OCBC share price torpedoed by Great Eastern

What a downer! In a month in which most investors expect local banks to announce rosy financial results, OCBC dropped the bombshell of a less-than-flattering Q4 performance. In a twist of event, OCBC share price got bombed out after delivering a lower Q4 net profit of 11% at $926 million. The surprise culprit for the disastrous performance was OCBC’s flagship subsidiary – Great Eastern Holdings, which announced a stunning 30% drop in net profit.

Of course, one quarterly result does not define OCBC share price but OCBC management team was left absolutely red-faced as DBS and UOB both announced increasing profits of 8% and 7% respectively for the fourth quarter. Certainly, investors wasted no time in punishing OCBC share price. OCBC share price went into goofy mode, falling from $11.60 on 21 February 2019 to $11.30 on 25 February 2019.

OCBC share price

While OCBC share price got walloped by lower contributions from its insurance subsidiary, its core banking operations delivered a robust performance which saw it growing 22% from a year ago to $817 million. Net interest income increased 9% year-on-year to $5.89 billion from $5.42 billion in FY17. Customer loans grew 9% to S$258 billion across all key markets. Based on these data, investors should not panic over OCBC share price and should instead stay calm.

Unlike DBS, OCBC is not a growth stock. Instead, OCBC share price is shaped primarily by several factors – shares buybacks, short-selling attacks and fund house buying. In this article, the drivers for OCBC share price are examined.

OCBC share price under pressure

Since 8 May 2018, OCBC embarked on some sort of aggressive share buy back which saw a whopping of 10.2 million of shares being acquired from the open market. The shares were bought when OCBC share price was trading at an average of about $11.00. Thus, OCBC would have spent an estimated $110 million on share repurchase. Despite the encouraging support from the share buy backs, OCBC share price suffered a poor run in the latter half of last year.

Similar to DBS share price, OCBC share price went into meltdown mode and experienced a correction of 25%. After hitting a high of almost $14 in May 2018, OCBC share price crashed to a low of $10.40 in October 2018. The culprits for causing the bearish sentiments were [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

Username
Password

» Lost your Password?

Not a member yet? You may sign up to become a member of SG Wealth Builder. The full benefits and privileges of SG Wealth Builder Membership:

  1. Access to the latest premium articles of SG Wealth Builder
  2. Email notifications of latest blog articles
  3. Bonus investment report on SGX stocks
  4. Access to Wealth Forum for investment ideas and discussion
  5. Request for coverage on stocks, insurance and other personal financial topics
  6. Comment in articles and Wealth Forum
  7. Future network opportunities

SG Wealth Builder Membership

You may sign up for the SG Wealth Builder Membership for only $15 per month. As a member, you can access all the articles, including the premium ones.

Note: After payment is made, you will be prompted with registration form to create your user-id and personal password.

Updated: March 23, 2019 — 3:30 pm

1 Comment

Add a Comment

Leave a Reply