My first Publication ocbc_ar17_fullreport_english | Page 137

OVERVIEW (continued)
The Group reported a net profit after tax of S$4.15 billion for the financial year ended 31 December 2017, an increase of 19%
from S$3.47 billion a year ago. This is the first time OCBC Bank’s reported net profit surpassed the S$4 billion mark. The strong
performance was driven by sustained growth momentum across the Group’s three business pillars: banking, wealth management
and insurance businesses.
Total income rose 14% over the prior year to exceed S$9.6 billion.
The Group’s full year net interest income rose 7% from the previous year to S$5.42 billion on the back of strong asset growth.
As at 31 December 2017, customer loans increased 8% to S$237 billion, underpinned by broad-based growth across key customer
and geographical segments. Full year net interest margin (NIM) of 1.65% declined 2 basis points from 1.67% a year ago, as lower
loan yields more than offset higher gapping income from money market activities. Nevertheless, NIM had been rising for each
consecutive quarter in 2017.
Non-interest income increased 23% to S$4.21 billion from S$3.44 billion a year ago. Fee and commission income climbed 19% to
S$1.95 billion, lifted by a 45% increase in wealth management fee income. Investment banking, fund management and trade-related
fees were also higher year-on-year. Net trading income, mainly comprising treasury-related income from customer flows, was S$515 million
as compared to S$529 million a year ago, while net gains from the sale of investment securities more than doubled to S$431 million.
Profit from life assurance of S$877 million was considerably higher than S$499 million in 2016, as Great Eastern Holdings achieved
strong underlying business growth and higher investment income from realised gains and favourable market conditions.
Operating expenses of S$4.03 billion were 6% above the previous year, mainly attributed to higher staff costs and a rise in expenses
to support the Group’s business expansion. This included the full year cost impact from the consolidation of the former wealth and
investment management business of Barclays PLC in Singapore and Hong Kong, which was acquired in November 2016. The Group’s
cost-to-income ratio improved to 41.9% from 44.6% in 2016. Net allowances for loans and other assets were S$671 million, 7% lower
as compared to S$726 million a year ago.
The Group’s share of results of associates for 2017 was S$389 million as compared to S$396 million the previous year.
The Group’s return on equity rose to 11.2% from 10.0% a year ago, while earnings per share increased to 97.6 cents from 82.2 cents.
Allowances and Asset Quality
Total net allowances for loans and other assets were 7% lower at S$671 million, as compared to S$726 million a year ago.
Despite the rise in oil prices reported towards the end of 2017, the charter rates and asset values of the offshore support services and
vessels (OSV) in the oil and gas industry continued to be depressed. Given the prolonged uncertainty and the lack of firm visibility
in the OSV sector, the Group took a prudent stance to further downgrade its OSV exposures and made appropriate allowances.
These significantly accounted for both the rise in non-performing loans (NPLs) from S$2.78 billion a year ago to S$3.42 billion,
and the majority of the S$1.41 billion in specific allowances made during the year. In the fourth quarter of 2017, the Group applied
S$887 million of cumulative portfolio allowances to cater for additional specific allowances. The Group continued to maintain
portfolio allowances at the prudent level of S$1.42 billion, which were sufficient to meet existing regulatory obligations. As at
31 December 2017, total allowances represented 313% of unsecured non-performing assets.
Apart from the OSV sector, the rest of the Group’s loan portfolio remained sound. The overall NPL ratio remained low at 1.45%,
being 0.19 percentage points higher than 1.26% a year ago.
From 1 January 2018, the Group is able to comply with the requirements of “Singapore Financial Reporting Standard (International)
(SFRS(I)) 9: Financial Instruments” and the revised MAS 612 with the current level of total allowances. The Group will make the
necessary disclosures from its first quarter 2018 results onwards.
BUILDING ON OUR CORPORATE STRATEGY FOR SUSTAINABLE GROWTH
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