"OCBC is one of the biggest beneficiaries of flows into Singapore as a wealth management hub," state analysts Harsh Wardhan Modi and Daniel Andrew Tan in their Jan 9 note.
They point out that OCBC units, Bank of Singapore, Great Eastern, Lion Global, as well as its footprint in Hong Kong, Dubai and Malaysia on top of Singapore, have allowed the bank to benefit across various tiers of the wealth management value chain, ranging from mass to affluent to the high net worths.
However, given that the stock is now trading at 1.45x forward book, for 11.8% ROE, these positives appear to be fully priced.
A key reason driving the gains of all three local banks has been their active capital management, with shareholders of all three enjoying higher dividend payouts, and, they await even more.
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Citing discussions with the bank's management recently, JP Morgan says there were no "new insights", and that they have no reasons to believe that excess capital at OCBC will be paid out to shareholders at a "faster pace", although they expect new CEO Tan Teck Long will lay down additional details when the bank reports its full year results next month.
Meanwhile, the analysts expect OCBC to "work through" the ongoing share buyback programme, which they estimate has another $630 million to be used by the end of this year.
"Hence, we believe the stock lacks a catalyst, which should lead to a period of consolidation."
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In addition, with the credit growth environment relatively muted and non-interest income growth potential fairly well understood, JP Morgan does not see a further re-rating on the back of communication of organic growth plans.
Nonetheless, they have slightly raised their net interest margin expectations by 1%, leading to a higher target price of $20.50 from $20.
