SINGAPORE: Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. posted fourth-quarter profit that missed analysts’ estimates as market turmoil dented income from wealth and trading operations.
OCBC’s net income unexpectedly fell 11 percent to S$926 million ($684 million) in the three months ended Dec. 31, Singapore’s second-largest bank reported Friday. UOB’s profit gained 7 percent.
The shares fell in early Singapore trading as the results wrapped up a disappointing earnings season for the country’s banks, which are facing headwinds posed by trade disputes, the Federal Reserve’s likely pause in interest-rate hikes and China’s economic slowdown.
The lenders found that their wealth management businesses weren’t immune from the equity market rout in the quarter as rich clients shunned investing.
“Looking ahead, global economic growth is expected to slow on concerns of continued trade and geopolitical tensions, subdued market and investment sentiments and rising policy risks in the advanced economies,” OCBC Chief Executive Officer Samuel Tsien said in a statement.
OCBC blamed much of its profit decline on a slump at its insurance unit, which booked mark-to-market losses on investments due to the market turmoil. The bank also added $205 million in loan allowances -- about four times as much as in the previous quarter -- suggesting loan quality may be deteriorating.
“OCBC’s weak results came from practically every part of the business coupled with a significant jump in its non-oil nonperforming loans,” Marcus Chua, an analyst at Nomura Holdings Inc. in Singapore, said in a report. UOB disappointed investors who were anticipating improvement in its net interest margin, Chua said.
Shares of OCBC fell 1.5 percent as of 9:27 a.m. in Singapore. UOB slid 1.7 percent, the biggest intraday decline since Dec. 18.
Both OCBC and UOB reported higher net interest income, thanks to growth in loans. But the outlook for lending profitability is being clouded by the prospect of slower interest-rate increases in the U.S. and elsewhere. UOB’s net interest margin declined from the previous quarter, while OCBC’s was unchanged.
Larger rival DBS Group Holdings Ltd. also relied on lending for profit last quarter as the market rout hit wealth and trading, results showed Monday. CEO Piyush Gupta said in an interview that wealthy clients who “froze” at the end of 2018 are becoming more active this quarter.
OCBC Key Figures
Net income missed the S$1.12 billion average analyst estimate
Allowances for loans and other assets rose 14 percent from a year ago
Wealth management fees dropped 13 percent
Net interest margin expanded 5 basis points from a year ago to 1.72 percent, but was flat from the previous quarter
Net trading income plunged 91 percent
UOB Key Figures
Net income of S$916 million missed the S$980 million average estimate
Wealth management fee income fell 20 percent
NIM shrank 1 basis point year-on-year and also from previous quarter to 1.80 percent
Net loss from investment securities totaled S$59 million
Allowances for credit and other losses declined 9 percent - Bloomberg
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