* Net profit S$505 mln Consensus S$556 mln

  * Says optimistic about 2011 due to Asia's growth

  * Q4 operating expenses up 33 pct, staff costs rise

  * OCBC shares up 0.6 pct at midday, underperformed in 2011

  SINGAPORE, Feb 18 (Reuters) - Oversea-Chinese Banking Corp , Singapore's second-biggest lender, missed market forecasts for its quarterly profit as higher costs offset strong loan income and falling bad debts.

  The bank said operating expenses grew 33 percent in the fourth-quarter due to higher staff costs, consolidation of its private bank and a one-time charge linked to the merger of its Indonesian units.

  The result trailed DBS , Southeast Asia's biggest bank, which last week announced a 38 percent rise in quarterly profit on falling bad-debt charges and higher trading income, beating expectations.

  OCBC said it is optimistic about 2011 despite risks from higher commodity prices.

  " While mindful of commodity price increases and other factors causing inflationary pressures, on balance, we are optimistic for the outlook for 2011 given the healthy economic growth prospects in Asia," CEO David Conner said in a statement.

  OCBC posted a net profit of S$505 million ($396 million) in October-December, compared to S$502 million in the same period a year earlier.

  That compared with an average forecast of S$556 million, according to six analysts polled by Reuters.

  OCBC, which completed the purchase of ING's Asian private banking unit in early 2010, has benefitted from the recovery in Asian markets and an economic rebound which has encouraged the region's rich to tap wealth management services.

  OCBC's net interest income rose 12 percent to S$769 million as loans grew 29 percent, which overcame a fall in interest rate margins, versus DBS's 16 percent loan growth. United Overseas Bank will report earnings on Feb 25.

  Fee and commission income climbed 33 percent to S$256 million, leading non-interest income higher even though contributions from its insurance unit Great Eastern declined as the insurer's profit slumped.

  As of Thursday, shares of OCBC had fallen 3.3 percent since the start of the year, underperforming a 1.8 percent rise in DBS shares while shares of UOB have risen about 2.9 percent. OCBC shares gained 9 percent in 2010 when it outperformed rivals. ($1 = 1.276 Singapore Dollars) (Reporting by Saeed Azhar Editing by Kim Coghill)