SINGAPORE: Singapore's Oversea-Chinese Banking Corp (OCBC) beat first-quarter profit forecasts on Friday, but built additional precautionary buffers as the war in the Middle East and related energy shocks raised risks to growth in Southeast Asia.
OCBC, the country's second-largest bank, stood out among Singapore's three listed banks this earnings season by pointing to extra provisioning linked to the Middle East conflict.
"We remain very concerned about what's happening in the Middle East war because it's a very direct impact in Southeast Asia in terms of energy supply and therefore the prices," CEO Tan Teck Long told reporters after the results.
"So to be prudent, although we don't see credit quality issue in our portfolio... we have put in some general provisions for non-impaired loans, it's really a third-order effect which we are being prudent about," he said, describing the potential threat to the macroeconomic environment.
The lender set aside S$191 million ($150.51 million) of allowances for non-impaired assets, up from S$118 million a year earlier and compared with a S$36 million write-back in the fourth quarter of 2025.
OCBC's net profit rose 5% to S$1.97 billion for January-March from S$1.88 billion a year earlier, beating the mean estimate of S$1.89 billion from three analysts surveyed by LSEG, as record non-interest income and strong wealth management fees offset pressure from lower interest rates.
Its results rounded out a resilient first-quarter earnings season for Singapore banks, but show them leaning more heavily on wealth, fees and treasury customer flows as falling rates squeeze lending margins and geopolitical risks cloud the economic outlook.
WEALTH INCOME CUSHIONS MARGIN PRESSURE
Net interest margin, a key profitability gauge, fell to 1.76% during the quarter from 2.04% a year earlier. Net interest income declined 5% to S$2.22 billion.
OCBC Chief Financial Officer Goh Chin Yee said the bank was "highly watchful" of the Middle East conflict and saw no significant credit deterioration so far.
"The first-order impact is not material, at less than 3% of loans or 1% of total assets," Goh said, adding this included petrochemical and refinery exposure and other direct Middle East links.
OCBC was monitoring potential second- and third-order effects if the conflict became protracted, she said.
Non-interest income rose 23% to a record S$1.61 billion, with fee income up 24%. Wealth management fees climbed 34% to S$422 million, while net new money inflows reached S$5 billion.
"Our wealth business is actually very diversified. We draw wealth from all over the world," Tan said, adding that OCBC continued to see opportunities from rising affluence in Southeast Asia and flows through its Singapore and Hong Kong hubs.
Tan added that the bank aimed to achieve double digit year-on-year growth in wealth fees and asset under management.
OCBC, which counts Singapore, greater China, Indonesia and Malaysia among its key markets, maintained its 2026 outlook guidance.
Larger peer DBS Group last week reported stronger first-quarter earnings that beat analysts' forecasts, while smaller rival United Overseas Bank on Thursday posted better-than-expected but weaker results.
Earlier this week, OCBC announced it had agreed to buy certain assets and liabilities of HSBC's wealth and premier banking portfolio in Indonesia, marking the first major deal under Tan since he took over in January. - Reuters
