OCBC's growing appetite for risky investments alarms analysts

It's hoarding more unrated and non-investment grade securities.

OCBC's investment portfolio has become substantially more risky in past years, with the bank snapping up more unrated and non-investment grade debt securities compared to peers.

A report by Jefferies Research showed that unrated and non-investment grade securities made up 46% of OCBC's total debt securities in 2014, up 8 percentage points from 38% in 2011.

In contrast, DBS' unrated and non-investment grade debt securities was stable at 46% for both years. UOB has trimmed holdings of such assets from 39% in 2011 to 38% in 2014.

"OCBC appears to have moved up the risk curve. Further, industry classification of its investment portfolio suggests a growing exposure to 'Others' and a shift away from financial institutions for OCBC," said the report.

OCBC's exposure to financial institutions and investment holding corporations has decreased from 62% in 2011 to 46% in 2014. DBS and UOB’s exposure to financial institutions has remained stable at 47% and 37%, respectively.

“Stock specific risks such as OCBC’s increased exposure to non-investment grade securities keep us from getting excited about the sector,” Jefferies said.

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