Singapore's OCBC shocks with near 2-year low quarterly profit, cautious on outlook

By Anshuman Daga

SINGAPORE (Reuters) - Singapore's Oversea-Chinese Banking Corp Ltd unexpectedly reported its lowest quarterly profit in nearly two years, pinning the blame on its insurance unit and saying a slowing economy will intensify challenging business conditions.

The result on Friday came as Singaporean banks gear up for tougher times after three years of strong loan growth as the city-state's export-reliant economy slows, partly due to the impact of a trade war between the United States and China.

OCBC's weak earnings came from practically every part of its business coupled with a significant jump in its non-oil non-performing loans, Nomura analyst Marcus Chua said in a report.

"A perfect storm found its way to OCBC's earnings," Chua said.

October-December net profit fell 10 percent to S$926 million ($684 million) from the same period a year earlier. The result compared with the S$1.17 billion average of four analyst estimates, according to data from Refinitiv.

Explaining the decline, OCBC said market uncertainty and a challenging environment particularly affected the investment portfolio of subsidiary Great Eastern Insurance Holdings Ltd.

In contrast, domestic peer United Overseas Bank Ltd (UOB) reported a 7 percent rise in fourth-quarter net profit on Friday. On Monday, Singapore's biggest lender, DBS Group Holdings Ltd, posted an 8 percent profit increase.

OCBC's share price fell 1.9 percent after the results while the broader benchmark index lost 0.4 percent. UOB was also down 1.8 percent, but DBS was up 0.6 percent.

"We expect Singapore's commercial banking sector to face a more challenging operating environment in 2019, which will put further downside pressure on loan growth," Fitch Solutions said in a report last month, citing a slowing Singaporean economy.

For all of 2018, Singapore's biggest three banks reported record full-year earnings, supported by improved net interest margins and higher interest rates. Net profit rose 11 percent at OCBC, 18 percent at UOB and 28 percent at DBS.

"Looking ahead, global economic growth is expected to slow on concerns of continued trade and geopolitical tensions, subdued market and investment sentiments and rising policy risks in the advanced economies," OCBC Chief Executive Samuel Tsien said in a statement.

($1 = 1.3535 Singapore dollars)

(Reporting by Anshuman Daga; Editing by Stephen Coates and Christopher Cushing)