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Oversea-Chinese Banking Corp Ltd O39 Stock Quote

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Morningstar‘s Stock Analysis O39

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Sharp Increase in Net Interest Margin Lifts OCBC Q2 Result

Michael Wu, CAIA Senior Equity Analyst

Analyst Note

| Michael Wu, CAIA |

OCBC reported a strong second-quarter result with the key positive being a sharp increase in net interest margin, underpinning a 13% quarter-on-quarter increase in net interest income. Loan growth of 1% was also supportive of net interest income growth. Overall net profit in the second quarter increased by 9% to SGD 1.48 billion. Asset quality improved as nonperforming loans/total loans declined to 1.3% from 1.4% last quarter, mainly due to recovery and upgrades in Malaysia and Indonesia. Positively, new nonperforming asset formation was also slower than last quarter. We adjusted our forecasts to factor in slower fee growth and weaker loan growth of 5%, offset by operating expense increasing at a slower pace. Our fair value estimate of SGD 16 per share is unchanged. While the common equity Tier 1 ratio of 14.9% remains above the bank’s comfort level of 12.5%-13.5% and continues to be a drag on the bank’s return on equity, a slight decrease in the ratio was due to higher risk weighted assets from loan growth, reflecting a utilization of capital for growth. The excess capital does provide room for further dividend growth in the second half, in our view. The first-half dividend of SGD 0.28 per share was up from SGD 0.25 from last year and our full-year dividend forecast is increased slightly to SGD 0.59.

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Key Statistics O39

Company Profile O39

Business Description

Based in Singapore, Oversea-Chinese Banking Corporation is a banking institution providing consumer and corporate banking and treasury services throughout Asia. OCBC Bank remains the longest-established Singapore bank, founded by the merger of three local banks in 1932. The group's operations include consumer banking; wealth management and private banking in the Bank of Singapore; small to midsize enterprise and business banking; corporate and institutional banking; and insurance through majority owned Great Eastern.

63 Chulia Street, No. 10-00 OCBC Centre East
Singapore, 049514, Singapore
T +65 63187222
Industry Banks - Regional
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Stock Type
Employees 30,800