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OCBC Q2 net profit down 8% as Great Eastern drags – TODAYonline

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OCBC Q2 net profit down 8% as Great Eastern drags – TODAYonline
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OCBC Q2 net profit downSINGAPORE — OCBC yesterday reported its second-quarter net profit fell 8 per cent from a year earlier, dragged down by significantly lower profit contribution from insurance subsidiary Great Eastern Holdings (GEH) and higher operating expenses.

Net profit fell to S$ 597 million in the three months to June, down from S$ 648 million in the year-ago period.

Profit from life assurance plunged 78 per cent to S$ 16 million for the period, as unrealised mark-to-market losses drove GEH’s second-quarter net profit down 77 per cent on-year despite the insurer seeing solid growth in new business sales.

“During the past quarter, due to movements in investment markets, our insurance company’s performance has been impacted by mark-to-market changes,” OCBC Chief Executive Samuel Tsien said. “As a result, there were significant unrealised losses in our non-participating portfolio.”

Mr Tsien emphasised that the S$ 156 million of mark-to-market losses — which are similar to paper losses in that they are an accounting entry rather than an actual capital loss —have no impairment on actual operating earnings.

OCBC’s results come a day after DBS Group and United Overseas Bank reported higher quarterly profit led by gains in fee income.

Despite lower insurance profit, performance at OCBC’s core banking businesses remained strong in the quarter. Net interest income was up 3 per cent on-year to S$ 961 million, driven by broad-based loan growth, while net interest margin remained unchanged at 1.64 per cent compared with the previous quarter.

“Loans grew 15 per cent on-year … Singapore loans grew 14 per cent on-year, Malaysia rose 15 per cent, and Indonesia increased 17 per cent,” said Chief Financial Officer Darren Tan.

Going forward, OCBC may achieve high single-digit or low double-digit growth for loans, said Mr Tsien, although the lender expects property cooling measures to continue to dampen housing loan demand in Singapore.

Meanwhile, non-interest income advanced 2 per cent on-year to S$ 606 million, driven by a 9 per cent rise in fee income as wealth management, loan-related, brokerage and fund management fees all edged higher.

OCBC said it saw higher contribution from its Malaysian and Indonesian franchises, with quarterly net profit up by 8 per cent and 40 per cent on-year respectively. This reflects a successful strategy to deepen and diversify business franchises in the region’s growth markets, Mr Tsien said.

But as the overseas expansion continues, an increase in foreign headcount has also led to higher expenses, which grew 9 per cent on-year to S$ 718 million in the quarter. Staff expenses accounted for 60 per cent of OCBC’s total expenses.

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