OCBC Misses Revenue Estimates: Analysts Scramble to Revise Models

Ladies and Gentlemen, buckle up! We've got a major development in the banking sector that you need to know about. Oversea-Chinese Banking Corporation Limited (OCBC) just missed its revenue estimates by 5.1%, and the market is buzzing with the news. Let's dive into what this means for investors and how analysts are reacting.



First things first, let's talk about the elephant in the room. OCBC reported a net profit of S$7.59 billion for the financial year ended 31 December 2024, an 8% increase from the previous year. Total income surged above S$14 billion for the first time, driven by record net interest income and strong non-interest income. But despite these impressive numbers, the bank fell short of analyst revenue estimates by 5.1%. OUCH!

So, what went wrong? Well, the devil is in the details. OCBC's net interest income rose to a new high of S$9.76 billion, but the net interest margin (NIM) was 8 basis points lower at 2.20%. This means that the rise in funding costs outpaced the increase in asset yields. Non-interest income growth was broad-based, rising 22% to S$4.72 billion, but it wasn't enough to offset the shortfall in net interest income.

Now, let's talk about how analysts are reacting to this news. They've been scrambling to revise their models, and the key adjustments they've made to their earnings and growth projections for the company are nothing short of dramatic. Jefferies analyst Sam Wong lowered the price target on OCBC to SGD14.50 (from SGD15.00) while maintaining a Hold rating. CLSA analyst Neel Sinha reiterated an Outperform (2) rating and SGD15.70 price target on OCBC, suggesting a more cautious outlook on the company's growth prospects. And Goldman Sachs analyst Melissa Kuang raised the price target on OCBC to SGD16.60 (from SGD15.40) while maintaining a Buy rating, indicating a more optimistic view on the company's earnings potential despite the revenue miss.



But here's the thing, folks. OCBC's performance is still impressive compared to its peers. The bank's non-performing loan ratio is at 0.9%, and its Common Equity Tier 1 Capital Adequacy Ratio (CET1 CAR) increased from 15.9% a year ago to 17.1%. This means that OCBC is in a strong position to weather any storms that may come its way.

So, what should you do as an investor? Well, if you're already invested in OCBC, don't panic. The bank's fundamentals are still strong, and its long-term prospects remain bright. But if you're thinking about investing in OCBC, now might be a good time to wait and see how the bank performs in the coming quarters. The market is unpredictable, and it's always better to be safe than sorry.

In conclusion, OCBC's revenue miss is a wake-up call for investors, but it's not the end of the world. The bank's fundamentals are still strong, and its long-term prospects remain bright. But as always, do your own research and make informed decisions. The market is a wild ride, and it's up to you to navigate the twists and turns. So, buckle up and get ready for the ride of your life!