OCBC

OCBC: 1Q13 results down, but above analysts’ expectations. Net profit at $696m, -16% yoy, +5% qoq. Yoy, the decline was due to gains from divestment of non-core assets, significantly higher trading income and mark-to-market invmt gains from the insurance business in 1Q12. Net interest income was $912m, -4% yoy, as revenue from asset growth was offset by lower net interest margin. Non-bank customer loans grew 10% yoy, with broad-based growth across consumer, corporate and SME segments in most key markets. Net interest margin (NIM) fell 22 bps to 1.64%, attributable to the persistently low interest rate environment, reduced opportunities in the interbank market, and competition in the Singapore housing loans segment. NPL ratio was 0.7%, down from 1.0% yoy. Overall, core non-interest income, excluding divestment gains in 1Q12, was 14% lower yoy at $676m. Fee and commission income rose 15% yoy to $316m, boosted by growth in wealth mgt, loan-related and fund mgt income. But trading income was lower compared to the strong 1Q12 performance, declining 65% to $56m. Great Eastern continued to record sound business growth, as reflected by a 17% rise in new business sales, driven by growth across its key markets, as well as from higher underwriting profits. However, Life assurance profit declined 19% to $198m on lower mark-to-market invmt gains. OCBC continued to focus on the wealth mgt segment. AUM increased 27% yoy to US$44b, contributing $520m revenue (stable yoy), comprising a third of total group revenue. On the Group’s performance and outlook, CEO Samuel Tsien notes business momentum is strong, and asset quality remains sound; will continue to strengthen the bank’s regional franchise to tap on the higher economic growth potential in key overseas markets. The stock trades at 1.6x P/B.