And although NIM is expected to widen this year, RHB expects this to be narrower than peers.
“Prefer UOB and DBS,” says RHB.
In a Monday report, analyst Leng Seng Choon expects NIM expansion in 1H19 and digitisation efforts over the next 2-3 years to contribute to OCBC’s ROE enhancement.
This would be driven in the short term by sequential NIM expansion anf digitisation-driven expense management over the next 2-3 years.
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In Jan/Feb, OCBC raised its home rate. This will raise lending yield for a portion of 1Q19 as more than half of OCBC housing loans are priced off this.
Lending yield should be even stronger in 2Q19 as the full three-month impact will be captured, adds Leng.
Industry-wide fixed deposit interest rates have also risen, but interest rates for CASA, which accounts for 66% of total deposits, have remained relatively flat – and this helps to cap the increase in OCBC’s cost of funds.
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“We forecast 2019 NIM of 1.76%, an improvement over 2018’s 1.70% due to higher lending yields offsetting the rise in cost of funds,” says Leng.
Meanwhile, OCBC’s Bank of Singapore, which caters to clients with at least US$5 million ($6.8 million), saw 2018 AUM rise 3% to US$102 billion.
While AUM could have further increased since then, 1Q19 wealth management fees are likely to be soft y-o-y, Leng expects.
“We raised 2019F net profit by 7% to $4.7 billion, mainly due to net interest income forecast being increased by 7%. We introduce 2020 and 2021 forecasts in this report,” says Leng.
As at 10.47am, shares in OCBC are up 4 cents at $11.82.
