OCBC

OCBC unveiled a robust set of 1Q14 result which was above estimates as net profit came in at $899m (+29%) on total income of $1.89b (+19%), driven by sustained momentum across all customer-related businesses. Net interest income surged to a quarterly high of $1.09b (+19%), driven by broad-based asset growth and a 6 bp widening of net interest margin (NIM) to 1.70%. Customer loans increased 18% to $175b, spread across all customer segments and key markets, while higher NIMs was due to wider loan spreads and increased income from money market activities and gapping opportunities. Non-interest income rose to $800m (+18%), led by a 12% rise in fee and commission income on back of increased contributions from wealth management, loan and trade related activities, and net trading income. The bank also recorded net gains of $52m from the sale of investment securities and once-off gains of $32m from the partial disposal of Great Eastern Holding’s stake in its China JV. Costs were well-managed as operating expenses inched up 5% to $706m, while the cost-to-income ratio improved from 42.3% in 1Q13 to 37.4%. Net allowances were higher at $41m versus $21m y/y, while OCBC’s non-performing loans (NPL) ratio of 0.7% remains unchanged. ROE was at 14.9%, compared to 11.7% last year. The group ended the quarter with total CAR of 15.6% and Tier-1 CAR of 14.4%. Commenting on the results, OCBC CEO highlighted that the momentum across the bank’s customer franchise is strong and sustaining, with increased operating profit from all its key markets, backed by sound quality asset and a robust capital, funding and liquidity base. In regards to its ongoing acquisition of Hong Kong’s bank, OCBC expects the two franchises to complement each other and provide the bank with an expanded platform to deepen and broaden its foothold in the region, while granting it further access to offshore RMB and the ability to capture growing trade, investment, capital and wealth flows between Greater China and other key markets. At current price, OCBC trades at 1.3x P/B.