Oversea-Chinese Banking Corporation (OCBC) - UOB Kay Hian 2018-09-26: Redefining Customer Engagement Through Digital Transformation


Oversea-Chinese Banking Corporation (OCBC) - Redefining Customer Engagement Through Digital Transformation

  • OCBC wants digital transformation to permeate across its commercial banking, wealth management and insurance businesses, instead of setting up a separate digital bank.
  • It will leverage on data analytics and AI to provide customer service and generate new sales. Its SME customers are “born digital”, having signed up for digital banking from day one. It has also started deploying smart ATMs to provide frequent services performed by bank tellers.
  • Maintain BUY. Target price: S$13.68.


  • We attended Oversea-Chinese Banking Corporation’s (OCBC) Investor Day 2018, which showcased the bank’s digital transformation initiatives.

~ SGinvestors.io ~ Where SG investors share

Setting quantitative targets.

  • OCBC target to increase the proportion of digital customers to 60% for Consumer Banking (2014: 36%, 1H18: 48%) and 70% for SME Banking (2014: 36%, 1H18: 60%). 
  • Digital customers generate twoInternet or mobile banking at least once in three months.
  • Over the course of its digital journey, OCBC has reduced the number of branches by 14% in 1H18 compared with that of 2012. It has cut teller headcount by 15% over the past five years. OCBC targets to improve cost-to-income ratio to 40% by 2023 (1H18: 43%).

Digital transformation for Consumer Banking:

Intelligent usage of data analytics and AI.

  • OCBC will leverage on data analytics and artificial intelligence (AI) to gain customer insights, so as to create sales opportunities and make real-time contextual offers. Its 24x7 virtual chat-bot Emma provides customer service and handles queries. 
  • OCBC targets to have 75% of customer service requests to be AI-assisted, resulting in faster turnaround.

Building eco-systems.

  • OCBC plans to build eco-systems to deepen customer engagement. ~ S G investors . io ~ Where SG investors shareIts OneAdvisor app guides customers through their home purchase journey. The one-stop platform has 7,000 property agents on board and has secured S$35m of mortgages. 
  • OCBC is also developing eco-systems for personalised travel journeys, alternative credit and predictive underwriting.

Digital transformation for SME Banking:

SME customers are digitally savvy.

  • OCBC’s business banking app provides 67% of transactions for its SME customers are already done digitally.
  • OCBC has a market share of 40% for bank accounts of newly-incorporated businesses in Singapore. Management sees growth momentum for SME businesses in Hong Kong and Indonesia.

Business owner dashboard.

  • OCBC provides SME customers with a smart business dashboard to track key performance indicators, including sales performance, inventory levels and cash flow. The platform assists time-starved SME owners in monitoring and managing their businesses.

Digital push at branches.

  • OCBC plans to install ATMs.
  • By 2019, smart ATMs will be able to handle instant cheque encashment and dispense up to S$200,000 in cash in one transaction. Half of its bank tellers would be upskilled to become branch digital ambassadors or perform other advisory roles.

Extending digital transformation regionally.

  • OCBC will establish regional analytics teams in its core markets. It will build a regional IT Hub at Shenzhen in the Greater Bay Area. It has set up a dedicated digital transformation team in Indonesia and will scale up digital transformation in Malaysia. 
  • Management sees the greatest potential for Indonesia as OCBC NISP is the 9th largest commercial bank with 330 branches.


OCBC adopts a different approach.

  • OCBC aims to digitally transform the entire organisation, permeating its commercial banking, wealth management and insurance businesses. Unlike its peers, OCBC does not intend to set up a separate digital banking entity.
  • Management believes in collaborating with fintech companies, such as specialist in artificial intelligence CogniCor. It also collaborates with many partners, such as StarHub, Robinson’s, NTUC Fairprice, AirAsia, Millennium Hotels & Resorts and Singapore Medical Group.


  • We maintain our existing earnings forecasts.


  • Maintain BUY. Our target price of S$13.68 is based on 1.42x 2018F P/B, which is derived from the Gordon Growth Model (ROE: 11.1%, COE: 8.25% (Beta: 1.1x) and Growth: 1.5%).


  • Divestment of its 33.33% stake in Hong Kong Life Insurance for HK$2.
  • Non-interest income from wealth management, fund management and life insurance will expand in tandem with growing affluence in Asia.

Jonathan Koh CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2018-09-26
SGX Stock Analyst Report BUY Maintain BUY 13.680 Same 13.680