Loans contracted 1.2% qoq but was 6.5% higher yoy to S$78.8b. Loans to Building & Construction has started to taper off, declining 2.8% qoq. Singapore dollar-denominated loans contracted 3.6% qoq. Net interest margin maintained at an attractive 2.42%. Net interest income expanded 16.0% yoy to S$740m primarily due to expansion of credit spreads for corporate loans.
Fees & commissions declined 2.5% qoq to S$155m. The only area of improvement was investment banking, rebounding from a low base to S$13m. Profit from life insurance more than doubled to S$266m. Great Eastern Holdings booked non-recurring profit of S$213m mainly from valuation surplus for Malaysia insurance business after implementation of Risk Based Capital framework starting Jan 09. OCBC also benefitted from trading gains of S$87m from foreign exchange, compared to losses of S$17m in 4Q08.
Staff costs reduced by 4.8% qoq due to control on headcount and salary increases and cash grants from government's job credit scheme. Other operating expenses was cut by 18.0% qoq with reduction in business promotions and travel expenses. Cost-to-income ratio fell from 42% in 1Q08 to 30.7% in 1Q09.
NPL ratio has edged slightly higher from 1.5% to 1.8% due to corporate and middle-market loans in manufacturing, building & construction and general commerce sectors for overseas markets. NPL ratio for Singapore remains relatively unchanged at 0.9% but increased from 3.3% to 3.6% for Malaysia. OCBC booked specific allowance of S$88m for loans in 1Q09, much lower than S$159m in 4Q08. However, it made allowance of S$94m for its corporate CDOs in 1Q09 and has fully written down its entire portfolio of ABS and corporate CDOs.
Tier-1 CAR remains robust at 15.1%, the highest among local banks.
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