What a downer! In a month in which most investors expect local banks to announce rosy financial results, OCBC dropped the bombshell of a less-than-flattering Q4 performance. In a twist of event, OCBC share price got bombed out after delivering a lower Q4 net profit of 11% at $926 million. The surprise culprit for the disastrous performance was OCBC’s flagship subsidiary – Great Eastern Holdings, which announced a stunning 30% drop in net profit.
Of course, one quarterly result does not define OCBC share price but OCBC management team was left absolutely red-faced as DBS and UOB both announced increasing profits of 8% and 7% respectively for the fourth quarter. Certainly, investors wasted no time in punishing OCBC share price. OCBC share price went into goofy mode, falling from $11.60 on 21 February 2019 to $11.30 on 25 February 2019.
While OCBC share price got walloped by lower contributions from its insurance subsidiary, its core banking operations delivered a robust performance which saw it growing 22% from a year ago to $817 million. Net interest income increased 9% year-on-year to $5.89 billion from $5.42 billion in FY17. Customer loans grew 9% to S$258 billion across all key markets. Based on these data, investors should not panic over OCBC share price and should instead stay calm.
Unlike DBS, OCBC is not a growth stock. Instead, OCBC share price is shaped primarily by several factors – shares buybacks, short-selling attacks and fund house buying. In this article, the drivers for OCBC share price are examined.
OCBC share price under pressure
Since 8 May 2018, OCBC embarked on some sort of aggressive share buy back which saw a whopping of 10.2 million of shares being acquired from the open market. The shares were bought when OCBC share price was trading at an average of about $11.00. Thus, OCBC would have spent an estimated $110 million on share repurchase. Despite the encouraging support from the share buy backs, OCBC share price suffered a poor run in the latter half of last year.
Similar to DBS share price, OCBC share price went into meltdown mode and experienced a correction of 25%. After hitting a high of almost $14 in May 2018, OCBC share price crashed to a low of $10.40 in October 2018. The culprits for causing the bearish sentiments were [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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