OCBC (SGX:O39)'s FY25 core-earnings were behind MIBG expectations.
Operationally, OCBC is well positioned to benefit from strong domestic and regional growth drivers. Its new ‘Next Frontier’ strategy positions the Group towards ASEAN growth yet lacks visibility on deliverable targets, while the probability of excess capital returns to shareholders is falling. This would lower medium-term yields vs FY25.
Stable operational outlook
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4Q insurance income was 2.2x y-o-y. Wealth fees +26% y-o-y – the fastest among peers, partly thanks to One Group synergies delivering.
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‘Next Frontier’ strategy is light on targets
OCBC has launched a new corporate strategy focused on capturing Asia flows, deepening core-market franchises (twin hubs of SG, HK & domestic markets of MY, ID), advancing AI, Digital and Data (ADD) capabilities and supporting green transition.
We note the earlier championing of Greater Bay-led growth seems to have become secondary in favour of capturing North Asia to ASEAN flows. The strategy is aimed at lower capital intensive, high growth segments. A whole-of-wealth proposition to capture synergies across banking, Bank of Singapore and Great Eastern is a key initiative. But it lacks quantifiable deliverables for now.
Guidance of ‘stable to improving ROE’ is vague, while spending on tech infrastructure to execute ADD is likely to raise opex. We increase FY26-27E expenses by 1-4%.
Dividend yield set to fall.
Read more at SGinvestors.io.
Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
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