OCBC

OCBC: Deutsche has earnings preview. Note that 4Q11 on 20 Feb and house expect revenue recovery. Expect Net profit of $547m (+7% QoQ and +8% YoY), sequential profit growth driven mainly by better rev, with non-interest income likely to recover from a tough 3Q11.

Stock is well off its highs and has underperformed local peers in the recent rally. A solid set of 4Q11 earnings should see the stock well supported. Overall, expect margins flat/down slightly QoQ but recent SOR have been positive while bank commentary suggests improved pricing power as a result of reduced European bank participation in the mkt.

Domestic deposit rate cuts late in 3Q11 should also provide modest NIM benefits across the sector. Lending is slowing although SG system statistics show 4% QoQ growth which is a decent outcome and supports 17% YoY net interest income growth forecast. Given recent macro trends, 3Q11 credit costs of just 12bps seem likely to represent the trough of this cycle (4Q11e 32bps).