OCBC

OCBC: 4Q12 results above expectations. Net profit at $663m, +12% yoy, beating Bloomberg consensus of $624m, as higher non-interest income offset narrowed lending margins. Net interest income was $921m, -0.4% yoy, as the positive impact arising from loan growth was reduced by a 15 bps decline in net interest margin (annualized 1.7% vs 1.85% yoy), attributed to pricing competition and limited interbank gapping opportunities in a flat yield curve environment. Non-interest income grew 32% yoy to $757m. Fee & commissions income was up 18% yoy at $304m, led by strong growth in wealth mgt income and loan-related fees. Net trading income declined 17% to $136m, while profit from life assurance more than quadrupled to $210m, boosted by strong underwriting profits and improved investment performance of Great Eastern’s Non-Participating Fund. Cost-income ratio was 43.1% vs yr ago 41.4%, 3Q was 40.3%. ROE cash basis 11.5% vs yr ago 11.5%. Tier 1 ratio continued to strengthen to 16.6% vs yr ago 14.4%; 3Q12 was 15.9%. Market may cheer the higher final div of $0.17/sh (4Q11: $0.15/sh), bringing FY12 total div to $0.33, +10% yoy. Mgt says market outlook remains uncertain; sees global economy posting “low-to-moderate growth” in year ahead. Nevertheless, believes the bank is well-placed to “pursue new opportunities”. OCBC’s positive results may give sector sentiment a boost, after DBS on 6 Feb posted 4Q12 results that missed estimates. UOB is scheduled to report its results 27 Feb. At last close at $10.03, OCBC trades at 1.5x P/B, offers 3.3% yield. DMG last had a Neutral rating with TP $8.80 but says its recommendations are under review pending analyst briefing.