We Adjust Our FVE for Singapore’s OCBC to SGD 16, but See Upside Potential for Future Dividends

We maintain our narrow-moat rating on Oversea-Chinese Banking Corporation, or OCBC, and lower our fair value estimate to SGD 16.0 from SGD 17.5 after fourth-quarter earnings and upon change of coverage analyst. Our new fair value estimate is equivalent to 1.40 times book value at the end of 2022 and represents 26% upside to the current share price, a similar amount of upside as exists to our fair value estimate for rival United Overseas Bank, or UOB, and a bit more than the 19% upside we see for rival DBS. Our fair values for UOB and DBS are equivalent to 1.57 times book value for UOB and 1.86 times for DBS, reflecting differences in our assumptions for the midcycle ROE of each bank. We put OCBC's midcycle ROE at 12.7%, compared with around 13% for UOB and around 16% for DBS.