Broker's take: Bernstein says OCBC is very well positioned, pegs target price at S$10.95/shr

OVERSEA-Chinese Banking Corp (OCBC) is very well positioned to ride the major growth trends in the region, investment house Sanford C. Bernstein said in its freshly published report on the Singapore bank on Tuesday.

"OCBC is a progressive bank that has executed strongly over the last few years including on key acquisitions in wealth management, and the large Wing Hang Bank acquisition.

"Geographically we think it is well positioned in a resurgent Asia led by China. Rating outperform, target price S$10.95,'' Bernstein's analyst, Kevin Kwek, said following an interview with OCBC Group CEO Samuel Tsien for its series on Singaporean banks CEO conversations.

At 03:53pm, OCBC is trading around S$9.71, up 7 Singapore cents, or 0.73 per cent.

On its return on equity (ROE), the bank believes 11-12 per cent normalized is possible, with potential boost from the insurance and wealth management businesses.

The bank's belief on long term growth rests on four Asia megatrends - wealth management, China, digitalisation and flows in the region. These are the key drivers and trends on which OCBC's strategy is based on.

During the interview, Mr Tsien said OCBC is now in two hub economies in Asia.

"We now have a base, a strong base in Hong Kong and that strong base is not a Hong Kong base. That strong base is a Greater China base, because Chinese companies use Hong Kong as a base. Just like Singapore is not about the Singapore domestic economy only. Singapore is a hub economy.

"Now, we are in two hub economies in Asia, in Hong Kong and Singapore. One captures the growth in South East Asia, the other captures the growth in China."