OCBC's Casa prowess to protect it from structural pressure

Casa deposits now 50% of total deposits.

CLSA notes that between 2001 and 2Q13, OCBC’s Casa deposits rose from 29% of total deposits to 50%; and 4ppts of this 11ppt increase were added between 1Q12 and 2Q13.

This Casa prowess, says CLSA, will help protect the bank from further structural pressure and increases its exposure to cyclical upside from rising interest rates.

Here's more from CLSA:

Impressive Casa-deposit gains…
OCBS has been extremely successful in recent quarters at bringing in more corporate operating accounts in both Singapore and US dollars. It now banks one in ev ery two startup businesses in Singapore and is one of only two providers of the government’s baby-bonus scheme (the other being Standard Chartered).

As a result of its deposit-gathering initiatives, the bank’s Casa deposits as a % of total deposits expanded by 4ppts between 1Q12 an 2Q13, versus 1ppt at UOB and no increase at DBS.

...should help underpin NIM
Between 1Q09-1Q13, OCBC’s NIM narrowed by 78bps, with 22bps of this contraction between 2Q12 and 1Q13. In 2Q13, the bank’s margin was stable as a contained liability yield offset pressure on the asset yield.

The liability yield benefited from sizeable Casa gathering in recent quarters. NIM may move up or down by a few basis points over the next few quarters, but the sizeable sequential contractions appear to be over and we expect continued CAsa gathering to facilitate a slow and steady margin recovery from 1.64% in 2Q13 to 1.71% by 2015.

More positively exposed to rising interest rates
Among Asian banks, those with significant Singapore-dollar Casa balances are most exposed to rising US rates. We estimate that a 2 ppt increase in the Fed funds rate would lift OCBC’s EPS by 14%.