OCBC Bank - Credit Cost Hit By Supply Chain Disruptions
- OCBC (SGX:O39)’s 4Q21 net profit of S$973m (-21% q-o-q, -14% y-o-y) was below our/consensus S$1.19bn/S$1.13bn estimates by 14%/18%. The miss was due to heftier 44bp credit costs, above the 20bp we expected.
- NII rose 2% q-o-q as NIM stabilised at 1.52%. Soft wealth and treasury income contributed to weaker non-II, causing PPOP to fall 8% q-o-q and 7% y-o-y.
- OCBC declared final dividend of S$0.28 in 4Q21, bringing FY21 dividend to S$0.53 and payout ratio to 49% (FY20: 32 cents). This was slightly higher than the S$0.50 dividend we expected in FY21.
- OCBC maintains a progressive and sustainable dividend policy with a targeted payout ratio of ~40-50%, although the decision on payout would largely be based on maintaining an absolute number rather than ratio (FY21: S$53cents, 49% payout). OCBC's CET1 stayed robust at 15.5% in 4Q21; there are no M&A discussions ongoing. We raise FY22F dividend estimates 50% payout) as we expect ~11% EPS growth and surplus capital.
- Reiterate ADD call on OCBC with GGM-based target price of S$14.20.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2022-02-23 2022-02-23
Previous report by CGS-CIMB:
2022-01-24 OCBC - Amplified NIM Expansion Ahead
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