Oversea-Chinese Banking Corporation, Singapore’s second largest bank, saw revenue from wealth management related activities slide 2 per cent in 2011 compared to the previous year, due to lower insurance income, said the bank today.

Profit from the bank’s wealth management franchise, which comprises insurance, private banking, asset management, stockbroking and sales of wealth management products, fell to S$1.28 billion ($1 billion) said the bank in its full year results to December 31 2011. As a share of total revenue, wealth management contributed 23 per cent in 2011 compared to 25 per cent in 2010.

Results were positive from the group’s private banking franchise,Bank of Singapore, where assets under management soared 19 per cent during the year to S$42 billion ($32 billion) as of 31 December 2011. This growth was primarily due to net new money from wealthy clients which totalled around $6 billion, said chief executive Renato 'Bing' De Guzman, at an announcement in November. The bank did not break out wealth management or private banking results on a quarterly basis, only saying that wealth management revenue was “lower” for the quarter.

OCBC bought Dutch bank ING's Asia private banking business in October 2009 and rebranded it under the Bank of Singapore moniker. 

Profit Rises On Growing Demand For Loans

Meanwhile the bank’s parent companyOCBC posted an 18 per cent rise in profit over the fourth quarter of last year, off the back of strong demand for financing.

Net income in the three months to 31 December 2011 rose to S$594 million from S$505 million for the same period in the previous year.

For the fourth quarter, net interest income rose a fifth year-on-year and 6 per cent from the previous quarter to S$925 million, led by strong loan growth of 5 per cent. Net interest margin was 1.85 per cent, stable quarter-on-quarter and lower than the 1.96 per cent a year ago.

Operating expenses in the fourth quarter were maintained flat year-on-year at S$620 million. However for the full year operating expenses increased 8 per cent to S$2.4 billion for the year, largely attributable to higher staff costs, which rose 13 per cent to S$1.4 billion.

The increase in staff costs reflected a 6 per cent growth in staff strength to support expansion of the group’s franchise, salary increments, higher incentive compensation and sales commissions linked to stronger business volumes.

The cost-to-income ratio was 43.2 per cent for 2011, compared with 42.3 per cent in 2010.

A changing landscape

OCBC’s rival DBS Group also reported buoyant results last week as profit grew 7.8 per cent during the quarter to S$731 million, also bolstered by a swelling loan book. Experts say that the on-going turmoil in the Eurozone will increasingly mean fewer and smaller loans from Western banks. Asian banks will be well placed to take up the slack from their European peers. 

However, demand for loans may be slower this year in both DBS and OCBC’s home market, after the Singaporean government imposed an additional 10 per cent stamp duty tax on residential real estate bought by foreigners and corporates. The new measures came in on December 7.

Singapore property sales plunged to their lowest in two years in December 2011, with just 632 units sold in the final month of the year. However last month sales rebounded to almost triple the previous month, with 1,872 units snapped up, according to data from the Urban Redevelopment Authority. Local reports say that individual developers have been dropping prices and offering incentives to lure back buyers and offset the government’s curbs.