By Yantoultra Ngui and Poonam Behura
SINGAPORE (Reuters) -Singapore’s second-largest bank Oversea-Chinese Banking Corp (OCBC) posted on Friday a better-than-expected 5% rise in first-quarter profit and made a S$1.4 billion ($1.04 billion) offer to take its insurer arm Great Eastern private.
OCBC, Great Eastern’s biggest shareholder, offered a 37% premium over Great Eastern’s last traded shares price to buy the 11.56% stake in the insurer that it does not currently own, valuing the insurer at S$12.12 billon.
It plans to delist Great Eastern from the Singapore bourse if the deal goes through.
OCBC, which is also Southeast Asia’s No. 2 lender, forecast its net interest margin at the higher end of a 2.20% to 2.25% range for the full year. It had first provided the range in February.
Net interest margin, a key profitability gauge for banks, declined slightly to 2.27% during the quarter from 2.30% a year earlier.
It’s full year forecast now assumes a lower number of global rate cuts, according to OCBC’s Group CEO Helen Wong in presentation slides accompanying the results.
OCBC maintained 2024 targets of low single-digit loan growth, credit costs between 20 to 25 basis points and 50% dividend payout ratio target, the slides showed.
“While some recent economic indicators are looking more favourable, near-term risks remain, such as heightening geopolitical volatility arising from ongoing wars and the outcome of a number of key elections this year,” Wong said in a statement.
OCBC said January-March net profit climbed to S$1.98 billion ($1.46 billion) from S$1.88 billion a year earlier, driven by stronger operating profit.
That beat the mean estimate of S$1.77 billion, or a 5.9% year-on-year decline, from four analysts polled by LSEG.
OCBC’s results rounded up strong first-quarter earnings from Singapore banks that all beat market expectations amid a higher-for-longer interest rates environment globally.
The city-state has benefited from strong inflows from wealthy clients in Asia, including in China, as well as from Europe and the Americas, drawn in by its political stability.
In the first quarter, OCBC reported a 1% rise in wealth management assets under management to S$273 billion from a year earlier.
Larger peer DBS Group (OTC:) posted this month a 15% jump in first-quarter net profit that trumped forecasts. It added full-year earnings for 2024 were expected to exceed the record result.
Smaller peer United Overseas Bank (OTC:) (UOB) posted on Wednesday a smaller-than-expected 2% drop in first-quarter profit and said it was confident of preventing further declines in its net interest margin.
OCBC’s return on equity was 14.7% in the first quarter, unchanged from the same period of 2023.
($1 = 1.3526 Singapore dollars)
