OCBC

OCBC: 1Q15 results above estimates. Net profit came in at $993m (+12% y/y, +26% q/q) versus consensus estimates of $911m, aided by a strong show in net interest income, lower than expected overhead expenses and strong trading income.

Net interest income came in at $1.3b (+15% y/y, -2% q/q), driven by total loans growth (+20%), with broad-based growth across OCBC’s key customer segments and markets. Customer deposits grew by 26% to $250m, setting the loan-to-deposit ratio at 83%. Excluding the acquisition of Wing Hang Bank, customer loans and deposits grew 4% and 8% y/y, respectively.

Net interest margin (NIM) however dipped to 1.62% (-8bps y/y, -5bps q/q), as a result of lower loan-deposit-ratio and weaker income from money market gapping activities.

Non-interest income was $859m (+7% y/y, +13% q/q), boosted by higher wealth management (+11%), brokerage (+49%), fund management (+16%) and credit card fees (+87%), as well as higher net trading income (+25%) and life assurance profit (+9%).

Overall operating expenses rose 24% to $922m, largely as a result of the acquisition of WHB. Otherwise, operating expenses would have risen 9%, due to higher staff cots and a 3% rise in headcount.

Total provisions rose 56% to $64m, with the increase partly contributed by the consolidation of WHB and higher allowances from Singapore.

Asset quality remained healthy, with NPL ratio at 0.6% (4Q13: 0.7%, 3Q14: 0.7%), while loan-loss coverage was at 171%.

ROE declined to 10.6% (4Q13: 11.9%, 3Q14: 13.1%) and capital adequacy ratios remained stable with fully-loaded CET1 CAR of 13.8% and Tier-1 CAR at 13.8%.

Going forward, management aims to deepen its presence in its core markets, and participate in opportunities arising from global market and consumer trends, while capturing trade, capital and wealth flows associated with increased economic interconnectivity between Greater China and Asean.

OCBC trades at 1.37x P/B versus DBS’s 1.36x P/B and UOB’s 1.41x P/B.