Loans issued by OCBC Bank that are under moratorium amount to $27 billion, slightly less than 10 per cent of its loan book, group chief executive Samuel Tsien said yesterday.
Eighty-eight per cent of such loans in its operating markets, such as Singapore, Malaysia and Hong Kong, are fully secured, he added.
Mr Tsien was addressing concerns about the uncertainty faced by banks in the region because of the Covid-19 situation, especially after relief measures rolled out by governments start to wind down over the next few months.
For Singapore, 6.8 per cent of the bank’s loans are on moratorium, with 96 per cent fully secured.
Governments in the region rolled out relief measures earlier this year, including loan moratoriums, to help businesses cope with the economic fallout due to the outbreak.
The Monetary Authority of Singapore earlier said it is working with banks to prepare a soft landing for firms that have taken up its support schemes, as relief measures will be rolled back by the end of this year.
Speaking at OCBC’s release of its second-quarter results, Mr Tsien said South-east Asia’s second-biggest lender is “managing the exit from the relief programme as much as we can, and we are working with regulators all around the world, including Singapore, Malaysia, Indonesia and Hong Kong”.
OCBC’s net profit for the three months to June 30 fell to $730 million, 40 per cent lower than the $1.2 billion a year ago, after it set aside “significantly higher allowances against expected credit losses” amid a worsening economy due to the coronavirus pandemic.
It missed the $930 million average estimate of eight analysts surveyed by Bloomberg.
This brings the bank’s net profit for the first six months this year to $1.4 billion, 42 per cent lower than the $2.5 billion a year ago.
Banks need to defensively shore up their balance sheets and prepare for the slow recovery, given that the near-term market outlook is very uncertain due to the ongoing pandemic and rising geopolitical risks, Mr Tsien said. “This is exactly what we have done since the start of the pandemic crisis,” he added.
Banks need to defensively shore up their balance sheets and prepare for the slow recovery, given that the near-term market outlook is very uncertain due to the ongoing pandemic and rising geopolitical risks, OCBC group chief executive Samuel Tsien said… The bank’s provisions for credit losses surged to $750 million in the second quarter from $111 million a year ago.
The bank’s provisions for credit losses surged to $750 million in the second quarter from $111 million a year ago.
OCBC said in a statement yesterday that its earnings since March have been hit by business disruptions and a slowdown in customer activities as countries took measures limiting movements and interactions to curb virus transmissions.
Mr Tsien said: “Despite the unprecedented size of government and central bank relief programmes extended across the world, business and consumer sentiments continued to be weak.
“The emergence of economies towards the road to recovery will be slow and challenging. We will continue to contain all discretionary expenditure, including management compensation.”
The bank’s net interest margin – a key gauge for profitability – fell to 1.68 for the first six months this year, from 1.78 a year ago.
Mr Tsien expects net interest margin to dip further but remain in the higher end of the 1.5 range in the second half of the year.
The board declared a dividend of 15.9 cents a share for the first half, with the scrip dividend scheme applicable. Shareholders can opt to receive the dividend in the form of shares, with the issue price of the shares set at a 10 per cent discount.
The move is in line with central bank guidance for local banks to moderate this year’s dividends. OCBC paid a dividend of 25 cents a share for the same period last year.
OCBC shares ended at $8.72 yesterday, down 8 cents or 0.91 per cent.