Should you trade OCBC shares?

• Oversea-Chinese Banking Corp Ltd (SGX: O39) share price rallied to S$11.74 on Thursday (28 July 2022)
• Singapore’s second largest bank is down some 7% in the last six months
• Analysts foresee a 20% upside potential in the next 12 months
• Keen to trade OCBC shares? Open an account with us to start today.

OCBC stock price: what’s the update?

Oversea-Chinese Banking Corporation (OCBC) shares have risen by over 2% since the start of the week, following new analyst updates.

Despite this latest rally, the blue-chip counter remains down by nearly 7% in the last six months, amid concerns of higher inflation and muted economic growth.

In terms of stock outlook, the latest analyst sentiments published by SGX StockFacts show a consensus rating of ‘outperform’, alongside a price target of S$13.90 on the stock.

The price target equates to a 18.4% upside potential from OCBC’s last traded price of S$11.74.

Where do analysts see OCBC in the next 12 months?

UOB’s equity research team recently reiterated a ‘buy’ call on the OCBC stock, but lowered its price target from S$14.95 to S$14.75.

Analyst Jonathan Koh forecasted a net profit of S$1.137 billion for the second quarter (Q2) of 2022, which would represent a decline of 2% year-on-year (YoY) and 16% quarter-on-quarter (QoQ).

He added that the bank is also on track to achieving loan growth of 6.5% YoY and 0.5% QoQ in Q2 2022. This would be driven mainly by network customers expanding overseas to acquire logistics, data centre and student accommodation properties and sustainable finance.

Finally, he expects OCBC’s net interest margin (NIM) to expand by four basis points (bps) on a quarterly basis to 1.59%.

Meanwhile, RHB analysts kept their ‘buy’ rating and price target of S$13.90 earlier this month.

‘OCBC Bank’s share price is almost unchanged year-to-date, retreating from the 18% year-to-date gain in mid-February 2022,’ the analysts wrote.

‘While recessionary fears may persist in the near term, its decent dividend yield (of approximately 5%) should provide share price support while the current price-to-book value of 0.9 times is undemanding.’

With the US Federal Funds Rate (FFR) rising faster than earlier anticipated, RHB also expects a meaningful uplift in OCBC's NIM in 2022.

‘NIM, having ticked up 3bps QoQ in the first quarter of 2022, should see progressive expansion in the quarters ahead as Singapore banks have started to raise lending rates following the FFR hikes in March (+25bps) and June (+75bps),’ RHB added.

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