OCBC Earnings: Singaporean Bank Surprises to Upside As Net Interest Margins Drop Less Than Forecast

We maintain our narrow moat rating and fair value estimate of SGD 16 for Oversea-Chinese Banking, after its first-quarter earnings. Annualized return on equity, or ROE, was 14.7%, well above our full-year forecast of 12.6% (which we are now raising to 13.5%), mainly due to some unexpected firmness in net interest margin, down only 1 basis point from the prior quarter to 2.30%, compared with OCBC’s previous guidance for full-year NIM to be around 2.10%. OCBC lifted that guidance and now sees NIM around 2.20%; our new full-year assumption is 2.22%.