---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 266391
conversation_id: 4507aea8-bf4f-4810-b749-7b791795e748
citations: 10
created: 2026-05-31 19:19:56Z
---

# What’s the bull case bear case for OCBC?

# Bull Case / Bear Case — OCBC (O39 SP)

OCBC reported 1Q26 on 8-May. Net profit was **SG$1.97bn** (+13% QoQ, +5% YoY), beating StreetAccount consensus of SG$1.87bn at both top and bottom lines [8][16]. The latest CLSA view in the corpus is from **30-Jun-2025** (sector note "Awaiting clarity") and **20-May-2025** ("Stuck in neutral"), so the framework below blends the post-results management commentary with the most recent sell-side coverage.

> **Note on coverage entity**: Singapore bank coverage in this RMS workspace is from **CLSA parent** (analysts Marcus Liu / Daxin Lin in Singapore, `@clsa.com`), not CLST. CLSA carries OCBC at **HC O-PF for UOB, HLD for OCBC, with TP S$15.90** [5]. Latest CLSA TP grid for the sector pegs OCBC at SGD 14.00 vs spot SGD 12.40 (~+12.9% upside), DBS +15.0%, UOB +13.6% — i.e., OCBC ranks third in CLSA's preference order.

---

## Bull Case

### 1. Diversified franchise / structural wealth + insurance optionality
OCBC is the only one of the three Singapore banks with a **fully integrated suite of banking, wealth management, asset management and insurance** (Bank of Singapore + Great Eastern), providing genuine cross-sell across the customer base. Asset quality is structurally sound — NPLs typically sub 1.5%, credit costs in the 15–20 bps range, and NPA coverage 120–140% over recent quarters [1]. 1Q26 reinforced this: **NPL ratio at 0.9% (unchanged for 8 consecutive quarters)** and NPA coverage rose to a multi-year high of **163%** [11].

### 2. Wealth is firing — the new structural growth engine
1Q26 saw **wealth fees +34% YoY**, with broad-based growth across private banking, bancassurance, treasury products, unit trusts and brokerage [9]. Group wealth management income hit SG$1.48bn (+14% QoQ, +11% YoY) — now **39% of group total income** [8]. Net new money inflows of S$5bn pushed Bank of Singapore AUM +12% YoY. StreetAccount notes that fee income growth **outperformed peers**, anchoring the bull thesis that NII drag can be more than offset by non-NII momentum [15].

### 3. HSBC Indonesia IWPB acquisition — accretive ASEAN wealth bolt-on
OCBC's IDR ≤SG$0.48bn-premium acquisition of HSBC's International Wealth & Premier Banking franchise in Indonesia [17] adds **SG$6.6bn of AUM** (mostly mutual funds, bonds, deposits) and modest credit-card balances — described by management as "**largely deposits, largely AUM** … sizable CASA … low-cost funding straight away" [14]. CLSA earlier identified Greater China / ASEAN expansion (OCBC Wing Hang, Ping An tie-ups) as a key catalyst if execution shows through [2]. Goldman's read: strategically aligned with the broader ASEAN wealth ambition; supports continued re-rating [15].

### 4. Capital return locked in + buyback flexibility
Capital position is **fully phased-in CET1 of 15.2%** vs medium-term target of 14%, even after the IWPB deal (which uses up to 0.2ppt of CET1) [12]. Management commits to completing the **SG$2.5bn capital return plan by FY26**, with the unused portion of the share buyback (~SG$800m remaining of S$1bn authorized) **flexibly returnable as a special dividend** in May-2027 if conditions don't favor open-market repurchase [13][15]. CLSA's capital-return model implies **2025CL total yield of 7.7%** (S$1.8 buyback + S$0.5 special = S$2.3/sh) and 2026CL of 6.9% [4][6].

### 5. Trading / non-NII record on the back of volatility
1Q26 customer flow income crossed **SG$400m for the first time (+35% YoY)**, supported by FX, hedging and corporate flows amid Middle East volatility [8]. The 1Q26 NIM print of 1.76% with March exit NIM at 1.75% indicates the rate-cut headwind is **decelerating**, while income from treasury assets has offset ~30% of the loan-rate impact [10].

### 6. Yield support
StreetAccount notes Singapore banks have been a defensive haven, with **CLSA's "Yield wield" theme** highlighting strong yields as the key attraction post-Liberation Day sell-off — capital return is the structural underpin. The stock hit **52-week highs in May at S$23.33 (+51% YoY)**.

---

## Bear Case

### 1. Worst-of-three NIM contraction — structurally lower-beta funding
The structural bear point: OCBC's **NIM contracted 11 bps QoQ in 1Q25 to 2.04%**, versus UOB **flat** and DBS **-3 bps** — CLSA called this "starkly inferior" [18][20]. In 1Q26 the NIM dropped further to **1.76%** (-23 bps YoY, -3 bps below 4Q25 day-adjusted) as **SORA fell >160 bps, HIBOR >120 bps, SOFR >60 bps YoY** [10]. CLSA flags continued SORA decline in 1H25, with swaps pricing in further drops — and OCBC has higher NIM sensitivity than UOB on the same SORA decline curve. NII sensitivity is **~SG$5m per 1bp** drop across SGD/USD/MYR/HKD (annualized) [10], with SGD the dominant driver.

### 2. Loan growth at risk of missing guidance
CLSA's 30-Jun-2025 update flags that **2025-to-date system loans were -0.4%**, putting "mid-single-digit loan growth targets at risk with five months of the year gone" — with manufacturing and business services dragging as corporates wait for trade-negotiation clarity [9]. Management is sticking to mid-single-digit guidance [6] but the gap to system data is widening.

### 3. CLSA / JPMorgan see limited capital-management ammunition
CLSA's HLD rating with **S$15.90 TP implies -2% potential** [5]. JPMorgan (Underweight, TP SG$20.00) explicitly says **"weak NII and limited capital management crimping upside"** and notes management is **not prepared to commit to capital-return plans beyond 2027** [15]. The bear read: post the SG$2.5bn return, the special-dividend optionality is a one-shot — beyond 2027, there's no clear new program.

### 4. Macro / Middle East / Greater China CRE overlays
Management has been "prudent" and added management overlays this quarter; **total credit costs rose to 23 bps annualized** (vs FY25 19 bps) [11]. While direct Middle East exposure is <3% of loans / <1% of assets, OCBC and DBS carry **higher Hong Kong / China CRE exposure than UOB** per CLSA — a known soft spot (1 HK CRE account drove ~SG$530m of new NPAs in 4Q24). Lower coverage ratios at peers may amplify any second/third-order macro shock.

### 5. Wealth talent / Dubai geopolitical noise
Management acknowledged the departure of Rajat Khanna in Dubai (Bank of Singapore) and possible further departures, although they characterize Dubai's contribution as "not that much" of total wealth AUM. Bear case: the regional wealth talent war means **competitor poaching can erode the wealth flywheel** just as the franchise becomes the primary growth driver.

### 6. Stock has run hard — relative preference is OCBC last
CLSA "Yield Wield" preference order: **UOB, then DBS, then OCBC**. "Stuck in neutral" notes investors near-unanimously prefer DBS then UOB then OCBC, citing OCBC's NIM contraction. Sell-side ratings on OCBC are **Buy 47% / Hold 41% / Sell 12%**, average target SG$23.20 vs spot ~SG$22.80 — implying only **+1.4% upside** despite the strong 1Q26 print [15]. CGS International **downgraded to Hold (TP S$23.30)** on 21-Apr; while Maybank upgraded to Buy (TP S$24.45) on 8-May, the dispersion (S$19.40 – S$25.50) signals genuine analyst disagreement [15].

---

## Bull/Bear Scorecard

| Dimension | Bull view | Bear view |
|---|---|---|
| **NIM** | March exit NIM 1.75% — decline decelerating; treasury asset deployment offsets 30% of loan-rate drag [10] | Worst-of-three NIM contractor; 1.76% in 1Q26 (-23bps YoY); SORA still drifting lower [10][18] |
| **Non-II / wealth** | Wealth fees +34% YoY; record non-NII SG$1.61bn (+20%); 39% of total income [8][9] | Wealth talent departures (Dubai); momentum may stall in 2Q on risk-off [15] |
| **Asset quality** | NPL 0.9% for 8 straight Q; NPA coverage 163%; <3% Middle East exposure [11] | Overlays rising; credit costs 23bps trending to upper bound of 20–25bps guide [6][11] |
| **Capital** | CET1 15.2% fully phased; SG$2.5bn return locked, ~S$800m left as buyback/special [12][13][15] | No commitment beyond 2027; JPM flags "limited capital management" [15] |
| **M&A** | HSBC Indonesia IWPB clean CASA-heavy bolt-on; earnings accretive from completion (Q2-2027) [14][17] | Integration & sovereign-rating risk in Indonesia; close 2027 means accretion lags |
| **Valuation** | 2025CL total return yield 7.7% [4]; structural ASEAN wealth re-rating story [15] | Spot ~+1.4% to average TP; CLSA HLD with -2% potential to S$15.90 [5][15]; preference order has OCBC last |
| **Sell-side stance** | Maybank upgrade to Buy, TP raised to S$24.45; GS TP raised to S$25.30 [15] | CGSI Hold (TP S$23.30); JPM Underweight (TP S$20.00); dispersion S$19.40–25.50 [15] |

---

## Synthesis

The bull case has structurally **improved** with 1Q26: wealth genuinely outpaces peers, the HSBC Indonesia IWPB deal is the cleanest possible bolt-on (deposits/AUM, not credit), and capital return is intact. The bear case is **mechanical and unchanged**: OCBC has the highest SORA-beta NIM of the three banks, its premium to peers on diversification has not translated into ROE leadership, and the stock now trades at multi-year highs against a sell-side average TP barely above spot. CLSA's HLD captures this — fundamental franchise quality, but bracketed by NIM headwind and a preference pecking-order that places it third behind UOB and DBS. The decisive variable for the next 6–12 months is **whether non-NII momentum (wealth + trading) can sustainably re-accelerate group profit growth** through the trough of the rate cycle; if SORA stabilizes (HIBOR rebounded 14bps in June already [7]) and the IWPB integration narrative builds, the HLD case erodes — if SORA grinds lower and wealth flows pause, the bear thesis dominates.

---

**Sources**

[1] OCBC investment thesis — *Singapore banks (Stuck in neutral)*, CLSA (20-May-2025)
[2] OCBC catalyst (Greater China) — *Singapore banks (Stuck in neutral)*, CLSA (20-May-2025)
[3] OCBC investment risks — *Singapore banks (Stuck in neutral)*, CLSA (20-May-2025)
[4] OCBC capital return yield projection (2025CL 7.7%) — *Singapore banks (Stuck in neutral)*, CLSA (20-May-2025)
[5] OCBC HLD rating, TP S$15.90, -2% potential — *OCBC - HLD (Business update first thoughts)*, CLSA (9-May-2025)
[6] OCBC FY26 guidance summary (NIM ~2%, CIR low-40%, credit cost 20-25bps, S$2.5bn capital return) — CLSA OCBC HLD note (9-May-2025)
[7] Singapore SORA decline trajectory — *Singapore financials (Awaiting clarity)*, CLSA (30-Jun-2025)
[8] OCBC 1Q26 results — Q1 2026 earnings call, OCBC (8-May-2026)
[9] OCBC 1Q26 wealth fees +34% — Q1 2026 earnings call, OCBC (8-May-2026)
[10] OCBC 1Q26 NIM (1.76%, March exit 1.75%) — Q1 2026 earnings call, OCBC (8-May-2026)
[11] OCBC 1Q26 NPL 0.9%, credit cost 23bps, NPA coverage 163% — Q1 2026 earnings call, OCBC (8-May-2026)
[12] OCBC 1Q26 CET1 (Transitional 17.0%, fully phased 15.2%) — Q1 2026 earnings call, OCBC (8-May-2026)
[13] OCBC S$2.5bn capital return plan completion by FY26 — Q1 2026 earnings call, OCBC (8-May-2026)
[14] OCBC commentary on HSBC IWPB acquisition (CASA-heavy, complementary) — Q1 2026 earnings call, OCBC (8-May-2026)
[15] Street Takeaways — StreetAccount, 14-May-2026 (analyst commentary: Maybank, GS, JPM, DBS)
[16] OCBC reports Q1 2026 net profit SG$1.97bn vs SA SG$1.87bn — StreetAccount, 7-May-2026
[17] OCBC announces agreement to acquire HSBC Indonesia IWPB (premium ≤SG$0.48bn) — StreetAccount, 4-May-2026
[18] OCBC 1Q25 NIM -11bps QoQ vs DBS -3 / UOB flat — *OCBC - HLD (Business update first thoughts)*, CLSA (9-May-2025)
[19] OCBC vs DBS vs UOB 1Q25 key metrics — *OCBC - HLD (Business update first thoughts)*, CLSA (9-May-2025)
[20] OCBC P&L summary (1Q24–1Q25CL) — *OCBC - HLD (Business update first thoughts)*, CLSA (9-May-2025)

## Citations

- [8] **Oversea-Chinese Banking Corporation Limited, Q1 2026** · external
- [9] **Oversea-Chinese Banking Corporation Limited, Q1 2026** · external
- [10] **Oversea-Chinese Banking Corporation Limited, Q1 2026** · external
- [11] **Oversea-Chinese Banking Corporation Limited, Q1 2026** · external
- [12] **Oversea-Chinese Banking Corporation Limited, Q1 2026** · external
- [13] **Oversea-Chinese Banking Corporation Limited, Q1 2026** · external
- [14] **Oversea-Chinese Banking Corporation Limited, Q1 2026** · external
- [15] **Street Takeaways - Oversea-Chinese Banking Corp. Q1 Earnings** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4677224&_doc_date=2026-05-14&_doc_product=SA>
- [16] **Oversea-Chinese Banking Corp. reports Q1 net profit SG$1.97B vs StreetAccount SG$1.87B** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4668399&_doc_date=2026-05-07&_doc_product=SA>
- [17] **Oversea-Chinese Banking Corp. subsidiary enters into agreement to acquire HSBC Indonesia's IWPB** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4656599&_doc_date=2026-05-04&_doc_product=SA>

