OCBC (SGX:O39) recorded 4Q23 net profit of S$1.62bn missed our/Bloomberg consensus estimates by 6%/8%. The miss came mainly from weaker-than-expected insurance (-60% q-o-q, -12% y-o-y) income – this was mainly attributable to higher insurance claims. Credit costs were also slightly higher than expected at 25bp in 4Q23 (calculated, vs our expected 20bp).
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NIM was a bright spot
Key positives – still some NIM expansion in 4Q23 of +2bp q-o-q to 2.29%. This comes against the NIM contraction recorded at peers. Nonetheless, NII rose only +0.2% q-o-q.
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As with peers, OCBC will be extending one-off support to 14,000 junior colleagues to cope with rising living costs. This amounted to S$9m in staff cost which was included in FY23 opex.
OCBC's FY24 targets
ROE of 13-14% (vs. FY23’s ~14% target),
NIM in the range of 2.2-2.25% (vs. FY23’s 2.28%),
low single-digit loan growth (vs. FY23’s +1%),
credit costs of 20-25bp (vs. FY23’s 20bp), and
50% dividend payout ratio target (vs. FY23’s 53%).
Focusing on working capital accounts to moderate funding costs
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Above is an excerpt from a research report by CGSI Research. Clients of CGS International may access the full PDF report @ https://itrade.cgsi.com.sg/.
