In major news on Singapore stocks, shares of Oversea-Chinese Banking Corp. Ltd. (SG:O39), or OCBC, slipped over 3% in early trade this morning after missing Q4 earnings estimates and announcing a lower-than-anticipated dividend. For the three months ending December 31, 2023, OCBC posted a 12% year-over-year increase in its net income to S$1.62 billion, lower than the consensus estimate of S$1.71 billion. The miss was mainly due to lower insurance income.
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OCBC declared a 21% jump in its Fiscal 2023 dividend to S$0.82 per share, representing a 53% payout ratio. The bank was able to boost its dividend due to full-year earnings of S$7.02 billion, up 27% annually.
Further Details About OCBC’s Performance
SGX-listed OCBC is one of the oldest and largest banks in Singapore, with a solid regional dominance. For Q4 FY23, net interest margin (NIM) fell to 2.29%, down 2 basis points from the year-ago period. Even so, net interest income rose 3% and non-interest income grew 25% compared to the prior year period. Allowance for loan losses declined meaningfully by 41% compared to Q4 FY22.
Looking ahead, CEO Helen Wong warned of persistent pressure from macro and geopolitical headwinds. Also, net interest margin (NIM) for Fiscal 2024 is expected in the range of 2.2% to 2.25%, down from 2.28% in 2023. This is owing to the fact that the global central banks are expected to reduce interest rates in the upcoming months.
Here’s What Analysts Say About the Results
Analysts believe that shareholders are seemingly disappointed by the dividend announcement. Here are some of their initial responses to the results.
Goldman Sachs analyst Melissa Kuang said that OCBC’s dividend guidance is weak even though the bank has continued to build up solid capital over the quarters.
Similarly, analysts at Citi believe the increased dividend amount may not impress investors.
Meanwhile, Morgan Stanley analyst Nick Lord said that the earnings miss, which was in part due to lower insurance income, is a “major” hit.
Is OCBC a Buy Now?
On TipRanks, O39 stock has a Moderate Buy consensus rating based on only one rating received during the past three months. The Oversea-Chinese Banking Corp. Ltd. share price forecast of S$15.30 implies nearly 15% upside potential from current levels.
