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OCBC share price: 4 key considerations ahead of Q4 earnings

We highlight four key things for investors ahead of OCBC’s Q4 FY2019 earnings report.

Source: Bloomberg

When is OCBC’s Q4 results date?

Oversea-Chinese Banking Corporation Limited (OCBC), Singapore’s second largest bank by market capitalisation at S$48.41 billion, is due to announce its Q4 FY2019 for the three months ended 31 December 2019, this Friday 21 February.

The oldest lender in Singapore, it counts OCBC Securities and Great Eastern Holding Limited among its subsidiaries. The bank has a presence in 19 countries and territories, and is the second-largest financial institution in Southeast Asia by assets (after DBS Group).

Ahead of the Q4 earnings report, we highlight four key things that investors and traders should note.

1. Q3 FY2019 performance: 6% drop in net profit

Although the company referred to its third quarter financial results as ‘resilient’, a closer look revealed that on a quarterly comparison, net profit Q3 FY2019 was 6% lower than the same period a year prior.

Net profit for Q3 FY2019 was S$1.172 billion, versus the S$1.245 billion recorded in Q3 FY2018.

However, for the first nine months of the fiscal year ended September 2019, the group’s net profit after tax rose to a ‘record’ S$3.63 billion. Excluding the one-time charge for the group’s Indonesian banking subsidiary, core net profit after tax for the group was S$3.72 billion, a 4% increase from S$3.57 billion a year ago.

OCBC attributed this to an earnings growth across the group’s banking, wealth management, and insurance franchise.

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2. CEO’s previous guidance for Q4

In the official release of the Q3 financial report, OCBC group CEO Samuel Tsien provided the following guidance for the final quarter of FY2019:

‘Global and regional economic growth continued to slow, and geo-political event risks have increased. We shall remain vigilant and will maintain prudent risk management practices while exercising disciplined cost management.

‘OCBC’s underlying business is resilient and our strong capital, funding and liquidity position will allow us to deliver robust and sustainable results to our shareholders and all stakeholders,’ he remarked.

He added that a diversified portfolio and balanced growth across the group’s banking, wealth management, and insurance businesses, are key factors for the lender’s continued profitability amid a challenging operating environment.

3. Outlook for FY2020; updates on coronavirus crisis

Last week, DBS Group CEO Piyush Gupta had commented in the bank’s Q4 financial update that there will likely be a ‘full-year revenue impact of around 1-2%’ as a result of the coronavirus crisis that has affected consumer spending across the region – and this is ‘assuming that the virus is controlled by summer’.

Gupta even warned that that there could be ‘more permanent revenue loss’ from consumer consumption and services in the travel, hospitality, retail, and aviation sectors. He said the expected loss will ‘impact their numbers for this year…it’s not just a shift by three to four months’.

With the Singapore Budget 2020 having addressed the national economic and social impact of the coronavirus – as well as announced a S$5.6 billion financial stimulus package to assist all local enterprises and workers – investors can most definitely expect a detailed guidance (with mentions of the virus’ impact on the various business segments) from OCBC for FY2020.

4. Analyst estimates for Q4

In the third quarter, earnings per share (EPS) worked out to be S$1.15 per share, representing a small drop from the S$1.17 achieved in the same quarter a year prior.

However, for the first nine months of FY2019 ended September, EPS was S$1.15 per share, up from S$1.13 for the first nine months of FY2018.

For Q4, Refinitiv analysts are expecting an average annualised EPS of S$1.105 for the full financial year, which would represent a 4.25% increase from FY2018’s reported annualised EPS of S$1.06.

OCBC’s last dividend payout of S$0.25 was made in October 2019. Refinitiv analysts are expecting a dividend per share amount of S$0.28 for Q4 FY2019.

Finally, analysts have given an average net profit estimate of S$1.132 billion for Q4.

OCBC shares are currently trading at S$10.96 per share, and is down 0.63% since the start of the year.

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The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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