Broker Name and Date of Report

• Broker: CGS International Securities
• Date: October 15, 2024

3Q24 Financial Overview

OCBC is projected to report a net profit of S$1.9 billion for 3Q24, representing a slight decrease of 2% quarter-on-quarter (qoq) but a 5% increase year-on-year (yoy). The decline in qoq profit is attributed to the bank’s strategic deployment of funds into lower-yielding high-quality assets during 2Q24, which resulted in a modest stabilisation of net interest margin (NIM).

Net Interest Margin (NIM) and Loan Growth

OCBC’s NIM is expected to stabilize at 2.18% in 3Q24, with only a slight contraction of 2 basis points (bp) qoq. While loan growth is anticipated to remain flat, there are still opportunities in specific market segments that could provide some upward momentum in the coming quarters. The slight contraction in loan growth is largely attributed to the ongoing global economic uncertainties and cautious lending.

Wealth Management Momentum

Wealth management fee recovery is a crucial aspect of OCBC’s growth strategy. After a period of conservative deployment into high-quality assets, OCBC expects its wealth management clients to begin increasing their allocations to investment products. However, this recovery in wealth management fees may take some time to gain momentum, as market conditions will dictate the pace of client investments.

Treasury Income and Asset Quality

In 3Q24, OCBC’s treasury income, particularly non-customer-related sources, is expected to provide a potential upside to earnings. Positive surprises in this segment could contribute to overall profitability. The bank remains watchful of asset quality, particularly amid inflationary pressures and elevated interest rates, though no significant sectoral asset quality concerns have emerged. OCBC is not expecting major impairments in 3Q24.

Dividend Strategy and Capital Position

OCBC’s strong Common Equity Tier 1 (CET-1) ratio of around 16% as of 2Q24 remains a key strength for the bank. This robust capital position provides OCBC with flexibility to pursue mergers and acquisitions (M&A) or to cushion against any potential asset quality deterioration. Investors will likely focus on the bank’s capital management strategy, particularly its dividend plans, during the upcoming earnings briefing.

Risk Management and Outlook

OCBC’s management remains cautious about the macroeconomic environment, particularly regarding inflation and interest rates, and continues to focus on maintaining asset quality. However, the bank’s conservative approach in previous quarters positions it well to navigate these challenges, and its focus on growing wealth management and treasury income could yield positive results as market conditions improve.

This summary is based entirely on the information provided in the report dated October 15, 2024, by CGS International Securities.