Why are OCBC shares rising?

• Oversea-Chinese Banking Corp Ltd (SGX: O39) share price rose further on Monday (8 August 2022)
• The bank’s Q2 net profit burgeoned 28% year-on-year
• UOB and RHB analysts have kept ‘buy’ calls on the stock
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OCBC beats analysts’ Q2 estimates

OCBC shares have rallied nearly 5% since reporting its financial results for the second quarter (Q2) of 2022.

The bank saw group net profit rise 28% year-on-year (YoY) to S$1.48 billion in Q2 2022. This surpassed expectations of S$1.26 billion from analysts polled by Bloomberg.

OCBC said this was due to ‘robust performance’ across its banking, wealth management and insurance businesses.

Consequently, OCBC declared an interim dividend of S$0.28 for the period, up from S$0.25 in Q2 2021.

Net interest income grew 16% to a new high of S$1.70 billion during the quarter, largely driven by asset growth and margin expansion.

Net interest margin (NIM) rose 13 basis points to 1.71%, as asset yields outpaced higher funding costs amid a rapidly rising interest rate environment.

Non-interest income was S$1.18 billion, up 6% from a year ago mainly from higher trading income and life insurance profit.

Operating expenses increased 10% to S$1.25 billion, on the back of higher staff costs (up 10% against the previous year mainly from annual salary increments and a rise in headcount).

OCBC stock price: what’s the latest forecast?

The bank’s stock has been in an uptrend for the last one month, increasing roughly 7% since 8 July 2022.

On a year-to-date basis, OCBC shares are up 7.6%.

In terms of stock outlook, OCBC shares have an average price target of S$13.90 and rating of ‘outperform’, based on the latest SGX StockFacts consensus data.

The price target represents a 11.7% upside potential from its last traded price of S$12.27.

The latest investment calls came from UOB and RHB’s equity research teams, who reiterated ‘buy’ ratings on the money lender.

Both teams also kept their price targets, with UOB maintaining it at a more bullish S$16.18 and RHB keeping theirs at S$13.90.

In light of the latest results, RHB analysts raised its earnings forecast for FY2022 to FY2024 for OCBC by 3% to 4%.

Meanwhile, UOB analysts expect OCBC to increase dividend for FY2023 to S$0.60.

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