Loans contracted 1.5% qoq to S$79.2b due to repayment of short-term loans and term loans by corporate customers. Net interest margin contracted from 2.42% in 1Q09 to 2.29% in 2Q09 due to lower gapping income.
Fees & commissions grew 25.1% qoq to S$194m with growth from brokerage, wealth management, investment banking and loans-related activities. It also recorded positive net trading income of S$61m.
NPLs increased by 14.3% qoq to S$1,628m due to manufacturing, general commerce and transport & communications sectors. By geographical regions, the new NPLs came from core Singapore and Malaysia markets. It is important to note that the increases in NPLs came from loans that are not overdue. We take this as a sign of conservative management and prudence.
OCBC made specific provision of S$44m and general provision of S$5m in 2Q09, represeting total provision of 25bp on an annualised basis. This is lower that provision of 45bp in 1Q09. OCBC also made provision of S$57m for investment in debt and equity securities. Preserved healthy NPL coverage of 97.1%.
Management commented that the inflow of NPLs has slowed across key markets.
OCBC remains strongly capitalised with tier-1 CAR at 15.4%. Core equity tier-1 is 11.3% after stripping out preference shares.
OCBC declared interim tax-exempt dividend of 14 cents/share, representing payout of 44% on core net profit for 1H09.
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