---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 173761
conversation_id: daa8930b-faef-44e3-a6d0-0e46566fe13b
citations: 15
created: 2026-05-31 21:35:17Z
---

# Is CLSA incrementally more positive/negative on OCBC. If so, why?

**Yes — CLSA has turned incrementally MORE NEGATIVE on OCBC over 2025.** OCBC was formally **downgraded from Outperform (O-PF) to Hold (HLD)** on 7 April 2025 when coverage transferred to analyst Marcus Liu, and it has remained the **least-preferred** of the three Singapore banks ever since (preference order: **UOB > DBS > OCBC**) [1][2][3]. The latest sector check (30 June 2025) reinforces a cautious set-up into 2Q25 results [latest CLSA corpus date in this matched set].

---

## Rating trajectory (CLSA corpus, most recent = 30 June 2025)

| Date | Document | OCBC Rating | OCBC TP (S$) | Sector Preference |
|---|---|---|---|---|
| 26 Feb 2025 | OCBC 4Q24 first thoughts | O-PF | n/a (pre-transfer) | — |
| **7 Apr 2025** | **Singapore banks – Capital shelter** | **O-PF → HLD (downgrade)** | **15.70 → 15.90** | UOB > DBS > **OCBC** [3] |
| 23 Apr 2025 | Singapore banks – Yield wield | HLD | 15.90 | UOB > DBS > OCBC |
| 9 May 2025 | OCBC 1Q25 first thoughts | HLD | 15.90 | — |
| 13 May 2025 | Singapore banks – On the defensive | HLD | **15.90 → 16.20** | UOB > DBS > OCBC [8][9] |
| 20 May 2025 | Singapore banks – Stuck in neutral | HLD | 16.20 (up/downside –0.1%) | UOB > DBS > OCBC [15] |
| 30 Jun 2025 | Singapore financials – Awaiting clarity | HLD (unchanged) | 16.20 | UOB > DBS > OCBC |

The recommendation-history table in the 13-May note formalises the trajectory: **Jun 2024: O-PF → HC O-PF → HC U-PF; Apr 2025: HLD → U-PF** — a clear de-rating arc through 2024-25 [13].

---

## Why CLSA is more negative on OCBC

### 1. Highest rate sensitivity — biggest NIM hit from Fed/SORA cuts
CLSA's NIM-to-SORA regression shows **OCBC has the steepest slope (0.21)** vs UOB (0.14) and DBS (0.17), meaning **OCBC's NIM compresses the most** as rates fall. Per 25bp Fed cut, CLSA estimates an NII hit of **S$141m for OCBC** vs **S$97m for UOB**, and notably both estimates are *above* company guidance ranges (OCBC guides S$100-125m) [11].

> "For OCBC, we downgrade to Hold, given it is likely to see most pressure from lower rates in the coming years. Past crises have also seen share price underperform versus peers." [2]

### 2. 1Q25 confirmed the thesis — NIM collapse
1Q25 was the validating data point. OCBC's NIM contracted **-11bps QoQ**, vs **flat at UOB** and **-3bps at DBS** — described by CLSA as "**starkly inferior**" [5][7].

| 1Q25 metric | DBS | **OCBC** | UOB |
|---|---|---|---|
| NIM QoQ | -3bps | **-11bps** | 0bps |
| Total income YoY | +6% | **+1%** | +4% |
| Pre-provision profit YoY | +6% | **-2%** | +7% |
| NPAT YoY | -2% | **-5%** | 0% |

OCBC was the **only one of the three with declining PiP** in 1Q25 [6].

### 3. Earnings cut on lower NIM assumptions
Post-1Q25, CLSA **cut OCBC EPS by 2-4% for 2025-27CL** "mostly as a result of lower NIM assumptions, given the sharper drop-off in 1Q25 and the lower SORA rate environment." TP only moved S$15.90 → S$16.20 — and that lift was a *PE multiple normalisation* (long-term average vs -1 s.d. prior) rather than an earnings upgrade. **Implied upside is essentially zero (-0.1% to -0.2%)** [8][15].

### 4. Weakest yield support / capital return — the key reason to own the sector
CLSA's central case for owning Singapore banks is yield. On their metrics:
- DBS 12m fwd dividend yield 7.7%, UOB 7.2%, **OCBC 6.3%** (laggard).
- Including buybacks, 2025CL total payout yields are 8.6%/8.5%/**7.0%** for DBS/UOB/OCBC.
- OCBC's S$2.5bn capital return over two years (10% as specials) is generous but smaller and less front-loaded than DBS's S$3bn buyback [6].

> "OCBC also has the lowest level of yield support, which forms a key reason to own these banks right now." [2]

### 5. Greatest tariff/HK exposure
- OCBC management's own first-order tariff impact estimate is **~3% of book**, vs DBS 1-2% and UOB ~2% — the **highest of the three** [14].
- OCBC also has meaningful **Hong Kong/China CRE and HKD-loan exposure**; CLSA flags this jointly with DBS as an asset-quality / NIM watchpoint as 1M HIBOR has fallen [15].

### 6. Investor sentiment confirms the de-rating
In CLSA's investor marketing (May 2025): "Conversations on OCBC understandably centred on NIM, given the 11bp contraction in 1Q25, in stark contrast to peers. While management stressed the bulk of the contraction for this year is already done, **investors are mostly in a wait-and-see mode**" [15].

### 7. June 2025 setup — incremental headwinds into 2Q25
The most recent CLSA sector note (30 Jun 2025) is cautious into 2Q25 results: **business loan growth slowing**, loan-to-deposit ratios at long-term lows, and SORA trends expected to **weigh on margins further** — a set-up that disproportionately hurts the bank with the highest rate sensitivity (OCBC).

---

## Bottom line

CLSA is **incrementally more negative** on OCBC for four converging reasons:

1. **Structural**: highest NIM-to-SORA sensitivity → biggest earnings hit as rates fall.
2. **Cyclical**: 1Q25 NIM collapse (-11bps) confirmed the rate-sensitivity thesis, forcing 2-4% EPS cuts.
3. **Defensive merit weakest**: lowest dividend yield and smallest/least-front-loaded capital return — undercuts the "yield shield" rationale for owning SG banks in a tariff-volatile world.
4. **Risk asymmetry**: highest stated tariff exposure (3% of book) plus HK/China CRE/HKD-loan concentration.

The downgrade to Hold (Apr 2025) and the persistent "least-preferred" ranking in every subsequent CLSA Singapore banks note (Apr 23 / May 13 / May 20 / Jun 30) is consistent — OCBC is being treated as the **funding name** for long-UOB/long-DBS positioning, not as a stand-alone idea.

---
**Sources**
[1] Singapore banks (Capital shelter) — CLSA (7 Apr 2025) — 607955234LinqAlpha.PDF — Order of preference UOB > DBS > OCBC
[2] Singapore banks (Capital shelter) — CLSA (7 Apr 2025) — "Why we downgrade OCBC to Hold"
[3] Singapore banks (Capital shelter) — CLSA (7 Apr 2025) — Rating table: OCBC O-PF → HLD, TP S$15.70 → S$15.90
[4] Singapore banks (Capital shelter) — CLSA (7 Apr 2025) — Order of preference UOB > DBS > OCBC (recap)
[5] OCBC - HLD (Business update first thoughts) — CLSA (9 May 2025) — 1Q25 NIM -11bps "starkly inferior"
[6] OCBC - HLD (Business update first thoughts) — CLSA (9 May 2025) — 1Q25 key metrics comparison table
[7] Singapore banks (On the defensive) — CLSA (13 May 2025) — "OCBC - margins a concern"
[8] Singapore banks (On the defensive) — CLSA (13 May 2025) — Trimming EPS 2-4%, TP to S$16.20, retain HLD
[9] Singapore banks (On the defensive) — CLSA (13 May 2025) — Still prefer UOB ahead of DBS and OCBC
[10] Singapore banks (Stuck in neutral) — CLSA (20 May 2025) — Investor feedback: NIM dominates OCBC conversation
[11] Singapore banks (Capital shelter) — CLSA (7 Apr 2025) — NII sensitivity table (OCBC NIM SORA slope 0.21, highest)
[12] Singapore banks (Capital shelter) — CLSA (7 Apr 2025) — OCBC sees most NIM compression as SORA falls
[13] Singapore banks (On the defensive) — CLSA (13 May 2025) — OCBC recommendation history table
[14] Singapore banks (On the defensive) — CLSA (13 May 2025) — OCBC tariff first-order impact ~3% of book, highest of three
[15] Singapore banks (Stuck in neutral) — CLSA (20 May 2025) — OCBC HLD, TP S$16.20, –0.1% up/downside; HIBOR + HK CRE risk

## Citations

- [1] **607955234LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607955234LinqAlpha.PDF>
- [2] **607955234LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607955234LinqAlpha.PDF>
- [3] **607955234LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607955234LinqAlpha.PDF>
- [4] **607955234LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607955234LinqAlpha.PDF>
- [5] **607958690LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607958690LinqAlpha.PDF>
- [6] **607958690LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607958690LinqAlpha.PDF>
- [7] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [8] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [9] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [10] **607959993LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959993LinqAlpha.PDF>
- [11] **607955234LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607955234LinqAlpha.PDF>
- [12] **607955234LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607955234LinqAlpha.PDF>
- [13] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [14] **607959041LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959041LinqAlpha.PDF>
- [15] **607959993LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959993LinqAlpha.PDF>

