Oversea-Chinese Banking Corp. (OCBC), Southeast Asia’s second-largest bank, posted a third consecutive quarter of increased profit, beating analyst estimates on gains in income from lending.
Net income for the second quarter rose 12 percent to S$648 million ($519 million) from S$577 million a year earlier, the Singapore-based lender said in a statement to the stock exchange today. That beat the S$609.5 million average of eight analysts’ estimates compiled by Bloomberg.
The result adds to evidence that Asian banks are withstanding the European debt crisis, with Japan’s three megabanks this week posting profit that beat analysts’ estimates. OCBC increased lending volume in the quarter as profitability from loans declined.
“The numbers look reasonably good and have come in stronger than I had anticipated,” said Matthew Smith, an analyst at Macquarie Capital Securities Singapore Pte. “The gains in interest income were basically driven by loan volumes rather than margins, which saw a compression.” Yields on mortgage lending and trade finance have fallen, he said.
Net interest income, the difference between what OCBC makes from lending and what it pays on deposits, climbed 13 percent to S$931 million. Gains from fees and commissions as well as trading revenue also propelled earnings in the quarter, the bank said.
The net interest margin, a measure of lending profitability, narrowed to 1.77 percent from 1.87 percent a year earlier.
OCBC’s non-interest income rose 2 percent on higher fees and trading income, the bank said. Great Eastern Holdings Ltd. (EH), in which OCBC holds 87 percent, according to its 2011 annual report, yesterday said second-quarter profit declined 31 percent to S$81.4 million on weak investment performance from unfavorable market conditions.
“While the economic environment remains uncertain, we will continue to grow our customer franchise across all key markets with our strong capital and liquidity base,” OCBC Chief Executive Officer Samuel Tsien said in the statement.
Loan growth in Singapore, Hong Kong and Malaysia will probably slow this year as economic growth cools, Standard & Poor’s analysts led by Ivan Tan wrote in a July 30 report. Singapore and Hong Kong are “particularly exposed to spillover effects” of economic conditions in their trading partners, they said.
Mizuho Financial Group Inc. led earnings at Japanese banks that exceeded analysts’ estimates last quarter. Mizuho, the country’s third-biggest bank by market value, almost doubled net income to 183.9 billion yen ($2.3 billion) in the three months ended June as higher bond-trading income offset a decline in lending.
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