OCBC Bank - RHB Invest 2024-05-13: Non-Interest Income Shines ~ Can This Be Sustained?

• Still NEUTRAL on OCBC (SGX:O39) with new target price of S$14.80 (up from S$13.90), 5% upside from the current OCBC share price. OCBC has launched a S$1.4bn offer to acquire the remaining 11.6% stake in Great Eastern (SGX:G07). If successful, the impact will not be too significant on earnings or capital, but there could be capital management opportunities.

1Q24 results were a beat on better-than-expected non-II & credit cost tracking below estimates.

• - Read this at SGinvestors.io -
• - Read this at SGinvestors.io -

Highlights of OCBC's results:

OCBC's non-interest income (+17% y-o-y; +47% q-o-q) was a standout in 1Q24 with all cylinders firing.

• Treasury income surged 31% y-o-y (+60% q-o-q) on improved customer and non-customer flow income, while insurance contribution jumped 21% y-o-y (+228% q-o-q).
• Fees rose by a more modest 6% y-o-y (+4% q-o-q), mainly from wealth.
• OCBC's 1Q24 net-interest income was up 4% y-o-y (-1% q-o-q) on asset growth but NIM eased 3bps y-o-y (-2bps q-o-q) on higher funding cost. Loan growth got off to a decent start (+2% y-o-y; +1% q-o-q) while deposits rose 1% y-o-y/+2% q-o-q.
• Operating expenses growth was in line with operating income growth, at 8% y-o-y (+3% q-o-q) while credit cost stayed low at 16bps (1Q23: 12bps; 4Q21: 21bps) despite a slight uptick in NPLs q-o-q (+8% q-o-q; -6% y-o-y).

Highlights of OCBC's briefing:

No changes to guidance, but OCBC thinks 2024 ROE could land at the upper end of the 13-14% guided range.

• Read more at SGinvestors.io.

Singapore Research RHB Securities Research | https://www.rhbgroup.com/ 2024-05-13 SGinvestors.io

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