Rejuvenated. That is the feel I get when I browsed through the annual report. Besides the new faces in some of the leadership roles, there are some strategy tweaks here and there which might help the group to grow further. The section of “Upfront with……” provides a good read as the key personnels share what they are thinking and doing. A check back shows that this section was there since FY2020 annual report.

The following excerpts are what I picked up from CEO Helen’s section that resonated with me.

With the retirement of some of our senior leaders, there have been new members joining our senior leadership team. These additions came from both our internal talent base as well as external hires. Together, we have the right mix of experience and perspectives in the senior leadership team to be able to deliver on our Corporate Strategy and drive sustainable growth.

“Courage: Oftentimes, someone just needs to tip the first domino and set things in motion. We have done that in the past. We were the first bank in Southeast Asia to say we would stop funding new coal-fired power plants and to announce a target for sustainable finance. Bank of Singapore was the first in Asia to incorporate ESG factors in assessing investment funding. We will continue to play this leadership role.”

“We have made some structural changes to our franchise in Hong Kong. Since OCBC Bank acquired Wing Hang Bank in 2014, Hong Kong branch and the renamed OCBC Wing Hang remained separate entities. In December 2021, we reached a significant milestone with the integrated platform of Hong Kong branch and OCBC Wing Hang………This change was foundational for us given the importance of Hong Kong. Together with Singapore as the nexus of ASEAN, and Hong Kong as the gateway to Greater China, we have successfully captured the increasing ASEAN-Greater China trade and investment flows.”

“2023 will hopefully be the year where we can put Covid firmly in our rear-view mirror. China’s faster-than-expected reopening and policy stimulus has made this more of a possibility, barring any setbacks. Trade and investment flows between Greater China and ASEAN will pick up as a result and we expect wealth flows to increase as well.”

Similar to UOB, they are looking at ASEAN market. And with her vast experience in Greater China, she should be able to bring in new growth for the group.

What do I expect in the coming year? (Not a recommendation)

OCBC has always been valued lower as compared to UOB and DBS. It could be their size or relatively weaker performance in previous years. With a strong showing for FY2022, the latest metric shows that it is currently valued lower than its past 5 years (excluding 2020) average.

Average PE 2018 to 2022 (excl. 2020)10.38
Average PNAV 2018 to 2022 (excl. 2020)1.10
Average Div Yield 2018 to 2022 (excl. 2020)4.6%

Assuming a flattish net interest income and improvement in non-interest in the coming year, a 5-8% increase in net profit seems plausible (this guess is not based on any computation, so is likely to be incorrect!). Using a dividend yield of 4.8%, then will translate to a price of $13.9 to $14.3 next year.

At the time of writing, OCBC takes up 6.2% of my portfolio.

Note: The group just published their responses to the substantial questions. Similar questions to those posted at UOB’s AGM. A pretty good read, you can access it by clicking here.