UPDATE 1-OCBC Q4 profit down 30 pct as bad debt spikes

* Q4 net S$301 mln vs expectations of S$381 mln

* Bad debt charges rise to S$243 mln vs S$13 mln yr ago

* says to tightly manage expenses, recession to last all
year
(adds detail, quotes)

By Saeed Azhar

SINGAPORE, Feb 18 (Reuters) - Singapore's Oversea-Chinese
Banking Corp (OCBC.SI) posted a bigger-than-expected 30 percent
drop in quarterly profit as a slumping economy boosted bad debt
charges.

The smallest of three Singapore banks warned on Wednesday
that 2009 will be challenging as a recession is expected to
last throughout the year.

OCBC, like its Asian peers, largely escaped the credit
storm that badly damaged Western banks, but is now threatened
by rising bad loans due to an economic downturn in Asia and
lower fees from crippled capital markets.

"Clearly asset quality is deteriorating and we saw that in
the big jump in provisions," said David Lum, a banking analyst
at Daiwa Institute of Research in Singapore. "That is
something, like all other banks, they will have to tackle."

OCBC CEO David Conner said in a statement that the bank
plans to manage its expenses more tightly and its risk
management will be on high alert given the uncertain outlook.

Net profit for October-December fell to S$301 million ($197
million) from S$428 million a year ago. Analysts had, on
average, forecast a net profit of S$381 million, according to
five forecasts compiled by Reuters.

For a graphic of the result, please click:
here

BAD DEBT

Bad debt charges surged to S$243 million in the
fourth-quarter from S$13 million a year earlier, led by bad
loans.

DBS Group (DBSM.SI), Singapore's biggest bank, reported
last week a bigger-than-expected 40 percent drop in
October-December profit, its worst results in three years, also
hurt by an increase in bad debt provisions.

OCBC's net interest income rose 28 percent from a year ago
to S$783 million in the quarter, helped by 12 percent growth in
loans and higher interest rate margins.

But non-interest income, which includes commissions and
fees on investment products such as mutual funds, dropped 44
percent to S$259 million, the bank said.

OCBC also saw a drop in contributions from its insurance
arm Great Eastern (GELA.SI), which reported a 47 percent drop
in net profit in the fourth quarter. OCBC owns 87 percent of
Great Eastern.

OCBC shares were down 0.4 percent at S$4.88 by midsession.
The shares are down around 2 percent this year after dropping
40 percent in 2008.

United Overseas Bank (UOBH.SI) has fallen about 16 percent
this year and DBS (DBSM.SI) is down 4.5 percent. The benchmark
Straits Times Index .FTSTI has fallen 7 percent so far this
year.
(Editing by Neil Chatterjee)