{"id":17737,"date":"2024-09-06T07:00:30","date_gmt":"2024-09-05T23:00:30","guid":{"rendered":"https:\/\/www.smallcapasia.com\/?p=17737"},"modified":"2026-06-08T19:02:26","modified_gmt":"2026-06-08T11:02:26","slug":"oversea-chinese-banking-corp-steady-execution","status":"publish","type":"post","link":"https:\/\/www.smallcapasia.com\/zh-hans\/oversea-chinese-banking-corp-steady-execution\/","title":{"rendered":"Oversea-Chinese Banking Corp &#8211; Steady Execution"},"content":{"rendered":"<p><em>Excerpts from UOBKayHian report<\/em><\/p>\n<h2>Oversea-Chinese Banking Corporation (SGX: O39)<\/h2>\n<ul>\n<li>Oversea-Chinese Banking Corp (OCBC) delivered a near-record net profit of S$1,944m in 2Q24 (+14% yoy), supported by strong net trading income and lower credit costs.<\/li>\n<li>NPL formation was benign at S$108m. Loan-loss coverage improved 24ppt yoy and 9ppt qoq to 156%, the highest among the local banks.<\/li>\n<li>OCBC benefits from FDI inflows to ASEAN as multinational companies seek to diversify their supply chains. OCBC provides an attractive dividend yield of 5.9% for 2025.<\/li>\n<\/ul>\n<p>Maintain BUY. Target price: S$18.70.<\/p>\n<h2>Purchased government bonds to insulate against rate cuts<\/h2>\n<p>Oversea-Chinese Banking Corp (OCBC) reported a net profit of S$1,944m for 2Q24 (up 14% yoy but down 2% qoq), above our forecast of S$1,644m.\u00a0 NIM eased 7bp qoq to 2.20% in 2Q24 due to growth in lower-yielding high-quality assets.<\/p>\n<p>Average assets expanded 3% qoq (loan growth of 1% qoq plus the purchase of government bonds), OCBC has shifted its asset mix to prepare for an environment of lower interest rates.\u00a0Net interest income grew 1.7% yoy and was flat qoq.<\/p>\n<h2>Fees grew 8% yoy but receded 3% qoq in 2Q24<\/h2>\n<p>Contribution from wealth management increased 17% yoy but eased 7% qoq. OCBC saw an increase in customer activities across all wealth channels. OCBC attracted net new money inflow of S$6b in 2Q24. AUM increased by 2% yoy to S$279b.<\/p>\n<h2>Contributions from insurance normalised<\/h2>\n<p>Contributions from life and general insurance expanded 13% yoy to S$294m. Net trading income sustained growth at 14% yoy to S$356m, driven by record customer flows.<\/p>\n<h2>Improved cost efficiencies<\/h2>\n<p>Operating expenses increased 3% yoy in 2Q24. Staff costs increased by 3% yoy due to annual salary increments and higher headcount to support strategic initiatives.<\/p>\n<p>Cost-to-income ratio was low at 37.8%, reflecting stringent cost discipline. OCBC recognised integration costs of S$12m relating to the acquisition of PT Bank Commonwealth in Indonesia.<\/p>\n<h2>Stable asset quality led to lower credit costs<\/h2>\n<p>NPL formation was benign at S$108m in 2Q24. NPL ratio improved 0.1ppt qoq 0.9%. Total provisions were S$144m in 2Q24, down 15% qoq. There was a small write-back in general provisions of S$10m.<\/p>\n<p>Loan-loss coverage improved 24ppt yoy and 9ppt qoq to 156% due to lower NPLs. Its loan-loss coverage is the highest among the local banks.<\/p>\n<h2>Value creation from steady execution and delivering good results<\/h2>\n<p>OCBC achieved ROE of 14.2% in 2Q24. CET-1 CAR eased 0.7ppt qoq to 15.5% due to the payment of final FY23 dividend and higher risk-weighted assets. The board declared an interim dividend of 44 S cents (+10% yoy), representing a dividend payout ratio of 50%.<\/p>\n<h2>Maintain guidance<\/h2>\n<p>NIM is likely to hit the lower end of the guided 2.20-2.25% for 2024 given the interest rate outlook of two cuts for 2H24. Management expects a low single-digit loan growth. Credit costs are estimated at 20-25bp. ROE is expected to be 13-14%.<\/p>\n<h2>Valuation\/Recommendation<\/h2>\n<p>Maintain BUY. Our target price of S$18.70 is based on 1.40x 2025F P\/B, derived from the<br \/>\nGordon Growth Model (ROE: 12.6%, COE: 9.0%, growth: 0.0%).<\/p>\n<figure id=\"attachment_17738\" aria-describedby=\"caption-attachment-17738\" style=\"width: 1523px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/www.smallcapasia.com\/wp-content\/uploads\/2024\/08\/OCBC-share-price-chart.jpg\"><img fetchpriority=\"high\" decoding=\"async\" class=\"wp-image-17738 size-full\" src=\"https:\/\/www.smallcapasia.com\/wp-content\/uploads\/2024\/08\/OCBC-share-price-chart.jpg\" alt=\"Oversea-Chinese Banking Corporation share price chart\" width=\"1523\" height=\"485\" \/><\/a><figcaption id=\"caption-attachment-17738\" class=\"wp-caption-text\">Oversea-Chinese Banking Corporation share price chart<\/figcaption><\/figure>\n<p>You can find the full report<em> <a href=\"https:\/\/www.smallcapasia.com\/wp-content\/uploads\/2024\/08\/OCBC.pdf\">here<\/a><\/em> and the company website <em><a href=\"https:\/\/www.ocbc.com\/group\/investors\/index.page\" target=\"_blank\" rel=\"noopener noreferrer nofollow\">here<\/a>.\u00a0<\/em><\/p>\n<p>[thrive_leads id=&#8217;15712&#8242;]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Excerpts from UOBKayHian report Oversea-Chinese Banking Corporation (SGX: O39) Oversea-Chinese Banking Corp (OCBC) delivered a near-record net profit of S$1,944m in 2Q24 (+14% yoy), supported by strong net trading income and lower credit costs. NPL formation was benign at S$108m. Loan-loss coverage improved 24ppt yoy and 9ppt qoq to 156%, the highest among the local [&hellip;]<\/p>\n","protected":false},"author":36,"featured_media":17742,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[3052,3051],"tags":[881,1331,2719,2843,2879,2880],"class_list":["post-17737","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock-exchange-listed-companies-singapore","category-singapore","tag-singapore-stocks","tag-singapore-stocks-to-buy","tag-banking-stocks","tag-banking-stocks-singapore","tag-oversea-chinese-banking-corp","tag-oversea-chinese-banking-corp-share-price-chart"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts\/17737","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/users\/36"}],"replies":[{"embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/comments?post=17737"}],"version-history":[{"count":4,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts\/17737\/revisions"}],"predecessor-version":[{"id":17743,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts\/17737\/revisions\/17743"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/media\/17742"}],"wp:attachment":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/media?parent=17737"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/categories?post=17737"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/tags?post=17737"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}