Apparently, the management of OCBC Bank decided to press the panic button. On 10 May 2019, OCBC announced a set of pretty decent Q1FY2019 results that saw net profits rising 11% to $1.23 billion. Despite the rosy report card, dark clouds loom head for OCBC share price as chilling effect of the property cooling measures is starting to take effect. To rub salt to injury, the issue of the ailing oil and gas sector has returned to haunt OCBC share price yet again. Against this backdrop, management had decided to launch a rescue mission for OCBC share price.
To be fair to the management, OCBC had achieved a breakthrough in the latest quarter as net interest margin has increased to 1.76%, up from 1.67% in Q1FY18. Return on equity (ROE) for 1Q19 has also improved to 12.0%, as compared to 11.8% in 1Q18. In view of such impressive performance, OCBC share price should be bullish. Yet since the release of the latest financial results, OCBC share price had slumped from $11.40 to the current $10.95.
In my view, the recent correction of OCBC share price is not unique to the bank alone. Both DBS and UOB suffered similar meltdowns due to market sentiments over the escalating trade war between United States and China. The fear is that the trade dispute could impact trade loans and lead to global economic downturn. In the last round of trade tariffs between the two countries, stock market had tanked and local bank stocks were not spared. Nonetheless, fear of a full scale economy downturn proved to be unfound. It seems that the trade disputes had mauled market sentiments but business fundamentals had not been disrupted, at least not yet.
The recent pull-back of OCBC share price should be attributed to its housing loan performance and the loan farmed out to the oil and gas sector. The fate of OCBC share price would have been worse if the management had not embarked on an aggressive shares buy-back in May 2019. So, what is the outlook for OCBC share price in FY2019?
OCBC share price faces destiny
The latest property cooling measures were implemented in July 2018. Time flies and it is almost a year since the introduction of the property curbs. Based on the OCBC latest financial results, the bank is starting to feel the chilling effect from the policy. From March 2018, the quantum of housing loans decreased from $65 billion to the current $63.7 billion. As a result, investors probably fled for their lives and stunted OCBC share price in the process.
The housing loan data for OCBC came as a shock to me because [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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