UPDATE 1-Singapore's OCBC surprises with Q3 profit rise but outlook challenging

* Q3 net profit S$943 mln; consensus S$834 mln

* Non-interest income up 25 pct on insurance, wealth units

* Bad debt charges up almost 11 pct (Adds insurance gains, outlook)

SINGAPORE, Oct 27 (Reuters) - Singapore’s Oversea-Chinese Banking Corp beat estimates with a 5 percent rise in quarterly profit, helped by gains from its insurance and wealth management units, although it warned of a challenging operating environment.

The city-state’s lenders must contend with growing risks to earnings as credit woes deepen for the offshore services sector, which has been hit hard by a drop-off in orders due to a near-two year rout in oil prices until early this year.

Net profit for Singapore’s No. 2 bank came in at S$943 million ($678 million) in the third quarter as its insurance and wealth management business powered a 25 percent climb in non-interest income.

The result handily beat expectations for a decline in profit with the average estimate at S$834 million from five analysts polled by Reuters.

But provisions for bad debt jumped almost 11 percent to S$166 million, while net interest income dropped 6 percent due to lower loan volumes and a weaker net interest margin.

“We continue to keep a firm grip on cost, maintain strong liquidity and capital, and ensure prudent levels of provisioning,” Chief Executive Samuel Tsien said in a statement.

Offshore firms that have said they are struggling with debt payments include oilfield services company Swiber Holdings , which was placed under judicial management this month.

Signs of weakness in a trade-dependent economy and the domestic property market are also further squeezing loan demand. ($1 = 1.3911 Singapore dollars) (Reporting by Saeed Azhar; Editing by Edwina Gibbs)