Morningstar

Morningstar, Inc.

Equity Bottom-Up

In line with banks in the region and globally, narrow-moat rated Oversea-Chinese Banking Corp, or OCBC, and United Overseas Bank, or UOB, reported weaker fourth-quarter results, mainly driven by lower trading income and weaker fee and commission income. The lower fee and commission income were attributable to the wealth management division as investors stayed on the side lines in the quarter while loan-related fees also declined. Net profit for UOB fell 12% quarter on quarter while…

We are adding Oversea-Chinese Banking Corporation, or OCBC, to our Best Ideas List. The narrow-moat-rated bank is trading at a 15% discount to our fair value estimate of SGD 13.60, as the bank’s share price declined in line with wider emerging markets. A forecast dividend yield of 3.9% is also attractive. While trade concerns will likely result in slower loan growth for the bank, we believe this is priced in. Our forecast assumes mid-single-digit loan growth in the medium term. We expect net…

Narrow-moat-rated Oversea-Chinese Banking Corp, or OCBC, posted another solid quarterly result as expected. We believe the bank remains undervalued against a fair value estimate of SGD 13.60. Annualised return on equity for the third quarter was steady at 12.6% and we assume steady increases in the medium term. This is supported by stronger economic conditions with rising U.S. interest rates. This will flow through to improve net interest margins, or NIM, for the bank. This was reflected in this…

OCBC’s investor day highlighted the progress of the bank’s digital strategy and prospects going forward. The generally positive economic conditions underpinning income growth over the medium term allow the bank to maintain a consistent level of technology investments, in our view. Management expects the benefit to progressively flow through by 2023, targeting a cost/income ratio of 40% from the current level in the mid-40s. Similar to its peers, income is already benefiting from previous…

Narrow-moat Oversea-Chinese Banking Corporation, or OCBC, wrapped up a positive first-quarter earnings season for the Singapore banks with a reasonably strong quarter of its own. Net profit rose 29% on the year-ago period and 8% against the prior quarter.
The result has no impact on our thesis, and the bank is largely fairly valued relative to our unchanged fair value estimate of SGD 13.60, after a decline of almost 3% in its share price following the result. We believe the market is…

Singapore

Oversea-Chinese Banking Corporation Limited offers a comprehensive range of financial services.  The Company's services include deposit-taking, corporate, enterprise and personal lending, international trade financing, investment banking, private banking, treasury, stockbroking, insurance, credit cards, cash management, asset management and other financial and related services.

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