Fri, Aug 07, 2020 – 8:23 AM
UPDATED Fri, Aug 07, 2020 – 10:49 AM
OCBC on Friday posted a larger-than-expected 40 per cent fall in Q2 net profit on surging provisions, taking additional provisions to "conservatively" write down the carrying value of the existing offshore support vessels that back corresponding non-performing loans.
The bank also joined its peers in bumping up allowances to buffer against bad loans to emerge amid the pandemic-fuelled crisis.
For the first half of 2020, an interim dividend of 15.9 cents per share has been declared, compared with the dividend of 25 cents per share declared in the year-ago period. This represents half of the maximum 31.8 cents dividend per share that can be paid out in FY2020, representing 60 per cent of FY2019s 53 cents.
In July 2020, the MAS nudged the Singapore banks to cap total dividends per share for 2020 at 60 per cent of that for 2019.
The scrip dividend scheme will be applicable to the interim dividend, OCBC said, giving shareholders the option to receive the dividend in the form of shares, with the issue price of the shares set at a 10 per cent discount.
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Net profit for the three months ended June 30, 2020 stood at S$730 million, compared with S$1.22 billion a year ago, underperforming the S$930 million average estimate of eight analysts polled by Bloomberg.
Allowances for the second quarter surged to S$750 million, compared with S$111 million a year go. It was also higher as compared with S$657 million in allowances posted in the previous quarter.
The bank's non-performing loan (NPL) ratio for Q2 ticked higher to 1.6 per cent, up from 1.5 per cent in both a year ago, and quarter ago.
Allowances in H1 2020 largely comprised allowances made for a Singapore-based corporate customer in the oil trading sectorfirst recognised in the first quarter, with further allowances were made in the second quarter to conservatively write down the carrying value of the existing offshore support vessels NPLs, given the poor outlook for the sector, the bank said.
"The decline in OSV employment was further aggravated by significantly reduced oil demand as a result of the prolonged COVID-19 pandemic."
Total general provisions set aside by OCBC as at June 30, 2020 stood at S$1.67 billion, up from S$1.44 billion in the previous quarter. The regulatory loss allowance reserve (RLAR) set aside by OCBC remained unchanged from a quarter ago at S$874 million.
For perspective, the non-performing asset (NPA) coverage ratio now for OCBC is at 101 per cent. DBS has the highest NPA coverage ratio of the trio at 106 per cent. For UOB, it is at 96 per cent.
To add, both OCBC and UOB calculate NPA allowance coverage by including what they have set aside under RLAR, a separate reserve in equity – in other words, coming out from retained earnings – that can be used to reflect more coverage against non-performing assets. But it does not substitute for provisions deducted against income earned in each quarter. DBS has not set aside RLAR in this period, and to be clear, its total general provisions of S$3.8 billion already exceeds the regulator's requirement by 24 per cent.
Net interest income for the second quarter fell 7 per cent from the year-ago period to S$1.48 billion, as asset growth was more than offset by margin compression.
Its net interest margin (NIM) stood at 1.6 per cent, falling 16 basis points from the quarter. A year ago, its NIM stood at 1.79 per cent.
Non-interest income in the second quarter rose 11 per cent from a year ago to S$1.14 billion, on increased trading andRead More – Source