ago, due to GEH’s fall in earnings. Meanwhile, net profit after tax from the group’s banking operations grew by 22% to S$817 million, the group said.

Net interest income for the fourth quarter rose by 7% to S$1.5 billion from S$1.4 billion the same period a year ago, supported by loans growth and a rise in net interest margin (NIM). NIM for the quarter rose by five basis points to 1.72%.

Earnings per share for the quarter was lower than a year ago's S$0.24, at S$0.22.

The fourth quarter registered lower net trading income, at S$9 million compared to S$99 million a year ago, due mainly to the unrealized mark-to-market losses in GEH’s investment portfolio as a result of ‘unfavourable market conditions’, said OCBC. Excluding GEH, trading income from the group’s banking operations rose by 5% year-on-year.

The bank has proposed a final dividend of 23 Singapore cents per share, a 21% increase from 19 Singapore cents a year ago. Adding the interim dividend of 20 Singapore cents per share, the total dividend for the financial year of 2018 amounts to 43 Singapore cents per ordinary share, which is an increase of 16% over last year.

Full-year net profit up, supported by banking operations segment

Net profit for the full-year of 2018 gained 11% from S$4.0 billion a year ago to S$4.5 billion, driven by the group’s banking operations which posted a 22% growth. Banking operations improved in performance significantly due to income growth, disciplined cost control and lower allowances, OCBC said.

For the full-year, net interest income rose by 9% from a year ago to S$5.9 billion, supported by loan growth and a rise in NIM. NIM for the full-year improved by 5 basis points to 1.70%, from higher margins in Singapore, Malaysia, and Greater China.

Non-interest income fell by 7% from the previous year, due mainly to lower investment income from GEH, the bank said. Net trading income was 1% lower from a year ago at S$508 million, while income from life and general insurance posted little changes, at S$911 million.

For the full-year, operating expenses rose 4% from a year ago to S$4.2 billion.

Earnings per share rose to S$1.06, from S$0.95 a year ago.

Commenting on the results and providing an outlook, OCBC’s chief executive Samuel Tsien said the group’s earnings reflect on the ‘strength and resilience’ of the bank’s diversified business and the depth of its relationship with customers.

Going forward, Mr Tsien said that global economic growth is expected to slow on concerns of continued trade and geopolitical tensions, subdued market and investment sentiments and rising policy risks in the advanced economies.

The group said it will work on its focused strategy, strong capital and funding base, and disciplined cost control to continue to prudently expand its franchise in its key markets and to provide support for its customers.

OCBC shares fell 1.82% a few hours into Friday’s morning trading, down S$0.21 to S$11.36.

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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