OCBC's focus on higher-yielding unsecured personal lending may be futile

It's not enough to offset higher funding costs.

Barclays sees rising earnings headwinds from lower loan growth and margins.

Here's more from Barclays:

We believe management’s attempt to focus on higher-yielding unsecured personal lending will not be enough to offset higher funding costs and falling corporate loan yields. 

Profit contribution from Great Eastern Holdings may be a source of positive surprise in 4Q12 as credit spreads narrowed further and equity prices rose mildly (STI up 3.5% q/q in 4Q12), but we see limited upside in the medium term in the persistently low interest rate environment. We maintain our EW rating.

Key upside risks include: 1) stronger-than-expected loan demand; and 2) further gains from disposal of non-core investments. Key downside risks include: 1) greater-than-expected margin pressure from retaining more US$ liquidity and growing reliance on long-term stable funding sources; and 2) rising credit costs if economic conditions deteriorate (SMEs ~15% of total loans).