OCBC share price: what to look out for in its Q3 results

As the OCBC Bank's third quarter earnings fast approaches, we take a look at where analysts think the company's share price is heading in the in the next 12-months.

Given that Oversea-Chinese Banking Corporation or OCBC Bank (SGX: O39) is set to report their Q3 results in under a week, we take a look at how the company has performed recently and where analysts think its stock is heading next.

On an intraday basis, the OCBC share price rose to S$10.99 per share today, as of 17:25 AEST.

OCBC Bank share price: the half that was

During the first-half of the 2019 fiscal year, OCBC saw its profits (NPAT) rise an impressive 6%, hitting S$2.45 billion for the half.

As part of this result, both net interest and non-interest income witnessed robust growth, rising high single-digits and low double-digits, respectively.

In the first instance, net interest income rose to S$3.12 billion during the first-half – up 9% from the year prior. According to the bank, these gains were ‘led by loan growth and an 11 basis points increase in NIM as higher asset yields outpaced the rise in funding costs.’

Comparatively, non-interest income grew even faster, rising ‘12% year-on-year to S$2.17 billion from both banking and insurance operations.’

Finally, the bank reported a small uptick in its annualised return on equity (ROE) – reaching 11.7% in the first-half of 2019. Earnings per share (EPS) moved up in step, reaching S$1.15 – up from S$1.06 from the year prior.

For income focused investors, OCBC’s emphasises on growing its dividends is also likely a pleasing development in recent times. Here, the bank reported a 25 cent per share interim dividend during H1 – an increase of 25% or 5 cents on the corresponding period.

The outlook moving forward

Building on these results, OCBC's CEO – Samuel Tsien commented that:

‘We are pleased to report another strong quarterly performance. Loan growth was sustained and NIM continued to improve. Fee income rose quarter-on-quarter, led by higher wealth management fees, with our private banking AUM climbing to new levels.'

Mr Tsien continued by noting:

‘While economic growth in our key markets is slowing, our healthy capital, funding and liquidity position will allow us to comfortably navigate the challenging operating environment and pursue our long-term growth strategy. This also gives us the flexibility to capitalise on market expansion opportunities as they arise.’

Investors will likely be keen to see just how well management has managed this difficult macro backdrop when the bank reveals its third quarter results next week.

Adding to this, Mr Tsien’s confidence seems neither completely replicated by the market nor analysts. In fact, the analyst outlook for OCBC remains decisively mixed, with 11 analysts rating the stock a buy and ten analysts rating the stock a hold. Positively at least, no analysts rate the blue-chip bank a sell, according to Bloomberg Data.

In saying that, analysts from Bloomberg do believe that growth in the bank’s wealth management business may support revenue expansion going forward.

According to Bloomberg Data, the average 12-month share price target on OCBC is S$12.45 – a modest increase on the last cited price of S$10.98.

OCBC is expected to release its Q3 results on November 5.

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