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Singapore Banks Earnings

The three local banks, DBS, OCBC & UOB comprise the lion’s share of the Straits Times Index (STI), so it is little surprise that their earnings announcements are closely watched.

Singapore banks Q3 earnings – Will they be measurable to their US peers?

Q3 bank earnings reports will trickle in closer to the end of October. Amongst the three largest Singapore Banks, only OCBC, has a higher-than-previous estimate projection, though the optimism from the higher-than-expected US bank earnings thus far may fuel hopes of upside surprises.

 

 

DBS

OCBC

UOB

Q2 Revenue (billion)

2.919

2.048

2.024

Q3 Revenue estimate (billion)

2.806

(+3.5% YoY)

2.144

(+2.5% YoY)

1.987

(-4.7% YoY)

Q2 EPS Adj.

0.418

0.212

0.485

Q3 EPS Adj. estimate

0.427

0.207

0.460

Q2 Net income Adj. (billion)

1.051

0.885

0.801

Q3 Net income Adj. estimate (billion)

1.042

(-2.3% YoY)

0.884

(-1.9% YoY)

0.736

(-14.2% YoY)

Source: Bloomberg

 

From a macro perspective, earnings may be weighed by a slowdown in growth. Singapore’s Q3 GDP (advance estimate) has just taken a plunge, declining 4.2% QoQ while year-on-year growth slowed to 0.6% YoY from 0.2% QoQ and 2.0% YoY respectively. Lacklustre loan growth continues to be seen, last reported to be 1.5% YoY for August, down from 2.2% YoY in July.  This could see a more profound impact on UOB amongst the three banks with UOB having a larger proportion of domestic exposure.

Meanwhile the talk of the town in the third quarter will be about the impact from oil and gas company, Swiber. Amongst the three banks, DBS has the greatest exposure to the firm and would in turn suffer in their non-performing loans section. Swiber has since been placed under judicial management after initially filing for liquidation. A filing in July 28 by DBS stated that the bank expects to recover only half of its $721 million exposure and OCBC and UOB will not be spared in this episode.

Despite the above, earnings records for DBS had surpassed expectations for the past four quarters. The same cannot be said for OCBC and UOB. Forward guidance from Bloomberg sees 12-month forward P/E ratio trending closely to prices until recently, with prices slipping to hover below the former. This had likely given rise to the 56% buy call by analysts for DBS. One step down we have OCBC and UOB where the consensus are for a hold.

Over at IG, clients were seen generally taking a bullish stance towards the three banks with at least 80% long positions in DBS and OCBC, while a 55% long position has been registered for UOB. From a technical perspective, prices have largely been caught between barriers and lack clear direction. Our take is to go with DBS and to cautiously trade the remaining two. The Q3 earnings reports will be interesting pieces of information providing insights to how a turn in macroeconomic situation cascades into bank earnings and the outlook for future performances.

OCBC

Earnings Release: 27 Oct 2016
Market Cap: S$31.1 billion3

Registered in 1932, OCBC is the oldest bank in Singapore, after a merger of three Hokkien lenders. It counts OCBC Securities and Great Eastern Holding Ltd among its subsidiaries. The bank has a presence in 18 countries and territories, and is the second-largest financial institution in Southeast Asia (SEA) by assets.

Live OCBC prices

UOB

Earnings Release: 28 Oct 2016
Market Cap: S$28.22 billion3

UOB was set up in 1935 and is now the third-largest bank by assets in Southeast Asia. Having started out as United Chinese Bank, UOB was renamed in 1965 and it now has over 500 offices across 19 countries and territories. The bank is increasing its yuan business, with the asset management arm securing a RQFII licence in June 2015.

Live UOB prices

DBS

Earnings Release: 31 Oct 2016
Market Cap: S$33.45 billion3

DBS is the largest bank in Singapore by assets and was initially established by the Singapore government to assume industrial financing activities. DBS acquired the Asian private banking business of Societe Generale in 2014, and was the only ASEAN bank to be ranked among the world's top 50 private banking brands in 2015.

Live DBS prices

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1 Based on revenue excluding FX (published financial statements, October 2016).

2 Awarded the best forex provider in Singapore by the Global Brands Magazine in 2016

3 Source: Bloomberg (12 February 2016)

4 IGA, may distribute research produced by its respective foreign affiliates within the IGA Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at +65 6390 5118 for matters arising from, or in connection with the information distributed.

This information prepared by IGA or IG Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

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