Has the share price of OCBC peaked? This is a question many investors are asking as they observe the recent decline in OCBC’s share price after reaching a 5-year high of $13.30 on July 31, 2023. Despite the bank delivering solid financial results driven by interest rate hikes, the share price remains flat year-to-date. So, what could be the reasons behind this stagnant performance?

On August 4, 2023, investors were taken aback when OCBC announced a net profit of only $1.71 billion for the second quarter of FY2023. This represented a 9% decline compared to the previous quarter. Among the three major banks, OCBC Bank fared the worst, with DBS’ net profit increasing by 2% and UOB experiencing a 6% decline. Although OCBC’s weak result for 2QFY2023 was overshadowed by the interim dividend, which was raised to $0.40, up 43% year-on-year, investors may still see it as a cause for concern.

OCBC attributed the income decline in the second quarter to higher allowances. The total allowances for 2QFY2023 amounted to $252 million, an increase from $110 million in 1QFY2023. Notably, the largest amount of non-performing assets came from Greater China, amounting to $829 million. With the recent bankruptcy filing by Evergrande, investors may be worried about OCBC’s exposure to the troubled Chinese real estate sector. This concern could explain the current bearish trend in OCBC’s share price.

The latest financial results show that OCBC has a loan exposure of $73 billion to Greater China as of June 2023. This substantial exposure to an uncertain market further adds to investors’ apprehension and may be contributing to the lackluster performance of OCBC’s share price.

In summary, despite delivering good financial results supported by interest rate hikes, OCBC’s share price has remained flat this year. The decline in net profit for the second quarter of FY2023 and the increased allowances, particularly from Greater China, have raised concerns among investors. The bankruptcy of Evergrande has further intensified worries about OCBC’s exposure to the Chinese real estate sector. These factors combined may explain the current bearish form of OCBC’s share price.

In my opinion, while the recent challenges have certainly impacted OCBC’s share price, it is important to consider the long-term potential of the bank. The interest rate hikes, although not fully reflected in the share price at the moment, can contribute to future profitability. Additionally, there is still room for recovery in the Chinese real estate market, which could positively impact OCBC’s loan exposure. Ultimately, investors should carefully evaluate these factors and consider the potential for OCBC’s share price to bounce back.

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Benjamin Low
Benjamin Low

Benjamin is known as The Passive Income Guy. He has helped hundreds of people to build passive income. He is also a member of the Million Dollar Round Table, and Certified Financial Planner™ (CFP®) and Certified Private Banker (CPB).

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