July 2025 Investment Note

OCBC shares have come under pressure ahead of the bank’s upcoming earnings report expected in early August. This decline is largely driven by cautious sentiment rather than confirmed negative results. Here are the key reasons:

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🔑 Key Factors Behind the Drop:

1. Shrinking Net Interest Margins (NIM):

Lower global interest rates are squeezing bank lending margins. OCBC’s NIM was already down to ~2.04% in Q1 FY2025, and further compression is expected.

2. Weaker Sequential Outlook:

Analysts forecast a quarter-on-quarter decline in earnings, citing lower contributions from trading and wealth management after a strong Q3.

3. High Base from Prior Quarters:

Q3 FY2024 was unusually strong, making it harder for upcoming quarters to show growth, especially with softer non-interest income.

4. Capital Return Priced In:

The S$2.5 billion capital return plan via dividends and buybacks was well received earlier, but it’s now largely factored into the stock price.

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🧭 What to Watch in Upcoming Earnings:

• Updated NIM and net interest income trends

• Wealth management and fee income performance

• Credit provisions and asset quality

• Guidance on loan growth and dividend sustainability

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📝 Analyst View:

Brokerages including CGSI and RHB have trimmed their target prices and revised OCBC to “Hold”, reflecting near-term earnings risk despite strong fundamentals.

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Summary:

OCBC remains a fundamentally strong bank, but market expectations have been tempered by margin pressure and a high base effect. Long-term investors may view this dip as a potential accumulation opportunity—pending confirmation from Q2 results.