Home » , » Oversea-Chinese Banking Corp Ltd - Positive surprises could come from loan growth and credit cost

Oversea-Chinese Banking Corp Ltd - Positive surprises could come from loan growth and credit cost

Shared By Stock Fanatic on Tuesday, May 8, 2018 | 8.5.18

1Q18 slightly below expectations: OCBC reported 1Q18 core net profit of S$1,112 mn (+7.5% QoQ, +29.2% YoY). 1Q18 net profit makes up 23.6%/ 23.0% of our and consensus 1Q18 estimates. Growth would be less pronounced (+14%) if 1Q17 was not restated for new accounting changes. Net profit growth was driven by PPOP increase of 13% YoY/-17% QoQ while provisions declined 93% YoY (-93% QoQ). Key drivers of PPOP +13% YoY: Revenue +10% YoY (Net interest +11%, NOII +8%) and expenses +6% (positive JAWS +4 pp).

Briefing key takeaways:
(1) Loan growth could potentially surpass high single-digit target,

(2) NIM was flat in 1Q 2018 but expected to gradually rise in coming quarters,

(3) GE's contribution to OCBC benefitted from the new accounting policy,

(4) New NPA formation expected to be in S$300 mn level (< 50 bp of loans) and credit cost is expected to be in the 15-20 bp range 50 bp of loans) and credit cost is expected to be in the 15-20 bp range.

Raise profit estimates and price target: We raise 2018-20 net profit estimates by 1-3% to factor in (1) higher loan growth, (2) better NIM, and (3) lower credit cost. However, this was partially mitigated as we lowered NOII growth estimates. Our 2018-20 ROE estimates are revised up to 12.2-12.3% vs 11.8-12.1% previously. Our price target (based on Gordon Growth model) is raised to S$15.10 (from S$14.70).

Technical Analysis
Daily Chart
Maintain OUTPERFORM. While OCBC is behind DBS and UOB in our pecking order, we expect the stock to outperform the market given that it is able to deliver strong net profit growth driven by robust loan growth, higher NIM and improvements in credit cost. Stock trades on 1.4x P/BV and 11x 2018 P/E (vs peer P/E average of 12x, average P/BV of 1.4x). The stock has lagged its other peers over the past 3-6 months. (Read Report)

Source : Credit Suisse Asia Pacific Equity Research


Posted on Tuesday, May 8, 2018 | 8.5.18
With No comments


Join Me On: Facebook | Twitter | Google Plus ::: Thank you for visiting ! :::
Share this article :

Post a Comment

 
Modified by : Stockfanatic
Copyright © 2008 - 2018. Singapore Stock Market News - All Rights Reserved
Template Created by Creating Website Published by Mas Template
Proudly powered by Blogger
Related Posts with Thumbnails