Singapore banks third quarter results and what to expect for DBS, OCBC, UOB
A cyclist rides past the city skyline at Marina Bay in Singapore.
Roslan Rahman | AFP | Getty Images
SINGAPORE – Singapore’s top three lenders are expected to release third quarter financial results this week, with analysts expecting further impact on profits due to persistently low global interest rates and associated economic recession by the pandemic.
The smallest of the trio, United Overseas Bank, will publish its results on Wednesday. The other two banks, DBS Holdings Group and Oversea-Chinese Banking Corp, will publish their bulletins on Thursday.
Analyst estimates compiled by Refinitiv showed DBS – Southeast Asia’s largest bank in terms of assets – would see the smallest drop in net income, while UOB would see the biggest drop.
Here are the forecasts for several key financial indicators, according to Refinitiv:
- Net revenue: DBS is expected to register a 28.2% year-on-year decline, while OCBC and UOB are expected to register declines of 31.5% and 49%, respectively.
- Provisions for loan losses: DBS is set to set aside an additional S $ 561 million ($ 411.2 million) – the largest of the trio; while OCBC and UOB are expected to set aside S $ 407 million ($ 298.3 million) and S $ 537 million ($ 393.5 million) respectively.
- Net interest margin: The credit lines of the three banks are expected to be around 1.5%. This represents an additional compression for DBS and OCBC, but a slight increase for UOB.
Despite the expected profits, some analysts said the results could show improvements in specific areas. This is because Singapore and several other Asian markets in which banks operate have reopened much of their economies following previous lockdowns aimed at containing Covid-19.
Potential bright spots include higher wealth management activity and credit card spending, which could boost banks’ commission income in the third quarter, analysts said.
“Higher fees and lower credit charges can position DBS with the most upside surprise potential, while UOB with the least,” said Thilan Wickramasinghe, analyst at Maybank Kim Eng.
Concerns about the build-up of bad debts have also subsided for the time being, as Singapore’s domestic market allows some cash-strapped people as well as small and medium-sized businesses to defer loan repayments longer than originally planned.
Beyond the third quarter financial measures, analysts said they were monitoring banks’ comments on the business outlook in the coming months.
Krishna Guha, an analyst at Jefferies, has pointed to the outlook for loan growth – especially for Hong Kong and the so-called Greater Bay Area – as an area he is monitoring. the Grande Baie region refers to a group of cities in southern China and the two special administrative regions of Hong Kong and Macao.
“We look forward to comments on the growth of loans to HK / GBA and on broader themes such as infrastructure, supply chain changes and digitization,” he said in a recent report.