OCBC BANK

OCBC BANK | BUY

TARGET PRICE: $14.83

MARCH 20 CLOSE: $13.42

Maybank Kim Eng, March 20

We believe OCBC's earnings momentum is likely to be sustained in an upcycle.

We raised our FY2018 to FY2020 forecast net profit by 4 per cent to12 per cent, due to higher assumptions for loan growth and non-interest income from stronger wealth management earnings and life insurance contribution from Great Eastern.

With the revisions to our earnings per share forecasts, our assumed sustainable return on equity (ROE) is now 14 per cent, up from 13.1 per cent previously, with a cost of equity of 10.5 per cent and growth rate of 3.5 per cent (both unchanged).

Our target price is raised 10 per cent to $14.83, based on 1.5 times FY2018 price-to-book-value.

We also believe that OCBC's valuation multiple deserves to rise in view of its ability to expand ROEs from non-interest income growth.

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