OCBC's profits predicted to climb 11% to S$660m in 3Q

Expected to beat market's forecast.

According to CIMB, it expects OCBC to report 3Q13 profit of S$660m (+11% qoq), above consensus expectations of S$626m.

Here's more from CIMB:

We are more optimistic than the market as we believe that 2Q13 earnings (S$597m) were overly depressed by the lack of earnings contribution from GEH due to the MTM losses of the non-par funds. With bond markets stable in 3Q13, we believe that GEH will show qoq earnings recovery.

This is a key driver of our expected 11% qoq earnings growth for OCBC. Wealth management fee growth, which registered some momentum in earlier quarters, is likely to remain robust.

While the drag from ‘disappearing’ insurance earnings will fade, the new negative is that OCBC’s Indonesia will likely see lower translated earnings.

OCBC does have the highest Indonesian exposure amongst the trio of banks. Although Bank NISP is known to be a high-quality SME bank (one of the few Indonesian banks that emerged unscathed from the Asian Crisis period) we reckon that there are valid concerns about Indonesia’s ongoing deposit competition and likely NPL deterioration as inflation materialises.