OCBC’s net profit plummets by 15% to $885m in 2Q

On back of lower insurance income.

The banking giant suffered blows dealt by a decline in investment income as well as unrealised mark-to-market losses in its insurance portfolio as it saw its bottomline crash by 15%.

According to a press release by OCBC, the results weren’t at par with last year’s strong quarter, which included a substantial gain from the sale of an equity investment under insurance subsidiary Great Eastern Holdings.

The release added that earnings from Great Eastern fell 66% to S$78 million from S$230 million a year ago, partly due to the absence of a S$105 million gain from the sale of an equity investment in 2Q15.

“GEH recorded strong underlying insurance business growth during the quarter, but its quarterly earnings were affected by unfavourable financial market conditions which resulted in unrealised mark-to-market losses in its bond and equity investment portfolio,” the release said.

Excluding Great Eastern, banking operations fell by 1% year on year. Net interest income also declined by 2% to S$1.26 billion from S$1.28 billion a year ago, as a drop in interest earning assets offset improvements in net interest margin.

“Customer loan balances of S$205 billion contracted 2% from a year ago from lower trade loans and reduced offshore borrowings of Chinese entities as a result of more favourable onshore borrowing rates. These offset increases in consumer loans and loans to the building and construction sector. Net interest margin for the quarter rose 1 basis point to 1.68% from a year ago from improved customer loan yields,” OCBC said.

Non-interest income for the bank was also 16% lower at $788m, while fee and commission income fell 5% to S$417 million, largely from lower brokerage and investment banking income.

“Net trading income, primarily treasury-related income from customer flows, rose to S$123 million from S$70 million in 2Q15,” the report said.