In 4Q17, net interest income grew 14% to $1.42 billion, contributed by an 11% rise in average interest earning assets and a 4 basis points increase in NIM to 1.67%.
Non-interest income was 30% higher at $1.21 billion. Fees and commissions increased 17%, led by higher income generated from wealth management and investment banking activities.
Net gains from the sale of investment securities were higher at $249 million, while net trading income was 19% lower at $99 million for the quarter. Profit from life assurance climbed 80% year-on-year to $259 million.
In Nov 2017, the group completed the acquisition of National Australia Bank’s private wealth business in Singapore and Hong Kong, which added $2.06 billion in loans and $2.42 billion in deposits to the OCBC franchise.
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Operating expenses grew 9% to $1.07 billion in line with increased business volumes. The cost-to-income ratio improved from 45.1% a year ago to 40.6%, as a 21% growth in total income outpaced cost increase. Net allowances for loans and other assets were $178 million as compared to $305 million a year ago.
Total net allowances for loans and other assets were 7% lower at $671 million, as compared to $726 million a year ago.
OCBC Bank said despite the rise in oil prices reported towards the end of 2017, the charter rates and asset values of the offshore support services and vessels (OSV) in the oil and gas industry continued to be depressed.
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In 4Q17, the group applied $887 million of cumulative portfolio allowances to cater for additional specific allowances. The group continued to maintain portfolio allowances at $1.42 billion, which it said were sufficient to meet existing regulatory obligations. As at Dec 31 2017, total allowances represented 313% of unsecured non-performing assets.
The group’s Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR and Total CAR as at Dec 31 2017 were 13.9%, 14.9% and 17.2% respectively.
CEO Samuel Tsien says: "Given the continued weakness observed in the OSV sector of the oil and gas industry, we prudently made additional specific allowances to reflect the challenging operating conditions and the uncertain market outlook. Apart from the stress in the offshore oil and gas support services portfolio, the credit quality of the overall loan portfolio remained sound."
The board has proposed a final tax-exempt dividend of 19 cents per share.
Shares in OCBC closed 31 cents higher at $12.57 on Tuesday.
