Singapore lenders Oversea-Chinese Banking Corp (OCBC.SI) and United Overseas Bank beat profit estimates, driven by recovery in core markets, but their sequential performance slowed sharply, underscoring challenges to maintain growth. Prospects in Singapore’s banking sector have improved as a rebounding economy has boosted demand for mortgages and loans, while booming markets bolstered the wealth management business. At the same time, OCBC and UOB joined global peers such as HSBC and Standard Chartered in signalling strong asset quality after last year’s huge provisions in the face of the coronavirus pandemic.
OCBC, Singapore’s second-biggest bank, reported net profit of S$1.16 billion ($858.75 million) in April-June versus S$730 million a year earlier. That compared with the S$1.12 billion average of four analyst estimates, Refinitiv data showed. But profit slumped 23% from the first quarter. As the virulent Delta variant carves a deadly path through Southeast Asia, turning it into a global epicentre of the virus, analysts are concerned that banks’ bad loans will increase. Weaker economic growth in Malaysia and Indonesia prompted OCBC to step up some provisions for potential loan losses in the second quarter, given a resurgence of cases. Quarterly net profit at smaller peer, United Overseas Bank, came in at S$1 billion, beating the S$948 million average of three analyst estimates. OCBC and UOB increased dividend pay-outs. Last week, Singapore’s central bank removed caps on bank dividends, citing an improving global economic outlook.