OCBC

OCBC: 3Q13 net income of $759m, beat street estimates of $662m. Excluding non-core gains realized a year ago from the divestment of FNN and APB, core net profit rose 5% y/y and 27% q/q, driven by continued growth in net interest income, record fees and commissions and higher life assurance profit. The Msian and Indonesia banking subsidiaries each recorded a 21% y/y increase in net profit, while Great Eastern earnings contribution to core net profit rose 49%. Net interest income rose 4% y/y to a quarterly higher of $978m, driven by a 16% increase in customer loans to $162b, which more than offset a 12bps reduction in net interest margin (stable q/q), attributable to the continued low interest rate environment and re-pricing of existing Spore housing loans. Non-interest income, excluding divestment gains, rose 3% to $779m, despite a 68% decline in trading income. The group achieved a consecutive quarter of record fees and commissions of $352m, +16%, spurred by robust growth across all fee segments. Great Eastern’s underlying insurance business continued to grow strongly, as profit from life assurance grew 26% to $240m driven by continued underwriting profit growth and improved invmt performance. Meanwhile, OCBC’s overall income from wealth mgt activities continues to rise. For 9M13, wealth mgt contribution rose to 1.44b, +8% y/y, accounting for a higher 29% share of group total income (9M12: 27%). OCBC’s private banking business continued to expand year-on-year, with assets under management of US$45 b, +15% y/y. Allowances for loans and other assets rose 34% to $94m. Nevertheless asset quality remained sound with NPL ratio unchg y/y at 0.8%. The group continues to be well-capitalized with common equity Tier 1 and total capital adequacy ratio of 14.3% and 16.1% respectively, well above the regulatory requirement of 4.5% and 10% respectively. OCBC ended 3Q13 with NAV per share of $6.72, which translates to 1.55x P/B based on yday’s closing price of $10.40.