OCBC climbs to new high on earnings beat

Oversea-Banking Chinese Corporation (OCBC) shares pushed to a new high, after its first quarter net profit beat analyst projections.

  • Oversea-Chinese Banking Corporation Ltd (SGX: O39) share price jumps to S$12.75 per share
  • The money lender reported an 115% year-on-year growth in first quarter net profit
  • Group CEO Helen Wong is confident that the group will be able to capitalise on opportunities arising in the Southeast Asia and Greater China markets
  • Buy and sell OCBC shares with an IG account

OCBC share price: What’s the latest?

OCBC shares rallied 1.5% to hit a new three-year high of S$12.75 in early trading on Monday (10 May 2021), following the release of its financial results for the first quarter of 2021.

The money lender registered the second highest total value of securities traded on the day on the Singapore Exchange (SGX), with S$63.6 million of transactions as at 15:00 SGT.

The blue-chip counter is up over 24% year to date. Analyst sentiments published by SGX StockFacts show a consensus rating of ‘outperform’ alongside a 12-month price target of S$13.08 on the stock.

OCBC’s records ‘significantly higher’ profit

Group net profit for 1Q 2021 of S$1.50 billion was ‘significantly higher’ (up 115% year-on-year) than the S$698 million a year ago (1Q 2020), the money lender said in the update.

It also beat analysts’ estimates of S$1.08 billion, as polled by Refinitiv.

Total income rose 17% from a year ago, with net interest income coming in 11% lower in 1Q 2021, as compared to S$1.63 billion last year.

This was mainly attributable to a 20 basis points compression in net interest margin in the sustained low interest rate environment, OCBC added.

Meanwhile, against the backdrop of an improving operating environment and favourable market conditions, non-interest income increased by 70% year-on-year from higher fees, trading and insurance income.

Operating expenses were 4% above the previous year, largely driven by a rise in staff costs associated with increased business activities.

Allowances for the quarter came in at S$161 million, ‘significantly lower’ than the S$657 million recorded a year prior.

What is OCBC’s outlook for the rest of 2021?

Helen Wong, Group CEO, OCBC, said the group’s ‘robust’ first quarter results were ‘underscored by the strength and resilience of our banking, wealth management and insurance franchise’.

‘Earnings were up in our core markets and the momentum across our businesses is building up from renewed market optimism,’ she noted.

Looking ahead, Wong is confident that the bank will be able to capitalise on opportunities arising from improved economic conditions, particular in ASEAN and Greater China, thanks to its strong balance sheet and capital position.

‘We will continue to invest in our franchise and capabilities to support our customers and drive long-term sustainable value for our stakeholders,’ she said.

Optimism aside, Wong added that the business will remain watchful of the prevailing risks in the operating environment, including the growing competition that has emerged in the Greater Bay area from the likes of DBS Group.

‘Very strong competition I’d expect, but indeed, the market is so big that the pie is big enough for everybody to do reasonable business,’ she said in a media briefing.

Finally, regarding the takeover of Citi’s consumer banking assets in Asia, she said OCBC will ‘stay open on this particular opportunity that (has) arisen’.

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