I’ve been getting quite a few questions for my latest views on banks.
As we all know, bank earnings (and share price) has been very strong in 2024.
But with the Feds (and global central banks) on a rate cut cycle – will 2025 be as kind to the banks?
As shared with FH Premium subscribers, I now think there is a risk that if not properly handled by policy makers, inflation may return in 2025, which could wreak havoc on the Fed rate cut cycle.
With all the uncertainty in play, is OCBC Bank at 1.25x book value and 5.8% dividend yield a good buy?
Let’s dive in.
Price Action for OCBC Bank remains bullish
Price action for now remains bullish.
OCBC Bank’s share price has been trending up since March 2024, and remains in an uptrend today.
Share price is up almost 20% in 2024 alone (excluding dividends).
Zooming out into the weekly chart – share price has clearly broken out of the 2021-2023 range it was stuck in for 2 years.
OCBC Bank’s Earnings are solid no doubt about it
I extracted some charts below from the 1H24 earnings, but frankly I don’t think there is much to discuss there.
Across the board, OCBC’s earnings are solid, there’s no doubt about that.
The core earnings business remains very strong, with 1H 24 NII coming in at all time highs (although net interest income peaked in 4Q 2023).
Other business lines for OCBC are doing well
Wealth Management income is up 14% on a year on year basis.
Insurance is up 40% on a year on year basis.
According to OCBC this is due to strong sales momentum from Singapore and Malaysia, which I suppose reflects the strong economic