UPDATE: Analyst briefs: OCBC 1H21 earnings

OCBC building in Signapore’s central business districtOCBC building in Signapore’s central business district. Photo taken pre-Covid.

This item was originally published on Thursday, 5 August 2021 at 12:36 a.m. SGT; it has since been updated to include comments from Daiwa and Maybank Kim Eng.

OCBC reported Wednesday its first half net profit jumped 86 percent on-year to S$2.66 billion on income growth and a substantial drop in allowances.

Shares of OCBC ended Wednesday up 1.80 percent at S$12.46.

These are analysts’ calls on the results:

Morgan Stanley

OCBC’s results were broadly in-line with expectations, with better income and costs offset by higher loan losses, Morgan Stanley said in a note Wednesday.

Non-interest income for the second quarter came in 3.5 percent ahead of Morgan Stanley’s estimate, helped by stronger-than-expected insurance revenue, partly offset by lower trading, the note said.

Loan losses of S$232 million were higher than Morgan Stanley’s estimate of S$191 million on higher general provisions, the note said.

Morgan Stanley said the outlook was “cautiously positive.”

It rated the stock at Equal-Weight, with a price target of S$12.82.

Credit Suisse

Credit Suisse said OCBC’s first half results were in line with its forecasts, with net profit making up 57 percent of the investment bank’s estimate for the full year due to a strong first quarter.

It kept a Neutral call on the shares, while raising its target price to S$12.40 from S$12.30 after tweaking its earnings estimates.


OCBC’s second-quarter net profit came in 2 percent above Daiwa’s forecast as slightly higher-than-expected non-interest income and associates contribution offset higher-than-expected credit cost, Daiwa said in a note Wednesday.

In the non-interest income category, life insurance and fee income beat the forecast, but trading income was lower than expected, while the associates contribution was mainly from Bank of Ningbo, Daiwa said. Higher credit cost was due to higher general provisions from Malaysia and Indonesia, it added.

Daiwa increased its 2021-23 core earnings per share (EPS) forecasts by 0-1 percent, and raised its target price to S$13.50 from S$13.00, keeping an Outperform call.

Maybank Kim Eng

OCBC’s first half earnings beat expectations, Maybank Kim Eng said in a note Wednesday.

“Operationally, there are early signs of inflection with stabilising margins, rising loan growth and increasing fee momentum. Provisions are falling overall, but pockets of stress exists in its ASEAN operations due to rising Covid levels,” the brokerage said.

“Nevertheless, the group’s gearing towards North Asia and Singapore together with a rising share in sustainability finance (50 percent of 2Q21 lending was green), gives it a strong platform for medium term growth,” the note said.

The brokerage increased its 2021-2023 EPS forecasts by 1 percent to 3 percent on a better outlook for insurance and North Asia, and increased its 2021 dividend per share forecast to 55 Singapore cents from 48 Singapore cents.

Maybank Kim Eng raised its target price to S$14.30 from S$14.17, keeping a Buy call.


DBS said OCBC has a “recovery in the works,” adding results were in line with its expectations.

“We believe there is further room for OCBC’s share price to re-rate as we look forward to earnings growth in full year 2021. The strong business momentum in the first quarter of 2021 is likely to continue in subsequent quarters, as OCBC revises up its loan growth guidance to mid-to-high single digit (from mid-single digit),” DBS said in a note Wednesday.

“Non-interest income drivers including wealth management and recovery in insurance business, as well as lower credit costs, will continue to support strong earnings recovery,” it added.

DBS rated OCBC shares at Buy, with a target price of S$14.00.