SINGAPORE, February 23 - Oversea-Chinese Banking Corp, Singapore's second-largest listed lender, said on Wednesday that global conditions will improve following a surprising 14% drop in quarterly earnings, bringing its shares to a one-month low.
Shares in OCBC, which reported a drop in operating expenses, fell by 5.5 percent in late-morning trading, on track for their biggest one-day drop in two years, to top the list of losers in a larger market by just 0.7 percent.
Helen Wong, the CEO of OCBC, who was appointed last year, spoke at a press conference that she was cautiously optimistic about an improvement in the operating environment.
Singapore lenders are benefiting from rising global interest rates and improved economic development, with its economy predicted to increase by 3% to 5% this year. The city-state is reopening its borders as it recovers from the COVID-19 epidemic, which is enhanced by high vaccination rates.
"I'm quite optimistic about controlling credit risks, and I do not see significant credit costs that we must meet," Wong said.
In October and December, OCBC's net profit fell to S$973 million ($723.4 million) up from S$1.13 billion a year earlier, securing a clear third of the S$1.18 billion average of four analyst estimates from Refinitiv.
The bank, which counts Singapore, Greater China, and Malaysia, has seen a 15% increase in quarterly operating expenses, owing to higher personnel expenses as a result of its expansion, and an absence of government employment.
Despite the fact that credit allowances more than half-sided, the total profit increased by 35% to pre-pandemic levels.
"While the broad trends (loan growth, margins, non-interest income. and expenses) were by and large, in line with peers, the increased credit cost and no comments on dividend policy were a dampener, in our view," said Krishna Guha, an analyst at Jefferies.
OCBC's stock has slumped to overthrow of its peers, causing the market to be held off by its modest credit losses and a bleak outlook.
The lender, which has a large private bank, Bank of Singapore, said it intends to invest more in expanding its wealth management hubs in Asia, Dubai, and London.
"I am optimistic that economies will continue to open in 2022, and that economic activity to pick up much better," said Wong, who left OCBC in 2020 after a 27-year career at HSBC Holdings.
United Overseas Bank joined DBS Group, a larger competitor, last week in indicating a robust performance after reporting a significant increase in quarterly earnings on the back of a notable decline in credit charges.
Wong said the bank's increase in expenses was primarily due to technology expenditure and hiring senior employees, but said she didn't anticipate a higher rate of expenses.
OCBC's stock had increased by 24% from Tuesday's close, compared to a 42 percent rise in DBS and a 36% increase in United Overseas Bank.
($1 = 1.3450 Singapore dollars)