OCBC Bank - RHB Invest 2023-08-07: Charting A Path Towards Sustaining Higher ROE

• Stay NEUTRAL on OCBC Bank with new S$13.70 target price from S$13.20, 6% upside from the current OCBC's share price with ~6% FY24F yield.
• - Read this at SGinvestors.io -
• While positive, we think China’s macroeconomic softness and net-interest margin (NIM) headwinds in the near term will likely cap the performance of OCBC's share price.

OCBC's 1H23 results are in line

• - Read this at SGinvestors.io -
• An interim dividend of S$0.40 (vs 1H22: S$0.28) was declared, which translates to a payout ratio of 50% and in line with its guidance. See OCBC's dividend date.
• 2Q23 net profit fell 10% q-o-q due to higher loan allowances (+116% q-o-q, +194% y-o-y) as OCBC booked in higher general provisions for non-impaired assets. Part of this is for its commercial real estate (CRE) exposure, despite the portfolio holding up. That aside, pre-impairment operating profit (PIOP) rose 1% q-o-q on higher non-interest income (non-II) from insurance and trading, partly offset by a 4bps q-o-q NIM squeeze and negative JAWS.
• Operating expenses rose 7% q-o-q while cost-income ratio (CIR) grew 140bps q-o-q to 38.5%, albeit below the 40-45% target.

Loan growth ticked up.

• Read more at SGinvestors.io.

Singapore Research RHB Securities Research | https://www.rhbgroup.com/ 2023-08-07 SGinvestors.io

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