OCBC and Other Banks Analysis: Achieving FY24F Targets and Beyond

Broker: CGS International

Date: November 8, 2024

OCBC On Track to Meet FY24F Targets

OCBC is well-positioned to achieve its FY24F targets, including a net interest margin (NIM) of approximately 2.2% and a return on equity (ROE) over 14%. The bank’s strategy of repositioning its balance sheet to maintain net interest income (NII) through cash flow hedges and running down its fixed deposit base is expected to sustain topline growth. Despite potential NIM compression in the short term, OCBC’s management remains optimistic about achieving incremental revenue targets.

Expectations of NIM Compression

OCBC experienced a 2 basis points (bp) quarter-on-quarter (qoq) NIM decline in 3Q24 due to the deployment of liquidity into high-quality but lower-yielding assets. While some NIM compression is anticipated in 4Q24F, stabilization is expected thereafter, given the bank’s exit NIM of 2.16% at the end of 3Q24.

Setting Aside Pre-emptive Provisions for Hong Kong Portfolio

In 3Q24, OCBC set aside pre-emptive general provisions of approximately 17bp for changes in the credit profile of watchlist accounts in Hong Kong, driven by economic headwinds and a weak real estate market. Despite the downgrade of real estate exposure, OCBC’s overall credit costs for FY24F are expected to remain around 20bp.

Shareholder Returns and Excess Capital

OCBC prefers dividends over share buybacks for shareholder returns. With an estimated S\$2.5 billion in excess capital, the bank could potentially return approximately S\$0.55 per share in dividends. The target price (TP) has been raised to S\$17.70, reflecting fewer anticipated US Federal Reserve rate cuts and a progressive recovery in wealth management fees.

DBS Group: A Conservative Hold

DBS Group’s current market position warrants a Hold rating. With a target price of S\$43.00, the bank’s earnings are expected to grow modestly over the next few years. The bank’s P/BV (price-to-book value) ratios for CY24F, CY25F, and CY26F are 1.85, 1.74, and 1.66, respectively. DBS Group’s return on equity (ROE) is forecasted at 18.7%, 16.5%, and 15.3% for the same periods.

Dividend Yield and Market Position

DBS Group’s dividend yield is projected to be between 5.2% and 6.2% over the next three years. The bank’s conservative approach and strong market position make it a stable investment, albeit with limited upside potential.

United Overseas Bank (UOB): A Strong Add

UOB is rated as an Add with a target price of S\$39.50. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 1.21, 1.13, and 1.05, respectively. UOB’s ROE is expected to be around 13.4%, 13.0%, and 12.8% for the corresponding periods.

Growth Prospects and Dividend Yield

UOB’s earnings are anticipated to grow significantly, with a projected dividend yield of 5.2% over the next three years. The bank’s strong fundamentals and growth prospects make it an attractive investment.

Bank Central Asia (BBCA): A High Performer

Bank Central Asia (BBCA) is rated as an Add with a target price of 11,800 IDR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 4.77, 4.38, and 4.02, respectively. BBCA’s ROE is forecasted at 22.0%, 21.6%, and 21.5% for the same periods.

Impressive Growth and Dividend Yield

BBCA’s impressive earnings growth and stable dividend yield of around 3.3% make it a high performer in the sector. The bank’s strong market position and consistent performance are key drivers of its valuation.

Bank Mandiri (BMRI): A Solid Add

Bank Mandiri is rated as an Add with a target price of 8,000 IDR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 2.07, 1.89, and 1.72, respectively. BMRI’s ROE is expected to be around 20.8%, 20.7%, and 21.0% for the corresponding periods.

Growth and Dividend Yield

BMRI’s strong earnings growth and dividend yield of around 7.0% make it an attractive investment. The bank’s solid fundamentals and growth prospects contribute to its positive outlook.

Bank Rakyat Indonesia (BBRI): A Reliable Add

Bank Rakyat Indonesia is rated as an Add with a target price of 6,000 IDR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 2.08, 1.99, and 1.87, respectively. BBRI’s ROE is forecasted at 19.5%, 19.6%, and 20.7% for the same periods.

Consistent Performance and Dividend Yield

BBRI’s consistent earnings growth and dividend yield of around 8.6% make it a reliable investment. The bank’s strong market position and stable performance are key drivers of its valuation.

Bank Tabungan Negara (BBTN): A Growth Story

Bank Tabungan Negara is rated as an Add with a target price of 1,600 IDR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.57, 0.52, and 0.47, respectively. BBTN’s ROE is expected to be around 11.1%, 11.2%, and 12.0% for the corresponding periods.

Growth Prospects and Dividend Yield

BBTN’s strong earnings growth and dividend yield of around 4.9% make it an attractive investment. The bank’s growth prospects and improving performance contribute to its positive outlook.

Bank Tabungan Pensiunan Nasional Syariah (BTPS): A Moderate Hold

Bank Tabungan Pensiunan Nasional Syariah is rated as a Hold with a target price of 1,150 IDR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.85, 0.79, and 0.73, respectively. BTPS’s ROE is forecasted at 11.7%, 13.4%, and 14.5% for the same periods.

Moderate Growth and Dividend Yield

BTPS’s moderate earnings growth and dividend yield of around 9.0% make it a stable investment. The bank’s performance is expected to improve gradually over the next few years.

Affin Bank Berhad: A Conservative Reduce

Affin Bank Berhad is rated as a Reduce with a target price of 2.68 MYR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.62, 0.61, and 0.59, respectively. Affin Bank’s ROE is expected to be around 4.1%, 4.5%, and 4.7% for the corresponding periods.

Limited Growth and Dividend Yield

Affin Bank’s limited earnings growth and dividend yield of around 3.1% make it a less attractive investment. The bank’s conservative approach and stable performance contribute to its Reduce rating.

Alliance Bank Malaysia Berhad: A Strong Add

Alliance Bank Malaysia Berhad is rated as an Add with a target price of 5.10 MYR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.90, 0.85, and 0.80, respectively. Alliance Bank’s ROE is forecasted at 10.0%, 10.3%, and 10.4% for the same periods.

Growth Prospects and Dividend Yield

Alliance Bank’s strong earnings growth and dividend yield of around 6.3% make it an attractive investment. The bank’s growth prospects and improving performance contribute to its positive outlook.

AMMB Holdings: A Solid Add

AMMB Holdings is rated as an Add with a target price of 5.95 MYR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.86, 0.81, and 0.76, respectively. AMMB’s ROE is expected to be around 9.3% for the corresponding periods.

Growth and Dividend Yield

AMMB’s strong earnings growth and dividend yield of around 4.9% make it an attractive investment. The bank’s solid fundamentals and growth prospects contribute to its positive outlook.

Bank Islam Malaysia Bhd: A Reliable Add

Bank Islam Malaysia Bhd is rated as an Add with a target price of 3.03 MYR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.83, 0.81, and 0.79, respectively. Bank Islam’s ROE is forecasted at 7.5%, 8.3%, and 8.7% for the same periods.

Consistent Performance and Dividend Yield

Bank Islam’s consistent earnings growth and dividend yield of around 5.4% make it a reliable investment. The bank’s strong market position and stable performance are key drivers of its valuation.

Hong Leong Bank: A High Performer

Hong Leong Bank is rated as an Add with a target price of 30.00 MYR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 1.11, 1.01, and 0.94, respectively. Hong Leong’s ROE is expected to be around 11.2% for the corresponding periods.

Impressive Growth and Dividend Yield

Hong Leong Bank’s impressive earnings growth and dividend yield of around 4.4% make it a high performer in the sector. The bank’s strong market position and consistent performance are key drivers of its valuation.

Malayan Banking Bhd: A Solid Add

Malayan Banking Bhd is rated as an Add with a target price of 12.30 MYR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 1.26, 1.17, and 1.10, respectively. Malayan Banking’s ROE is forecasted at 10.2% for the same periods.

Growth and Dividend Yield

Malayan Banking’s strong earnings growth and dividend yield of around 6.4% make it an attractive investment. The bank’s solid fundamentals and growth prospects contribute to its positive outlook.

Public Bank Bhd: A Reliable Add

Public Bank Bhd is rated as an Add with a target price of 5.40 MYR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 1.47, 1.38, and 1.30, respectively. Public Bank’s ROE is expected to be around 11.6% for the corresponding periods.

Consistent Performance and Dividend Yield

Public Bank’s consistent earnings growth and dividend yield of around 4.5% make it a reliable investment. The bank’s strong market position and stable performance are key drivers of its valuation.

RHB Bank Bhd: A Strong Add

RHB Bank Bhd is rated as an Add with a target price of 7.00 MYR. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.76, 0.71, and 0.67, respectively. RHB Bank’s ROE is forecasted at 8.6% for the same periods.

Growth and Dividend Yield

RHB Bank’s strong earnings growth and dividend yield of around 6.5% make it an attractive investment. The bank’s solid fundamentals and growth prospects contribute to its positive outlook.

Bangkok Bank: A Solid Add

Bangkok Bank is rated as an Add with a target price of 195.0 THB. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.50, 0.48, and 0.45, respectively. Bangkok Bank’s ROE is expected to be around 8.1% for the corresponding periods.

Growth and Dividend Yield

Bangkok Bank’s strong earnings growth and dividend yield of around 5.1% make it an attractive investment. The bank’s solid fundamentals and growth prospects contribute to its positive outlook.

Kasikornbank: A Reliable Add

Kasikornbank is rated as an Add with a target price of 188.0 THB. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.63, 0.59, and 0.55, respectively. Kasikornbank’s ROE is forecasted at 8.7% for the same periods.

Consistent Performance and Dividend Yield

Kasikornbank’s consistent earnings growth and dividend yield of around 5.1% make it a reliable investment. The bank’s strong market position and stable performance are key drivers of its valuation.

Kiatnakin Phatra Bank: A Moderate Hold

Kiatnakin Phatra Bank is rated as a Hold with a target price of 49.00 THB. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.71, 0.68, and 0.65, respectively. Kiatnakin Phatra’s ROE is expected to be around 6.7% for the corresponding periods.

Moderate Growth and Dividend Yield

Kiatnakin Phatra’s moderate earnings growth and dividend yield of around 4.8% make it a stable investment. The bank’s performance is expected to improve gradually over the next few years.

Krung Thai Bank: A Solid Hold

Krung Thai Bank is rated as a Hold with a target price of 20.90 THB. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.68, 0.64, and 0.60, respectively. Krung Thai’s ROE is forecasted at 9.6% for the same periods.

Consistent Performance and Dividend Yield

Krung Thai Bank’s consistent earnings growth and dividend yield of around 5.0% make it a reliable investment. The bank’s strong market position and stable performance are key drivers of its valuation.

Muangthai Capital: A Growth Story

Muangthai Capital is rated as a Hold with a target price of 42.00 THB. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 2.66, 2.29, and 1.97, respectively. Muangthai Capital’s ROE is expected to be around 17.5% for the corresponding periods.

Strong Growth and Moderate Dividend Yield

Muangthai Capital’s strong earnings growth and moderate dividend yield of around 1.2% make it a growth story in the sector. The bank’s performance is expected to improve significantly over the next few years.

SCB X: A Moderate Hold

SCB X is rated as a Hold with a target price of 111.0 THB. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 0.80, 0.78, and 0.77, respectively. SCB X’s ROE is forecasted at 8.7% for the same periods.

Moderate Growth and Dividend Yield

SCB X’s moderate earnings growth and dividend yield of around 9.2% make it a stable investment. The bank’s performance is expected to improve gradually over the next few years.

Srisawad Corporation: A Reliable Add

Srisawad Corporation is rated as an Add with a target price of 37.50 THB. The bank’s P/BV ratios for CY24F, CY25F, and CY26F are 1.79, 1.55, and 1.34, respectively. Srisawad’s ROE is expected to be around 16.5% for the corresponding periods.

Growth and Dividend Yield

Srisawad’s strong earnings growth and dividend yield of around 1.1% make it an attractive investment. The bank’s solid fundamentals and growth prospects contribute to its positive outlook.