Why analysts are jittering with excitement for OCBC's earnings report

Something unusual is going on here.

Amid earnings forecasts for 2Q14 for Singapore banks, OCBC is believed to have the most scope to surprise on the upside.

According to a research note from Maybank Kim Eng, this is due to the possibility that its outsize investment book might have benefited from yield compression during the quarter.

The report's earnings forecast for OCBC for 2Q14 is SGD803m (-7.4% QoQ, +34.5% YoY) vs SGD750m.

Meanwhile, Maybank Kim Eng expects OCBC's NIM to weaken to 1.67% (1Q14: 1.70%, 4Q13: 1.64%, 3Q13: 1.63%, 2Q13: 1.64%).

Here's more from Maybank Kim Eng:

Insurance and net trading incomes would be a wild card in this quarter's results for the bank, said the report.

Compression in bond yields would have boosted marked-to-market gains, providing some cushion to weaker capital market-related income.

Loan growth could have slowed to 2.0% QoQ, after two consecutive strong quarters (1Q14: +3.3 QoQ, 4Q13: +4.8%).

The 0.7% QoQ depreciation in SGD vs MYR could moderate the sequential loan growth during the quarter.

Note that MYR loans account for 12.2% of OCBC's total loan base.

We expect OCBC's asset quality to stay benign.

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