Oversea-Chinese Banking Corp (OCBC) 3Q21 - UOB Kay Hian 2021-11-05: Pick-up In Loan & Deposit Growth

OVERSEA-CHINESE BANKING CORP (SGX:O39) | SGinvestors.io OVERSEA-CHINESE BANKING CORP (SGX:O39)

Oversea-Chinese Banking Corp (OCBC) 3Q21 - Pick-up In Loan & Deposit Growth

  • OCBC's earnings grew 19% y-o-y in 3Q21 and were slightly above our forecast. NIM was dragged lower by one-off factors, such as interest reversals from downgrades of secured consumer loans in Malaysia and lower gapping income. Loan growth has picked up in 2H21 and should sustain into 2022. Management guided high single-digit loan growth for 2022.
  • OCBC provides attractive dividend yield of 4.2% for 2021 and 4.7% for 2022. P/B is low at 1.0x. Maintain BUY.



OCBC'S 3Q21 RESULTS

  • OCBC (SGX:O39) reported net profit of S$1,224m for 3Q21 (+19.1% y-o-y), slightly above our forecast of S$1,163m.
  • Pick-up in loan and deposit growth. Loans expanded 6% y-o-y and 4% q-o-q, led by Singapore (+4.5% q-o-q) and Greater China (+4.3% q-o-q). The pick-up was broad-based across corporate and consumer loans. Deposits grew 8% y-o-y, driven by expansion of 13% y-o-y for current and savings accounts (CASA) deposits.
  • NIM compression worsened by one-off factors. NIM compressed by 2bp y-o-y and 6bp q-o-q to 1.52% due to the decline in asset yields (competition to serve large high-grade corporations), interest reversals from downgrades of secured consumer loans to non-performing loans in Malaysia and lower gapping income.
  • Fee income grew 14% y-o-y, driven by higher volume of customer transactions and business activities. Loans/trade-related fees expanded 6% q-o-q. Wealth management fees increased 18% y-o-y and 3% q-o-q. Bank of Singapore's assets under management (AUM) expanded 6% y-o-y to US$123b with continued net new money inflows.
  • Bank of Ningbo performed well as seen by growth from associates of 33% y-o-y.

Insurance and treasury continue to grow.

  • Net trading income was costs moderated to 21bp in 3Q21, receding from 30bp in 2Q21.


STOCK IMPACT

  • Anticipating stellar loan growth in 2022. Management guided high green and sustainable finance, which has surpassed its goal of S$25b by 2025. It aims to increase double lending to SMEs to S$3b by end-21.


VALUATION/RECOMMENDATION






Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-11-05
SGX Stock Analyst Report BUY MAINTAIN BUY 15.350 DOWN 15.650



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