Can OCBC shares break through S$12 soon?

• Oversea-Chinese Banking Corporation Ltd (SGX: O39) share price slipped to S$11.81 on Thursday (02 June 2022)
• The bank has priced S$500 million worth of perpetual capital securities at 3.9% per annum
• Analysts foresee an 18% upside on the blue-chip stock in the next 12 months
• Keen to trade OCBC shares? Open an account with us to start today

OCBC stock price: what’s the latest?

Oversea-Chinese Banking Corporation Limited (OCBC) shares opened lower on Thursday, after it priced S$500 million worth of perpetual capital securities with a minimum term period of five years at 3.9% per annum.

The stock of Singapore’s second largest bank has not been performing well of late, with market capitalisation down by 4% in the last one month.

Looking ahead, the blue-chip counter has an average rating coming in close to ‘outperform’, alongside an average share price target of S$13.91 (based on the most updated SGX StockFacts data).

The price target equates to a 17.6% upside potential from OCBC’s last traded stock price of S$11.83.

Last month, UOB and RHB’s equity research teams lowered their price targets on OCBC shares to S$13.90 and S$14.88 respectively, while keeping ratings unchanged at ‘buy’.

What should you know about OCBC’s latest instrument?

On Thursday, OCBC priced S$500 million worth of 3.9% perpetual capital securities, to be issued on 08 June 2022. The securities, first callable in 2027, are being issued under the bank’s US$30 billion Global Medium Term Note Programme.

‘The capital securities are intended to qualify as additional Tier 1 capital of the bank under the requirements of the Monetary Authority of Singapore (MAS),’ the bank stated in a press release.

‘The net proceeds from the issue of the capital securities will be used for the general corporate purposes of OCBC Bank,’ it added.

The instrument will confer a right on the holder to receive distributions semi-annually in arrear at a fixed rate of 3.9% per annum from the issue date to the first reset (callable) date of 08 June 2027.

The capital securities are expected to be rated Baa1 by Moody’s Investors Service, BBB- by Standard & Poor’s Rating Services and BBB+ by Fitch Ratings Ltd.

As a Basel III capital instrument, if the bank is determined by the MAS to be non-viable, the capital securities will be written off in whole or in part.

In addition, the capital securities may also be subject to cancellation, modification, conversion, change in form, or have the effect as if a right of modification, conversion, or change of form by the MAS under Division 4A of Part IVB of the MAS Act 1970 of Singapore without prior notice.

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