OCBC delivered 1Q16 net earnings of S$856m, down 14% YoY and down 11% QoQ, and below market expectations of S$899m based on a Bloomberg poll. Although Net interest income improved 5% YoY to S$1.31b, Non-interest income fell 12% to S$753m. The latter was partly due to lower income from Great Eastern Holdings (GEH), which fell 58% YoY and 65% QoQ to S$83m. This was largely due to unrealised mark-to-market losses from its bond & equity investment portfolio.

Allowances also increased YoY by 162% to S$167m, but was down from S$193m in the previous quarter. Net Interest Margin (NIM) improved from 1.62% in 1Q15 and 1.74% in 4Q15 to 1.75% in 1Q16. NPL ratio edged up slightly from 0.9% in the previous quarter to 1.0% this quarter.

OCBC has outperformed its peers YTD, with share price appreciation of 1.1% versus -7.5% for DBS and - 3.9% for UOB. We do not cover OCBC, but based on Bloomberg, there are currently 13 BUYs, 8 HOLDs and 3 SELLs, with a 12-month target price of S$9.33. The stock closed at S$8.90 yesterday.

Source: OCBC Research - 29 Apr 2016