OCBC

OCBC posted a 2QFY10 net profit of $503m (+8% yoy,-26% qoq), above our expectations but below the Bloomberg Consensus of $546m. The net profit growth was driven by increased fee and commissions, higher realised gains on investment securities and lower allowances.Despite a 21% yoy increase in loans growth, net interest income grew merely by 1% due to a decline in net interest margin from 2.29% to 1.96%. Non-interest income increased 5% yoy on higher fee and commission income and higher realised gains from the sale of investment securities. Volatile financial markets resulted in a 35% decline in net trading income. Net profit contribution from Great Eastern Holdings fell by 26%, but the underlying insurance business stays healthy with a 30% yoy increase in new business sales. Operating expenses spiked up 24% yoy against a 3% increase in operating income. The higher operating expenses are due to the group's renewed investments in regional expansion and higher biz vol

In addition, the group's asset quality and coverage ratios remained strong. NPLs declined by 4%, resulting in an improvement in NPL ratio from 1.5% to 1.3%. Total cumulative allowances represented 112% of total non-performing assets. A higher interim dividend of 15 cts/share has been declared for the first half-year 2010, a 7% increase from the 14 cts/share last period.