OCBC

DMG & Partners Research, Nov 5

OCBC has guided for 2014 loan growth of a high single digit. We believe the slower growth guided (vis-à-vis 2013) is partly in response to the various property cooling measures imposed by the Monetary Authority of Singapore.

Already, OCBC is seeing a 30 per cent y-o-y drop in residential mortgage applications and thinks that the impact on loan growth would start to be felt in H2 2014. The group remains open for potential M&A activities, especially if these involve any of OCBC's four key markets of Singapore, Malaysia, Indonesia and Greater China.

Our FY2013 earnings forecasts are unchanged, but we raise our FY2014 net profit forecast by 6 per cent on revising down loan allowances. We lift our fair value to $10.90 (from $10.60) after rolling forward our valuation base year to end-2014 (from June 2014).

There is no change to our target P/B multiple of 1.45 times. The pick-up in OCBC's profitability was largely due to MTM gains from the insurance unit, while the underlying profit at its banking operations was more muted. Maintain "neutral".

NEUTRAL