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OCBC share price dips as it cuts 360 savings account’s rates again

OCBC’s shares faltered slightly on Tuesday following news of a fourth reduction to its popular flagship 360 savings account’s interest rates.

Source: Bloomberg
  • OCBC Bank (SGX: O39) share price slipped 1% to S$10.00 per share on Tuesday (05 January 2021)
  • The lender is further lowering interest rates on its flagship savings account
  • This will be the fourth time it has done so since May 2019
  • DBS analysts see OCBC’s stock as a dividend yield play for this year
  • Go long or short on OCBC shares by opening an IG account today.

Another round of interest rate reductions

Starting 01 February 2021, balances up to S$25,000 in OCBC 360 savings accounts will earn 0.3% salary credit bonus interest, below the 0.4% at the moment. As for balances between S$25,000 and S$50,000, the interest will be reduced to 0.6%, from 0.8% currently.

The 1.2% interest will stay the same for balances of S$50,000 to S$75,000.

Singapore’s second largest bank said that it intends to adjust its product offerings accordingly ‘if and when the interest rate situation improves’.

Following the announcement on the rate revisions, shares in the bank dipped as much as 1% on the day to trade at S$10 as at 13:00 SGT on Tuesday (05 January 2021), with some 1.7 million shares changing hands.

As at Tuesday, out of 19 analysts polled by Bloomberg, 12 recommended ‘buy’ on OCBC, seven rated it ‘hold’, while two had ‘sell’ calls. Their average 12-month target prices stood at S$10.96.

DBS Group on Monday (04 January) rated OCBC a ‘buy’ with a 12-month target price of S$11.00, while Macquarie recommended ‘neutral’ with a S$10.44 target.

OCBC an ‘inexpensive’ stock

DBS analysts wrote that there are ‘opportunities in value names’ such as OCBC, which are ‘trading below average historic valuations that have recovery potential after the Covid-19 pandemic’.

OCBC also has a strong Common Equity Tier 1 (CET1) ratio, and offers a 2021 dividend yield of around 4.5%, said the DBS analysts in the report.

While the Monetary Authority of Singapore has imposed a dividend cap on banks in the immediate term, the DBS research team believes that certain banks are willing to resume their previous dividend policies as soon as the central bank changes its stance.

And among banking and property names, DBS thinks OCBC is an ‘inexpensive’ pick, as the latter is trading near -1 standard deviation below its average 15-year forward price-to-book-value ratio.

Between OCBC and United Overseas Bank (UOB), the analysts also have ‘a slight preference’ for OCBC given its cheaper valuations, which provide better share price upside and potential income support from its diversified non-interest income.

The DBS analysts added that they see both OCBC and UOB among the yield plays that will reign in 2021.

OCBC could register a 22% year-on-year growth in its earnings per share in 2021, according to DBS’ estimates.

How to trade OCBC with IG

Are you feeling bullish or bearish on OCBC’s stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Oversea-Chinese Banking Corp> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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