Citigroup raises OCBC (O39.SG) to Neutral from Sell, saying valuations look compelling.
“Although management post-3Q results adopted a cautious stance on growth (mid-single digit loan growth, possible further NIM slippage) citing low visibility on the broader macro outlook, current minus-one standard deviation PER and P/B valuation levels should have downside protection given OCBC’s continued best-in-class asset quality (3Q-specific loan provisions 7 bps) and solid capital base.”
Post-3Q12 results, the house’s core profit forecasts assume single-digit loan growth and further modest NIM slippage into 2013; “ample global liquidity and low rates make early NIM recovery unlikely, but equally support healthy treasury profits and suggest that provisions will remain below normalised levels.”
It tips a favourable risk-reward if NIM stabilisation and improving macro data materialise in coming quarters. It lifts its target to $9.75 from $9.15 after tweaking earnings estimates. It upgrades its view on Singapore banks to Neutral from Underweight in its Asian regional banks portfolio. The stock is up 0.6% at $9.20.
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