OCBC

OCBC: UOB Kay Hian has earnings preview. Note that bank growing in tandem with industry peers. Expect OCBC to register loan growth of 5% qoq in 3Q11, while Net interest margin (NIM) was affected by SOR rates turning temporarily negative in Aug. According to mgt, less than half of its corporate loans and housing loans use SOR as reference rate.

Fee income should stays resilient, while Bank of Singapore’s AUM was US$30b, an increase of 30% yoy. However, customers have low appetite for taking risk and are holding basic plain vanilla products, which command narrower margins.

For investment banking, OCBC was manager, underwriter and placement agent for IPO of Sheng Siong, a chain of groceries, which was also well traded in the secondary market. Expect lower contribution from life insurance. The yield curve has flattened in both Singapore and Malaysia.

Asset quality intact as Mgt has not seen any signs of stress in its loan portfolio but have, nevertheless, stepped up vigilance and scrutiny on underwriting standards.

Tip OCBC to report net profit of $541m for 3Q11, a decline of 5.1% yoy and 5.9% qoq. Forecast lower contribution from Great Eastern but core banking businesses in SG, Msia and Indonesia are expected to remain resilient.