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SINGAPORE (Reuters) – Singapore’s second-largest lender Oversea-Chinese Banking Corp Ltd (OCBC) reported a stronger-than-expected 28% jump in quarterly profit and gave a robust outlook as rising interest rates pushed up its net interest margins.
With Singapore relaxing most of its COVID-19 local and travel restrictions since early April this year, banks are benefiting from the rebound in economic recovery of the Asian financial hub.
“Overall economic growth in our key markets is expected to remain positive this year but at a slower pace due to the heightened headwinds in the operating environment,” OCBC’s Group Chief Executive Helen Wong, who took charge last year, said in the results statement on Wednesday.
She said growth in net interest income from rising interest rates is expected to make up for near-term pressure on non-interest income. She said credit costs are expected to be at the low end of its guidance.
OCBC’s net profit rose to S$1.48 billion ($1.1 billion) in April-June from S$1.16 billion a year earlier and versus the S$1.22 billion average of five analysts’ estimates compiled by Refinitiv.
Singapore banks are expected to report 10 basis points net interest margin expansion in April-June on a quarter-to-quarter basis, the highest over the last eight quarters, outperforming Asian peers, JPMorgan (NYSE:JPM) analysts said last month.
OCBC’s net interest margin, a key gauge of banks’ profitability, increased 13 basis points to 1.71%, the highest level in two years, according to Refinitiv data.
The bank said higher trading income and profit from its life insurance business boosted non-interest income in the quarter but net fee income fell 15%, mainly due to lower wealth management, brokerage and investment banking fees.
Last week, smaller local lender, United Overseas Bank (OTC:UOVEY) Ltd posted an 11% rise in quarterly profit, supported by a strong improvement in net interest income.
($1 = 1.3829 Singapore dollars)
