Share buybacks driving OCBC’s stock into new territory: analysts

[SINGAPORE] OCBC’s entry into Singapore’s rare S$100-billion club has set the market abuzz about the driving factors behind its record-breaking streak.

Various analysts have cited the bank’s latest share buybacks for its share-price resilience amid the Middle East war.

As at Thursday (Apr 2), it has outperformed peers in the year to date – rising 14 per cent, against DBS’ 1.9 per cent and UOB’s 4.6 per cent.

OCBC hit a high of S$22.81 at Thursday’s open, before retracing to S$22.65 by 9.11 am. As at 2.40 pm, the stock was trading at S$22.37, 0.8 per cent or S$0.18 lower.

The bank’s market capitalisation has been pushed past the S$100-billion mark. OCBC is one of only two Singapore-listed companies to have achieved this; the other is DBS, which is also South-east Asia’s biggest lender.

From Mar 17, OCBC picked up 600,000 shares from the market over 10 trading days. This contributed to around 6 per cent of daily traded volume on Wednesday, noted Citi analyst Tan Yong Hong.

“These buybacks are likely to fund OCBC’s approximate 17 million shares per year in terms of employee options or a deferred share plan, estimated based on prior years’ trends,” he said in a Wednesday note.

UOB KayHian analyst Jonathan Koh noted that OCBC has also completed 22 per cent of its share buyback programme thus far.

“Management will consider returning the balance of S$780 million to shareholders through special dividend if they are not utilised by the end of 2026,” he wrote on Monday.

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Koh therefore has a “buy” rating on the counter, with a target price of S$25.30. He believes that the lender’s shift to accelerate growth will give an “uplift” to its return on equity.

He added that the bank will maintain its dividend payout ratio at 50 per cent, as it is “committed to growing its franchise”.

Broader investor discussions recently agree that OCBC also reported better asset-quality trends in the fourth quarter of 2025, on top of robust wealth flows and net new money momentum.

Jayden Vantarakis, Macquarie Capital’s head of Asean equity research, pointed out that OCBC had the “best Q4 result”, with the shift on capital management providing visibility on a 60 per cent payout being maintained this year.

“The more volatile environment also augurs higher general allowances compared with the Q4 position,” he said in a Tuesday report. “OCBC has a strong starting point on general allowances and non-performing asset cover.”

But Tan noted that OCBC was still underperforming compared with DBS and UOB prior to the latest share buyback and after the start of the Iran war.

“(Hence), the timing of OCBC’s outperformance leads us to conclude that the share buyback was a material driver for relative outperformance,” he said.

OCBC has a current price-to-earnings ratio of 13.7 times, while DBS and UOB have logged values of 15 times and 13.3 times, respectively.

Mixed on DBS

While OCBC is Vantarakis’ top sector pick, other analysts continue to have a more positive view on DBS.

This is because DBS is likely to follow up with an offer to buy back about five million shares under employee share schemes, said Tan, which could help in retaining an attractive value.

He has set a target price of S$63.60 for the lender.

UOB KayHian’s Koh added that DBS also benefits from a positive reputation with “structural growth in wealth and institutional assets”.

“Customers view DBS as a safe and neutral bank to facilitate wealth and capital flows,” he noted.

This comes as DBS was recognised as the “Safest Bank in Asia” by Global Finance for the 17th consecutive year. It also retained its second position in the global list of the 50 safest commercial banks.

Coupled with its attractive 2026 dividend yield of 5.7 per cent, DBS continues to be Koh’s top pick, with a “buy” rating and target price of S$67.55.

In comparison, yield levels of OCBC and UOB for FY2026 forward stood at 4 per cent and 4.7 per cent, respectively.

However, Vantarakis has an “underperform” rating on DBS, after considering the outlook for the bank’s fundamentals.

“While the outlook for wealth is positive, any abrupt reversal in client risk appetite could have an impact on growth in fees,” he said. “This is important as the outlook for net interest income is negative with lower rates.”

Koh acknowledged that DBS’ management guided for the 2026 net interest income to be slightly below 2025 levels, assuming two rate cuts by the US Federal Reserve and the Singapore overnight rate average at 1.25 per cent.

“Net profit is expected to be slightly below 2025 levels… (while) guidance for specific provisions is unchanged at 17 to 20 basis points,” he wrote on Monday. “There could be potential write-backs in general provisions.”