Oversea-Chinese Banking Corp. said its third-quarter net profit rose 3% from a year earlier to S$2.04 billion (US$1.60 billion), beating analyst estimates, and Singapore's second-largest bank raised its outlook for 2026 on stronger loan demand and lower expected credit losses.

The result, reported on Friday, Nov. 6, closed a Singapore bank earnings season in which both DBS and United Overseas Bank missed forecasts on weaker trading income, according to Reuters. OCBC also faced lower trading and insurance income, but its core lending and wealth franchises held up well enough to clear expectations. For investors who hold the three lenders as a block for income, OCBC's upgraded guidance is the clearest positive signal of the season.

Profit compared with S$1.98 billion a year earlier and was above the S$2.01 billion mean estimate of four analysts compiled by LSEG, Reuters reported. It fell 8% from the second quarter, the bank said.

OCBC raises loan growth and credit cost guidance

OCBC now expects loans to grow at a low-double-digit rate in 2026, Reuters reported, narrowing an earlier range of high single digits to low double digits. It expects total income to grow by at least a mid-single-digit percentage and net interest income to be flat or slightly lower. It cut its forecast for credit costs to 15 to 20 basis points of loans, from 20 to 25 basis points.

The balance sheet supports the loan forecast. Customer loans reached S$372 billion at Sept. 30, up 14% from a year earlier and 3% from June in constant-currency terms, according to the bank's results release. Customer deposits rose 12% to S$461 billion, and the loans-to-deposits ratio climbed to 79.5% from 78.4% at the end of June.

Net interest income rose 4% from a year earlier to S$2.31 billion in the quarter, helped by loan growth. Margins kept shrinking: the net interest margin for the first nine months was 1.71%, down 22 basis points from 1.93% a year earlier, the bank said.

Credit quality improved. Allowances fell to S$52 million in the quarter, equal to annualized credit costs of 6 basis points compared with 14 basis points in the second quarter. Nonperforming assets dropped 3% from June to S$3.04 billion, with a nonperforming loan ratio of 0.8% and coverage of 168%. The common equity tier 1 capital ratio stood at 15.5%, or 14.0% on a fully phased-in basis.

Great Eastern losses weigh on trading and wealth income

The weak spot was OCBC's insurance arm, Great Eastern Holdings. The insurer booked mark-to-market losses on its bond portfolio in the third quarter, and large equity gains from the second quarter did not recur, according to Reuters.

As a result, insurance income fell 37% from a year earlier and 48% from the second quarter, the bank said, describing the decline as reflecting market-driven valuation losses. Trading income fell 33% from the prior quarter and 10% from a year earlier. Non-customer flow trading and investment income swung to a S$15 million loss, Reuters reported.

Underneath those swings, client business was strong. Customer flow trading income hit a record S$480 million, up 29% from a year earlier. Net fees were S$735 million, comparable with the record set in the second quarter, and fee income rose 8% from a year earlier. Group wealth management income fell 25% from the prior quarter because of Great Eastern, but banking wealth management income, which excludes the insurer, rose 2% from the prior quarter to a record S$1.12 billion. Assets under management in the banking wealth business rose 2% from June to S$358 billion, with net new money flowing in across all segments, the bank said.

Profit from the banking operations alone reached a record S$1.90 billion, up 8% from the second quarter. Insurance sales also kept growing: the value of new business at Great Eastern, measured as new business embedded value, rose 14% from a year earlier with a margin of 57.5%.

Operating expenses fell 3% from the second quarter and were flat from a year earlier. Because income fell faster, the cost-to-income ratio rose to 40.8% from 37.8% in the second quarter.

Nine-month profit at a record

For the first nine months, OCBC's net profit rose 10% to a record S$6.24 billion. Non-interest income rose 19% to S$4.93 billion and made up 42% of total income, up from 38% a year earlier, while net interest income slipped 1% to S$6.80 billion. Wealth fees climbed 25% to a record S$1.33 billion. Return on equity for the period was 13.5%, up from 12.9%.

Group Chief Executive Tan Teck Long said in the release that the near-term outlook depends largely on how far energy prices ease, and that AI-related sectors continue to grow strongly. He said the bank is "well positioned to navigate uncertainties and tap the growth sectors." Reuters reported that OCBC is watching the conflict in the Middle East, energy markets and market conditions in Indonesia.

The results release did not announce a change to dividends or share buybacks. The next test is the full-year result, when investors will check whether loans grew at the low-double-digit pace the bank now expects and whether Great Eastern's investment income recovers.