‘Swiftest pace of expansion’: RHB lifts OCBC target price to S$21.30 on Q4 earnings growth forecast

[SINGAPORE] RHB has raised its target price for OCBC to S$21.30, driven by forecasts that the bank will post single-digit year-on-year earnings growth at its upcoming fourth-quarter results release on Feb 25.

This marks an increase of 13.9 per cent from its previous target price of S$18.70 and comes as RHB maintained a “neutral” call on OCBC in a Tuesday (Jan 27) report.

OCBC is expected to record a final dividend per share (DPS) of S$0.575 in Q4, which would bring its DPS for FY2025 to S$0.985 and translate to a 60 per cent payout, RHB said.

The forecast bottom-line growth is driven by projections that OCBC could record its “swiftest pace of expansion in 2025” for Q4, with net profit rising around 2 per cent year on year, due to higher non-interest income.

This comes despite expectations that OCBC will post a mid-teens earnings contraction from the previous quarter due to seasonality, whereby non-interest income may be weaker even as operational expenditure could have risen.

RHB noted that positive liquidity inflows in Q4 and a lower interest rate environment has supported the growth of current and savings accounts (Casa) for OCBC.

“The resulting reduction in fixed deposit rates has reduced their attractiveness, and depositors are content to leave their savings in Casa deposits instead,” RHB said, adding that the repricing of fixed deposits should be felt in Q4 2025, after the steep decline in benchmark rates earlier on.

For loan growth, OCBC is also “on track” to meet its guidance of mid-single-digit growth, RHB said.

While wealth management fees may soften on the quarter due to seasonality and off a high base in the third quarter of 2025, strong inflows and improving investor sentiment should nonetheless translate to “decent fee growth” year on year for OCBC, RHB noted.

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More capital returns on the cards

With OCBC set to complete its capital return dividends, RHB highlighted potential room for further capital optimisation and returns.

One possible source of this could be the capital set aside earlier – of around 40 basis points – if the delisting exercise for Great Eastern had gone through.

There is also the possibility that a portion of the S$1 billion capital distribution planned for share buybacks could be returned through dividends instead, given the bank’s strong share-price performance and valuations, RHB added.