Results review OCBC reported a decline in core net earnings to S$396mil (-6.8%
yoy, +3.9% qoq, 2Q08: S$381mil) due to higher operating profits but negated by
higher allowances.
Net interest income grew to S$684mil (+20.9% yoy, +1.0% qoq) attributable to 20.2%
growth in loans and improved NIM of 13bps to 2.18% due to lower cost of funds and
higher spreads. Non-interest income was 4.0% lower at S$462mil from lower fee
income, lower foreign exchange income and net losses of S$26mil on disposal of
investment securities. Expenses increased to S$492mil (+15.5% yoy, +4.0% qoq)
due to increased salaries and headcount, overseas investment, business-volume
related costs and consolidation of PacificMas Berhad’s expenses. Cost to income
was higher at 43.0%.
Gross loans expanded to S$81.4bil (+19.6% yoy, +3.8% qoq), driven by corporate
and SME loans in Singapore. Building and construction loans grew 38.9% to
S$16.5bil while housing loans increased 5.6% to S$19.7bil.
The Bank took a S$156mil allowance for loans and other assets comprising of S$
30mil for specific allowances, S$9mil for portfolio allowances, S$4.0mil for corporate
CDOs and S$113mil for debt securities.
NPLs fell 19.0% over the year to S$1.20bil while the NPL ratio improved to 1.3% from
2.1% last year. Total cumulative allowances amounted to 128% of NPLs as
compared to 107% last year. CAR ratio increased to 14.7% with Tier 1 higher at
14.4% after the issuance of S$2.5bil of Tier 1 preference shares.
Revise earnings estimate From history, OCBC recorded higher impairment charge
of 291bps of loans in 1998 as Singapore went through a recession during the Asian
Financial Crisis. Similarly in the Dotcom bust, OCBC charge off 108bps of loans as
impairment both in 2001 and 2002 following the contraction of the Singapore
economy in 2001.
The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned
To my beloved friend CW8888
1 year ago
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