SINGAPORE (May 11): RHB Research believes OCBC Bank’s acquisition of National Australia Bank’s private wealth business in Hong Kong and Singapore is likely to be positive for its overall wealth management business.
The segment accounted for close to a third of OCBC’s total income in 1Q17.
However, RHB analyst Leng Seng Choon says in a flash note on Thursday that the impact is likely to be small.
“The acquired loans and deposits only account for 1.1% and 1.6% of OCBC’s current loans and deposits respectively,” Leng says.
While the acquisition would see OCBC gain access to close to 11,000 new customers, Leng says the impact on OCBC is “seen to be not significant”.
As such, the research house is keeping its “neutral” call on OCBC, with an unchanged target price of $10.22.
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(See: OCBC to acquire National Australia Bank’s private wealth business in Singapore, Hong Kong)
However, the acquisition could also help OCBC expand its share of loans to the housing mortgage space, which Leng also sees as “marginally positive”.
Some 26.7% of OCBC’s group loans in 1Q17 were in the housing mortgage segment.
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An increase in the bank’s ratio of housing loans is positive as these are typically seen to have a lower risk of default compared to corporate loans.
As at 4.56pm, shares of OCBC are trading 9 cents higher at $10.55.