SINGAPORE: Oversea-Chinese Banking Corp , Singapore's second-largest listed lender, said on Wednesday it expects overall conditions to improve after it posted a surprise 14% drop in quarterly profit, knocking its shares to a one-month low.
Shares in OCBC, which reported a jump in operating expenses, fell 5.8% in late morning trade, on track for their biggest one-day fall in two years, to top the list of losers in a broader market down just 0.7%.
OCBC CEO Helen Wong, who took charge last year, told a news conference that she was cautiously optimistic about an improvement in the operating environment.
Singapore lenders are benefiting from rising global interest rates and rebounding economic growth, with its economy forecast to grow 3% to 5% this year.
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The city-state is reopening its borders as it recovers from the COVID-19 pandemic slump, bolstered by high vaccination rates.
"I'm quite optimistic about controlling credit risks and I do not see massive credit costs that we have to build in," Wong said.
OCBC's net profit fell to S$973 million ($723.4 million) in October-December, down from S$1.13 billion a year earlier and well below the S$1.18 billion average of four analyst estimates compiled by Refinitiv.
The bank, which counts Singapore, Greater China and Malaysia, among its key markets, posted a 15% rise in quarterly operating expenses, citing higher staff costs linked to its expansion, and an absence of government job supports grants.
Still, full-year net profit rose 35% to pre-pandemic levels after credit allowances more than halved, helped by an improvement in asset quality.
"While the broad trends (loan growth, margins, non-interest income. and expenses) were, by and large, in line with peers, the elevated credit cost and no comments on dividend policy was a dampener, in our view," Jefferies analyst Krishna Guha said in a note.
OCBC's shares have underperformed peers, dented by market worries over its relatively high credit losses and muted outlook.
The lender, which has a leading private bank, Bank of Singapore, said it plans to invest further in expanding its wealth management hubs in Asia, Dubai and London.
"I remain optimistic for economies to continue to open further in 2022 and for economic activities to pick up much better," said Wong, who joined OCBC in 2020 after a 27-year career at HSBC Holdings.
Last week, United Overseas Bank joined bigger competitor DBS Group in flagging a strong outlook after reporting a sharp rise in quarterly profit on the back of a big decline in credit charges.
Wong said the bank's annual increase in expenses was mainly due to technology spending and hiring senior staff, but said she didn't expect a higher pace of gains in expenses.
As of Tuesday's close, OCBC's shares had gained 24% over the past year versus a 42% surge in DBS and a 36% rise in United Overseas Bank.
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