February 21, 2020 / 6:58 AM / a month ago

Singapore bank OCBC sees virus trimming revenue by 2% this year

SINGAPORE (Reuters) - Oversea-Chinese Banking Corp flagged on Friday a 2% hit to annual revenue from the coronavirus outbreak, following in the footsteps of larger peer DBS Group and signalling Singapore lenders may find it tough to keep growing robustly.

FILE PHOTO: A man walks out of an OCBC Bank branch in Singapore October 8, 2019. REUTERS/Feline Lim/File photo

Even before the virus outbreak, banks in the city-state had forecast muted earnings growth for 2020 as interest rates soften and lending moderates after a record performance in the last three years.

The epidemic, which has claimed over 2,100 lives in China and infected hundreds in dozens of other countries, has rattled markets and raised concerns about its impact on economic growth due to supply chain disruptions and weak consumer spending.

“On the revenue side, we may see a 2% reduction as compared to what we would have seen under a normal situation,” Samuel Tsien, Chief Executive of OCBC, Singapore’s second-largest bank, told reporters in a conference call, adding that overall revenue would rise this year.

He said loan growth is likely to be low this year, after expanding 3% last year.

Singapore, one of the countries hardest hit by the virus outside of China, has already cut its economic growth outlook this year and flagged the possibility of recession.

Last week, the city-state’s biggest bank DBS had warned the outbreak could pull down full-year revenue by as much as 2%.

OCBC, which also has operations in Hong Kong and mainland China, said the most impacted sectors - hotels, hospitality, retail, food and beverage and airlines - account for about 6% of its total loan portfolio.

CEO Tsien expects the virus situation to dwindle by June and a gradual market recovery to take place in the third quarter.

Wee Ee Cheong, CEO of United Overseas Bank Ltd (UOB), the city-state’s smallest listed lender, said separately that “many signs point to more challenging times ahead”, including the virus impact.

OCBC reported a 34% rise in net profit to S$1.24 billion ($885.27 million) for October-December, helped by an improvement in its net interest margin, versus the S$1.13 billion average of five analyst estimates compiled by Refinitiv.

The bank’s net profit beat expectations, mainly due to strong insurance income and very strong trading gains, analysts at CGS-CIMB Research said in a report.

OCBC’s full-year net profit rose 8% to a record, powered by a 12% rise in total income. Wealth management income, which includes insurance, private banking and asset management, grew 20% to a record, making up 31% of total income.

UOB reported a 10% gain in fourth-quarter net profit, in line with estimates.

($1 = 1.4007 Singapore dollars)

Reporting by Anshuman Daga; Editing by Christopher Cushing and Muralikumar Anantharaman

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