Net profits at OCBC plunged 43 percent in the first quarter due to non-operating losses from its insurance arm and increased provisions most notably for oil-linked exposure.
OCBC posted S$698 million ($494 million) in quarterly net profits – below analyst estimates of $666 million, according to Refinitv data.
Its insurance contributions nosedived 94 percent year-on-year due to unrealized mark-to-market losses and its total allowances were increased from $176 million to $465 million which includes $195 million set aside for a «Singapore-based corporate customer in the oil trading sector».
Recently, OCBC was reportedly amongst the lenders to disgraced oil trader Hin Leong, with an estimated exposure of $220 million.
Driven by fee income wealth management and brokerage units, non-interest income was up 11 percent to $551 million. Net investment gains were also up at $84 million due to the sale of debt securities.
Net trading income plummeted by more than 90 percent to reach $13 million due to unrealized mark-to-market losses in Great Eastern’s investment portfolio.
Despite a still stable balance sheet – non-performing loans were up by only 2 bps while net interest margin remained at 1.76 percent – the additional provisions signal further headwinds ahead in light of the effects from the coronavirus pandemic.
According to OCBC group CEO Samuel Tsien, the coming period is expected to be very difficult for individuals and businesses.
We paid close watch on our credit portfolio against the market uncertainty, and significantly shored up our allowances on a forward-looking basis, he said.