OCBC faces squeeze from contracting interest margins

Strong loan growth helps boost the profit of the world’s strongest bank by 12% in the second quarter but its net interest margins continue to shrink.

Singapore-based Oversea-Chinese Banking Corporation reported that its net profit for the three months ended June 30 was US$519.5 million, up from US$464 million year-on-year. It reported strong loan growth despite growing pressure on net interest margins.

Net interest income for the quarter was US$750 million, up 13% from US$666 million, while noninterest income rose 2% to US$480 million from US$472 million.

Net interest margins or the spread between the cost of borrowing and gains from lending, however, continued to shrink, falling to 1.77% in the second quarter from 1.86% in the first and 1.87% a year earlier.

Singapore's banks, like Hong Kong’s, have faced continuing problems from shrinking net interest margins since 2009.

Chief Executive Samuel Tsien said the bank’s asset quality also remained strong as a result of continued prudent risk management and active portfolio reviews.

"While the economic environment remains uncertain, we will continue to grow our customer franchise across all key markets with our strong capital and liquidity base,” he said.