OCBC falls most in 6 months after profit misses estimates

Bloomberg

Oversea-Chinese Banking Corp., Southeast Asia’s second-largest lender, fell the most in six months in Singapore trading after its quarterly profit missed estimates amid a surge in bad-loan provisions.
Net income fell 18 percent to S$789 million ($554 million) in the three months to December from a year earlier, the Singaporean bank said on Tuesday in an exchange filing. That missed the S$864 million average forecast in a Bloomberg survey of six analysts. Net allowances for loans and other assets jumped 57 percent to S$305 million.
Singaporean banks have been contending with rising provisions for bad loans from the offshore energy services sector, which have dragged on profitability at a time when credit growth is slowing in the city’s sluggish economy. To offset those challenges, OCBC has been bolstering its wealth management and private-banking business, which included buying units from Barclays Plc last year.
“There continued to be stresses in parts of the portfolio, particularly within the oil and gas support services sector which drove increases in nonperforming loans and allowances,” Chief Executive Officer Samuel Tsien said in the filing.
The lender’s allowances for loan and asset impairments exceeded the S$245 million estimated by RHB Research Institute. Nonperforming assets increased 42 percent from a year earlier to S$2.89 billion, as soured assets in Singapore and Indonesia jumped, the filing showed.
“Results were slightly disappointing given higher credit cost,” Melissa Kuang, an analyst at Goldman Sachs Group Inc., said in a note.
The bank is the first Singapore lender to report its quarterly earnings, which come after its Great Eastern Holdings Ltd. insurance unit posted an 11 percent profit decline on Monday. DBS Group Holdings Ltd. will report its numbers on Feb. 16, followed by United Overseas Bank Ltd. the following day.
OCBC has been expanding its wealth unit, a strategy that included buying Barclays’s wealth-management units in Singapore and Hong Kong last year. The deal helped enlarge its Bank of Singapore unit’s assets under management to $79 billion as of Dec. 31, from $55 billion a year earlier, allowing it to compete more equally in Asia with larger rivals
including DBS and UBS Group AG.