OCBC’s FY profit flat at S$2.07b, but core net profit up 30%

Singapore’s third largest lender OCBC Bank has reported flat profits for the full year at S$2.07 billion, marginally higher than S$2 billion profit in 2006.

Excluding divestment gains from non-core assets and tax refunds, OCBC’s core net profit beat expectations by growing 30% to S$1.88 billion on the back of strong loans growth.

OCBC is seeing broad-based revenue growth across its key markets and business units, in particular Great Eastern Holdings.

The lenders booked a 25% jump in net interest income, thanks to a sharp 19% jump in loans driven by the buoyant property market.

But for the fourth quarter, it had to set aside an additional S$10 million in provisions for its portfolio in collateralised debt obligations, bringing the total to S$231 million.

This reduces the value of its asset-backed securities by 85%.

“We’ve taken 85% so there isn’t much left. As far as we’re concerned it’s nothing to worry about one way or another,” said OCBC’s CEO David Conner.

OCBC said the economic outlook for 2008 is uncertain because of the slowing US economy, but the bank’s CEO said there are reasons to stay positive.

Said Conner: “We still see reasonably healthy demand out there. I think most people are coming to the conclusion that perhaps the residential market will slow a little bit. We can’t forget that we have a big SME business as well – the investments in petrochemical plants that have been announced – about $16 (to) $18 billion worth of investments coming through.

“So there are many parts of the economy that are still quite hot and likely to see demand growing. We think that there’s reasonable expectation for healthy loan demand on the SME front, and to some extent on the real estate front.”

He also had some good words for Richard Stanley, the incoming CEO for rival bank DBS, who worked under him previously at Citibank.

“(Richard) worked for me, he was my subordinate for about 5 and a half years here in Singapore. He’s a good banker, solid guy,” said Conner.

Stanley previously worked at Citibank from 1989 to 1995 when Connor was its country manager.

Connor was also asked about OCBC’s plans for its stake in the tin smelting and property firm Straits Trading Company. He said the lender is moving away from its earlier stance and will consider the revised offer from the Tan family.

OCBC had earlier said it does not intend to sell its 6.2% stake in the Straits Trading Company. That was when the highest offer was S$6.55 a share by the Lee family.

With the latest offer by the Tan family through Tecity at S$6.70 per share, OCBC is now saying it’s reviewing the proposal. – CNA /ls

Source : Channel NewsAsia – 22 Feb 2008

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