OCBC

OCBC: 2Q12 results. Net profit of $648m, +12% yoy, -22% qoq, above Street estimates of $610m (8 analysts, range $554 – 670m). Yoy, earnings growth was underpinned by higher net interest income, fees and commissions, trading revenues and lower allowances, but offset by lower profit from life insurance, as Great Eastern’s invmt performance was impacted by less favorable mkt conditions. Qoq, the weaker net profit was driven by a 25% plunge in non-interest income, attributed to i) life assurance profit plunging 68% qoq, ii) net trading income collapsing 54% sequentially. This was partially offset by loan allowances plunging 51% qoq. Net interest income rose 13% yoy to $931m, driven by broad based loan growth of 14% across all key sectors and geographies. This helped offset the decline in net interest margin (NIM), which narrowed 9bps qoq, and 10bps yoy to 1.77%, due to increased interbank placements. OCBC noted that asset quality remained healthy. NPL ratio was 0.9%, vs 1.0% in 1Q12 and 0.8% in 2Q11. Allowances for loans and other assets were $38m, significantly lower than the $96m in 1Q12 and $56m yoy. Interim dividend of 16cts declared, vs 15cts interim div last yr. This represents 38% payout ratio of core net profit. The Scrip Div Scheme will not be applicable. Mgt ntoes while the economic environment remains uncertain, the bank will continue to grow the customer franchise across all key mkts. At $9.62, the stock trades at 1.32x P/B.