This is what dragged down OCBC's 2Q13 profit by 14%

Unrealized MTM losses are to blame.

According to Maybank Kim Eng, OCBC’s 2Q13 results were below expectation at 44% of their full-year forecast, but generally within consensus. The variance was due primarily to MTM losses for the insurance division.

Here's more from Maybank Kim Eng:

Expectations are for the yield curve to steepen further and earnings volatility is likely to persist awhile longer for the group. Our earnings are cut by about 11-12% for FY13-15. 

2Q13 net profit declined 8% YoY and 14% QoQ, dragged down primarily by unrealized MTM losses in Great Eastern’s non-par fund. Positively, loan growth was robust at 15% YoY and QoQ growth of 7% was ahead of the 3-5% growth registered by its peers. As was the case with its peers, NIMs were stable QoQ.

GE- Unrealized MTM losses on the company’s non-participating fund were a setback to earnings, but underlying trends are still strong. Total weighted new sales grew jumped 34% YoY while new business embedded valued rose 20% YoY. Operating profit alone rose 32% YoY.

Guidance, however, more subdued. Unlike its peers, however, management is cautious of loan growth into 2H13 and is maintaining its guidance of sub-10% to low teens loan growth for the year, vs low to mid teens for its peers, citing restricted loan growth opportunities domestically. NIM guidance, however, is similar to peers ie stable for the rest of the year.

Mortgage applications meanwhile are about 20% lower following recent property restrictions. Owner occupied mortgages make up 70% of its loan portfolio vs 75% for UOB and 95% for DBS.

Both OCBC Malaysia and OCBC NISP contributed positively to group earnings, with 2Q13 net profit up YoY and QoQ on strong loan growth of 16% YoY and 19% YoY respectively.