Singapore Banks Post Strong Profit Growth, Declining Loan Losses

SINGAPORE, Aug 4 (Reuters) – Singaporean lenders Oversea-Chinese Banking Corp (OCBC.SI) and United Overseas Bank (UOBH.SI) beat quarterly profit estimates on Wednesday, driven by the recovery in their core markets and the decline provisions for loan losses.

The outlook for Singapore’s banking sector has improved as the economic recovery has boosted demand for mortgages and loans, while booming markets have supported wealth management activity.

At the same time, low credit costs indicate that banks have been able to manage asset quality in the face of the pandemic affecting businesses.

OCBC, Singapore’s second-largest bank, reported net income of S $ 1.16 billion ($ 858.75 million) in April-June from S $ 730 million a year earlier. That compared to the S $ 1.12 billion average of four analyst estimates, data from Refinitiv showed. But profit fell 23% from the first quarter.

“While the long-term trajectory of the global economic recovery is positive, we remain vigilant on the current operating environment given the recent resurgence of the virus and enhanced security measures in our key markets,” said the Managing Director Helen Wong, who took office in April, said in a statement.

The bank’s loan loss provisions fell 69% in the second quarter from a year earlier.

Quarterly net profit of a smaller counterpart, United Overseas Bank, stood at S $ 1 billion, beating the S $ 948 million average of three analyst estimates, according to data from Refinitiv. Profit was up 43% from a year ago as depreciation charges were cut by more than half, but profit remained stable from the first quarter.

Both banks have increased their dividend payments. Singapore’s central bank last week lifted ceilings on dividends paid by banks, citing an improving global economic outlook. Read more

Southeast Asia’s largest bank, DBS Group Holdings (DBSM.SI), reports results on Thursday.

Low interest rates weighed on banks’ net interest margins – a key indicator of profitability – but this was dampened by an increase in commission income, including wealth management fees.

($ 1 = 1.3508 Singapore dollars)

Reporting by Anshuman Daga; Editing by Christopher Cushing and Sonali Paul

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