OCBC share price won the battle but lost the war

It’s official. 3QFY2019 results for OCBC showed that the Hong Kong protests did not rupture its businesses nor impact its growth. On the contrary, OCBC Hong Kong actually reported an 11% increase in net profit on year-on-year basis. In this regard, many investors must be able to sleep better at night. But is OCBC share price really out of the woods?

Despite taming the menacing fallout from the Hong Kong protests, there are signs that OCBC share price have peaked. In today’s context, it is unlikely that OCBC share price will hit the giddy high of $13.80 in 2018. The latest financial results revealed some hits and misses for the venerable bank. In this article, lets delve into the quality of OCBC 3rd quarter earnings and the potential outlook for OCBC share price.

OCBC share price

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in this counter before. Whether OCBC share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

OCBC share price at cross-roads

In the stock market, confidence means everything. This is especially for bank stocks. In this regard, OCBC share price is currently facing headwinds caused by the cautious market sentiments and slowing Singapore economy.

While the unfolding Hong Kong protests had not inflicted any collateral damages to OCBC’s business momentum in Hong Kong, net profit declined 6% to $1.17 billion for 3QFY2019. The net profit was slightly higher than UOB’s $1.12 billion. But then again, OCBC had a lower net interest income of $1.6 billion and lower net interest margin of 1.77%. As a bank, investors will always judge OCBC share price based on the net interest income because this is the core business income of banks.

Bullionstar

The culprit for the lower quarterly profit was the result of “a one-time charge of S$91 million due to a refinement in the Group’s Expected Credit Loss (“ECL”) modelling approach for its Indonesian banking subsidiary, Bank OCBC NISP, relating to allowances for non-impaired assets”. Allowances increased 262% to $179 million as compared to last year. Moving forward, OCBC share price will be vulnerable to more allowances as Singapore economy sours and bad loans soar.

Another factor that could disrupt OCBC share price is the [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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Updated: November 11, 2019 — 1:17 am

2 Comments

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  1. Hi Gerald, along with the 3Q results out, you seem to have changed your viewpoints towards these 3 bank counters. I would say, much more bullish than a month ago.

  2. Hi Leo,

    It seems that I have over-estimated the impact of the Hong Kong riots to local banks and also the chilling effect of the property cooling measures. Surprisingly, the banks had managed the headwinds pretty wind. This could provide the impetus for a potential bull run for the local bank stocks in the coming months. Just my view only. Of course, things could turn sour in the blink of eye for the banks.

    Regards,
    Gerald
    https://sgwealthbuilder.com

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