OCBC's pre-provision profits slipped 4-5% in 1Q13

Trading gains also dipped.

According to Barclays, OCBC reported 1Q13 net profit of S$696mn, +5% q/q, -16% y/y and 3% above our estimates, due entirely, Barclays believes, to lower-than-expected credit costs (6bps).

Revenue and pre-provision profits declined 4-5% q/q, as net interest margin compressed by 6bps q/q to 1.64% (lower than estimate of 1.69%), trading gains declined and Great Eastern's (an 87% life insurance subsidiary) mark-to-market investment gains fell.

Here's more from Barclays:

We expect margins to trend lower to 1.59% in FY13, in contrast to management's guidance for stable margins (1.64%). Foreign banks are driving loan and deposit pricing competition, returns on surplus funds are low and the mortgage back-book will continue to be repriced down.

We cut our FY13-15E EPS forecasts by up to 4%, reflecting c8-10bp lower margins, but offset partially by lower credit costs.

Management has not disclosed the fully loaded Basel III core Tier 1 ratio, but we estimate that it is 11.4%, much lower than the 16.2% reported under transitional rules, and lower than DBS's 11.6% and UOB's 12.6% on our estimates. OCBC's 87% stake in Great Eastern Holdings, preference shares and AFS reserves should be fully deducted against CET1 on full Basel III implementation.

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