OCBC Earnings: Growth in Wealth Management Underpins Solid Results

We maintain our fair value estimate of SGD 17 per share for Overseas Chinese Banking Corp., or OCBC, 15% above the current share price and around 1.35 times 2024 book value. Second-quarter results were mostly in line with expectations, though annualized return on equity, or ROE, of 13.7% came in a bit above our full-year forecast of 13.5% thanks to wealth-management revenue growing by a midteens percentage. OCBC’s good performance was, however, broad-based—net interest income and noninterest income were both up (with net interest income growing even as net interest margin narrowed a bit), expense control generated positive operating jaws, and annualized credit costs remained benign at 19 basis points of loans. It was reassuring to see the ratio of nonperforming assets remaining stable across geographies, including in Hong Kong where increases in nonperforming assets were reported recently by some peer banks.