Fee income soars, housing loans climb, leading to 35% rise in core net earnings
HIGHER lending activity and soaring fee income saw the three Singapore-listed banks post another sharp rise in core net profit in the second quarter.
Their combined net profit rose 35 per cent to $1.77 billion, excluding one-time gains, fuelled by buoyant economic conditions and the frenzied stockmarket activity earlier in the year.
OCBC Bank saw its core net profit grow the fastest, rising 65 per cent year-on-year to $518 million.
Its larger rivals, United Overseas Bank (UOB) and DBS, also saw double-digit growth in their bottom lines over the year. DBS's net profit rose 21 per cent to $664 million, while UOB's grew 32 per cent to $585 million.
Non-interest income soared at all three banks, as they raked in fund management fees, stockbroking commissions and gains from investments.
DBS, the largest of the three lenders, saw the most rapid loans growth. Its net customer loans rose 19 per cent over the year to a record $99 billion at end-June, led by corporate and small business loans in Singapore and Hong Kong.
UOB saw the fastest growth in housing loans - the largest single component in the loan book of each bank, comprising about one-quarter of total loans. Its housing loans rose 18 per cent over the year and 5 per cent over the quarter to $20.7 billion at end-June.
DBS, the largest mortgage lender here, saw its home loans grow more slowly to $26.1 billion, while OCBC's stayed largely unchanged at $18.1 billion.
Net interest margins, which measure the difference between what the banks earn on loans and pay on deposits, generally held steady, as all three banks worked to improve their asset-liability mix to offset the impact of declining interest rates.
In May, the three-month Singapore interbank offered rate (Sibor) used by the banks to benchmark most of their Singapore-dollar corporate and small business loans fell sharply, triggering concerns that their margins would be dragged down.
But some analysts warned at the time that the full impact of the lower Sibor on the banks would be seen only in their second-half earnings.
The Sibor has since recovered slightly, but at 2.6 per cent, it is still substantially below the 3.4 per cent level at the start of the year.
DBS chief executive Jackson Tai said at the release of the group's results on July 27 that he did not believe interbank rates would remain low for long. 'The fundamentals don't support this kind of rates.'
OCBC's net interest margin actually improved from the first quarter, rising to 2.13 percentage points from 2.04 points in Q1.
Its chief executive, David Conner, said the bank had worked 'very hard' to improve the bank's mix of deposits by selling more current and savings accounts.
Yesterday, the banks' share prices rose amid a rebound in the broader market after Monday's sharp falls. DBS shares rose 5.3 per cent to close at $21.80, while OCBC ended 3.6 per cent up at $8.70. UOB's share price rose the most, ending 6 per cent higher at $21.20.
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