OCBC Bank suffered from margin pressure

Pressure was evident in Singapore, Indonesia, and China.

According to Barclays, while OCBC's life insurance and wealth management business was strong in 4Q, the banking business suffered from margin pressure and lower market-related fee income. 

Here's more from Barclays:

Margins and loan growth could remain under pressure in FY13. We maintain our Equal Weight rating and lower our price target to S$9.3 (from S$9.5) based on our unchanged blended valuation methodology.

Weak underlying banking trends: OCBC reported FY12/4Q12 net profit of S$3.99bn/S$663m, 1%/5% above our estimates due to 1) better investment return on Great Eastern Holdings (GEH is OCBC's 85% life insurance subsidiary) Non-Par Fund and 2) lower-than-expected credit costs.

Core banking revenue was weak, down 3% q/q as net interest income declined while fee income was flat. Margin contracted by 5bp q/q to 1.70% (same magnitude as DBS's 5bp q/q decline), pressure was evident in Singapore (downward loan repricing), Indonesia (fierce deposit competition and low return on government bonds) and China (interest rate cuts).

Lower investment banking and brokerage revenue offset growth in wealth management and loan-related fees.

Persistent margin pressure: In FY13, management guides for margins to remain under pressure and loans to grow at a "high single digit" rate with growth skewed towards 2H12 (in the hope of a US recovery).

Management sees "low-teens" mortgage growth, which is still relatively strong (vs. 18% in 2012) as loans are drawn down when property projects complete. Management cites China-related lending as a key growth opportunity, but we see downside risk if monetary conditions remain loose in China (total social financing at record high in January 2013) leading to lower cross-border loan demand overseas.

We cut our FY13-14E profit forecasts by 2-3% reflecting a lower margin assumption.

Cut in dividend payout: OCBC unexpectedly lowered its dividend payout ratio from 45% to 40% of core profits (excluding the one-off disposal gains) in preparation for any "complementary opportunities" in its key focus markets - Indonesia and Greater China.

A final dividend of 17c/share (full year 33c/share) was declared, much lower than our 52c full year forecast. Accordingly, we lower our dividend payout forecast to 44% for FY13 and 40% for FY14-15 (from 45% previously).