What’s next for OCBC shares following earnings beat in Q3?

• Oversea-Chinese Banking Corporation (SGX: O39) share price falls 0.9% on Wednesday (03 November)
• The bank posted its third quarter results for 2021 earlier in the day
• Its net profit of S$1.22 billion beat analysts’ estimates of S$1.19 billion
• IG analyst Yeap Jun Rong said the results ‘point towards ongoing improvement in economic conditions’
• Keen to trade OCBC shares? Open an account with us to long or short the stock now.

OCBC posts 19% net profit gain in Q3 2021

Oversea-Chinese Banking Corporation (OCBC) reported that group net profit for the third quarter of 2021 rose 19% to S$1.22 billion from S$1.03 billion in the same quarter a year ago.

This beat Bloomberg analysts’ average earnings estimates of S$1.19 billion.

The bank said this was driven by resilient business growth and lower allowances as the credit outlook continued to improve. Total allowances (loan loss provisions) were 54% lower at S$163 million as the credit environment improved.

Net interest income grew 3% year-on-year, underpinned by a 4% increase in average loan volumes, partly offset by a 2 basis points decline in net interest margin.

Meanwhile, non-interest income was 2% lower, with net fees and commissions rising 14% year-on-year to S$569 million, on the back of broad-based fee growth associated with the rise in customer transactions and business activities.

Group CEO, Helen Wong, said the company’s third quarter results ‘were resilient, despite the challenging conditions associated with the Delta virus variant’.

She noted that the momentum across banking, wealth management and insurance business ‘has continued to grow’, with asset quality also ‘stabilising as the economic situation improves’.

‘We remain positive on the long-term outlook but are watchful of the near-term headwinds from the pandemic. Together with our strong business franchise and established global network, we are well-positioned to tap on the rising opportunities in the region to drive sustained long-term growth for the Group,’ she added.

How do analysts view the results?

IG analyst Yeap Jun Rong said that the further decline in loan loss provisions, strong lending momentum and increase in net fee income ‘seems to point towards ongoing improvement in economic conditions’.

‘While OCBC’s 3Q net interest margins remain subdued, interest rate outlook ahead seems to carry more upward bias, as central banks globally continue to shift towards normalisation in monetary policies,’ he added.

In terms of OCBC’s stock price outlook, Yeap stated that banks have been among the strongest performing sectors globally this year.

All three local banks, he said, have been outperforming the broader market since the start of the year, delivering an average year-to-date return of 21.7%, compared to the STI’s 13.2%.

‘While it still trails behind the US, where the KBW bank index has delivered 42.5%, it may suggest some room for catchup if economic conditions continue to improve with reopening ahead,’ he opined.

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