OCBC (SGX:O39)
UOB (SGX:U11)
OCBC & UOB Earnings Highlights - A Decent Showing; Dividends Reinstated
- UOB’s higher dividend payout (50%) set it apart from OCBC (42%) in the 2Q21 earnings. Both reported net profit in line with our estimates and consensus.
- UOB reported flattish q-o-q PPOP vs -19% q-o-q for OCBC given the latter’s higher base in 1Q21. CET-1 for OCBC was stronger at 16.4%.
- Credit cost (calculated) also was higher in OCBC at 34bp vs UOB’s 24bp. Reiterate OVERWEIGHT on the banks sector. Our preferred pick is UOB.
UOB’s 2Q21 earnings highlights
- UOB (SGX:U11)’s 2Q21 net profit of S$1.0bn (flat q-o-q/+43% y-o-y) was in line with our S$993m estimate and above consensus expectation by 6%. 1H21 formed 50%/52% of our and consensus forecasts. UOB declared interim dividend of S$0.60 in 1H21 – above our expectations of S$0.55. We forecast total dividend of S$1.10 for UOB in FY21F (FY20: S$0.78).
- UOB's fee income eased 7% q-o-q from an exceptionally high base in 1Q21 but remained strong overall. Fees were supported by strong wealth management fees (eased 16% q-o-q in 2Q21) and sustained momentum in loan and trade-related fees. Trading and investment income dipped 26% q-o-q to S$182m, from a high base in 1Q21.
- UOB's NIMs eased 1bp q-o-q to 1.56% in 2Q21 (1Q21: 1.57%). Nonetheless, NII rose 3% q-o-q as loan growth rebounded +2% q-o-q in 2Q21 (1Q21: +5.8% q-o-q). These came mainly from corporate loans in Singapore and China. LDR held steady at 87% in 2Q21 (1Q21: 87%).
- Opex was well contained with CTI of 43.7% in 2Q21. PPOP was 3% lower q-o-q on the back of weaker non-II. Impairment provisions were S$182m (24bp) in 2Q21 (1Q21: S$201m or 29bp); these comprised 17bp SP and 7bp GP, in line with management’s (previous) guidance of a base case of 30bp in FY21F credit costs.
- CET 1: 14.2% in 2Q21 (1Q21: 14.3%). ROE: 10.1% in 2Q21 (1Q21: 10.2%, FY20: 7.4%).
- UOB's management guided for
- high single-digit loan growth,
- double-digit non-II growth,
- stable CTI,
- lower credit cost of below 25bp (revised lower from 30bp previously), and
- resumption of 50% dividend payout.
- See
OCBC’s 2Q21 earnings highlights
- OCBC (SGX:O39)'s 2Q21 net profit of S$1.16bn (-23% q-o-q/+59% y-o-y) was also in line with our S$1.15bn estimate and consensus. OCBC declared dividend of S$0.25 for 1H21 – this was in line with our estimate. We forecast total dividend of S$0.50 from OCBC in FY21F.
- NIMs rose 2bp q-o-q to 1.58% - this was a surprise. As a result, NII edged up 1% q-o-q as loan growth stayed sluggish at +1.4% q-o-q in 2Q21 (1Q21: +1.4%).
- OCBC's fee income remained relatively strong in 2Q21, although it eased 4% q-o-q from the high base in 1Q21. Wealth management fees stayed solid at S$288m (+28% q-o-q/+10% y-o-y). Other fee income drivers held steady q-o-q. Trading income declined 36% q-o-q (-36% y-o-y) to S$249m in 2Q21 due to lower MTM gains from Great Eastern Holdings (SGX:G07) on the back of less favourable market conditions.
- On balance, PPOP fell 19% q-o-q (-6% y-o-y) on the back of the weaker treasury income. Although opex growth was contained (flattish q-o-q and y-o-y), CTI rose to 44.3% in 2Q21 (1Q21: 39.4%, FY20: 43.8%) on the back of stronger revenue growth.
- OCBC set aside impairment provisions of S$232m in 2Q21 (34bp of (calculated) credit costs). These comprised 19bp SPs and 15bp GPs.
- See
Andrea CHOONG
CGS-CIMB Research
|
LIM Siew Khee
CGS-CIMB Research
|
https://www.cgs-cimb.com
2021-08-04
SGX Stock
Analyst Report
13.750
SAME
13.750
