- OCBC’s 1Q25 earnings beat Street/MIBG expectations. Trading, insurance delivered most of the surprise. However, uncertain markets amidst heightened US policy flip-flops may impact delivery from these segments going forward. We think this also increases risks of guidance downgrades in 2H25, despite OCBC's management keeping to their pre-Liberation Day targets so far.
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Good 1Q25 momentum.
- OCBC's non-interest income saw strong expansion rising +36% q-o-q. Trading came in significantly above expectations rising +31% q-o-q. Customer flows made up 77% (vs. 74% 1Q24). Whether increased client activity is a structural shift or an example of front loading ahead of tariff uncertainty needs to be watched going forward.
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But forward visibility limited.
- NIMs fell massively by -11bps q-o-q. Management claims this was due to rapidly contracting loan yields given 2/3 of the loan book is denominated in currencies that are sensitive to falling rates.
- OCBC has also rapidly built up liquidity. Deposits increased +9% y-o-y (loans +7% y-o-y), and this may have limited options to price down funding costs. However, in subsequent quarters the excess liquidity could be deployed to high quality, low yield instruments to bolster NII and also slow NIM contraction.
- Stronger trading and insurance has us raising 2025-27E EPS forecast for OCBC by 6-11%.
Unchanged, positive guidance. Downside risks?
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