Meanwhile, asset quality issues pertaining to the oil & gas segment have been dealt with and sufficient provisions have been made. More importantly, a visible improvement in asset quality – contrary to stabilisation – could mark a strong re-rating catalyst, says Lim.
However, there needs to be a further evaluation on the impact to the implementation of the IFRS9/SFRS109, pending clarity on certain aspects especially with regards to the tax treatment on general provisions. Capital enhancement measures are underway and should be made clear during the release of its FY17 results in February 2018.
Following the positive macro dataset released, DBS has further tuned up our loan growth assumption for FY18-19 to 8% from 7%, lifting our FY18-19 earnings forecasts marginally. Sustained upward trajectory of SIBOR/SOR should re-rate NIM higher by 4-5bps.
"Our earnings forecasts remain above consensus. We reiterate our BUY rating and nudged up our target price to $14.00," says the analyst.
See also: SAC Capital initiates ‘buy’ on Sanli Environmental after $105.3 mil contract win from PUB
As at 3.40pm, shares in OCBC are down 8 cents at $12.87 or 11.5 times FY18 forward earnings.
