40-year heritage
152,600 clients worldwide
10,000 markets to trade

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 bank Q1 earnings – More room on the upside?

Company Earnings Report Date
UOB 28 April 2017
DBS 2 May 2017
OCBC 9 May 2017

 

Taking the lion’s share on the Singapore Straits Times Index, the banking sector had been one of the better performers in the first quarter of the year. The question remains as to whether earnings can match up to the strong performance in share prices. 

Singapore's first quarter bank earnings will be released from the end of April. The smallest of the trio, by market capitalisation, would be leading release on 28 April 2017. Analysts have pencilled in growth for both UOB and OCBC, while Singapore’s largest bank, DBS, is expected to face a decline in revenue when compared in year-on-year (YoY) terms

Singapore banks results and expectations

 

DBS

OCBC

UOB

Q4 Revenue (billion)

2.863

2.095

2.028

Q1 Revenue estimate (billion)

2.844

(-3.0% YoY)

2.150

(+5.4% YoY)

2.058

(+4.5% YoY)

Q4 EPS Adj.

0.36

0.17

0.45

Q1 EPS Adj. estimate

0.43

(-9.9% YoY)

0.21

(+5.0% YoY)

0.45

(+4.3% YoY)

Q4 Net income Adj. (billion)

0.913

0.721

0.741

Q4 Net income Adj. estimate (billion)

1.024

(-14.9% YoY)

0.846

(+0.9% YoY)

0.723

(+2.3% YoY)


Source: Bloomberg

Looking at the last earnings release, Q4 2016 had been a rough patch for local banks. Weaker than expected earnings had been the case despite expectations of performance improvements with the turnaround in macroeconomic situation. The considerable weight exerted by a deteriorating oil and gas sector and broadly subdued global growth had dampened profits with the apparent need to provide increases in allowances, a symptom cutting across the three local banks. The noticeable guidance post earnings release from the banks had been that non-performing loans (NPLs) likely peaked in 2016, though the surge itself had been a surprise for the market for Q4 2016. 

We have seen banking share prices losing steam after the last earnings release. Confidence seem to be wavering after the stellar rally. Singapore’s largest bank, DBS, appears to have been an obvious target with headline news of Ezra Holdings’ collapse taking the most significant toll upon the bank. The unsecured claims of S$394 million  had been the highest amongst the three Singapore listed banks, while UOB had the smallest exposure. 

Source: Bloomberg

Moving forward to the upcoming release, the pencilling of YoY growth in revenue and EPS should by no means be a surprise as the three banks are expected to find a pick-up in net interest margin (NIM) from rising interest rates. Singapore’s three month SIBOR, or Singapore Interbank Offered Rate, remained broadly supported at the start of the year, spiking briefly above 0.98% mid-February. 

Loan growth meanwhile had risen since the start of the year, coming in at a YoY growth of 5.2% in February 2017. This does not necessarily mean that the banks are out of the shadows with regards to their exposure to the embattled oil and gas sector, which remains a latent concern. That said, ratings agency Moody’s has lent a vote of confidence earlier highlighting that banks are more resilient in coping with weakness within the oil and gas industry with the more vulnerable firms having already defaulted or restructured their liabilities. 

Looking at the long-term outlook, revenue growth for Singapore banks is expected to improve in the year. Certainly, the US federal reserve has demonstrated their ability prepare the market for and actually lift interest rates with conditions permitting. Their plan to further bring interest rates higher for the rest of 2017 will have a direct impact on local interest rates and bank earning performances. With approximately 9.0% gains as of late April, DBS remains the best performer of the trio, surpassing that of the Straits Times Index, and a preferred pick amongst investors. Although the bias is on the upside, Q1 2017 earnings still pose an event risk for trading. Disappointments in earnings could set the stage for selloffs for the perched prices of banking stocks. 

Technical Analysis of DBS

DBS Group, a key interest for clients, have been seeing prices stuck in consolidation since the release of Q4 2016 earnings. For the upcoming release, take UOB’s Friday release as a proxy. Surprises on the upside could bring DBS to break above the $19.50 resistance. Dips below the $18.65 support could be the case otherwise. 

OCBC

Earnings Release: 9 May 2017
Market Cap: S$40.52 billion3

Registered in 1932, Oversea-Chinese Banking Corporation Limited (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 Apr 2017
Market Cap: S$35.93 billion3

United Overseas Bank (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: 2 May 2017
Market Cap: S$48.86 billion3

Development Bank of Singapore (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

Why trade shares with IG?

  • Trade on desktop and mobile

    Enjoy seamless trading with our browser-based platform and mobile and tablet apps

  • Access over 8,000 global share CFDs

    Low margins and competitive spreads on a wide range of popular, global stocks

  • Competitive prices

    Competitive prices sourced from multiple venues

  • Commission from 0.1%

    Commission at just 0.1% on Singapore share CFDs

  • Direct market access (DMA)

    More control, functionality and liquidity, plus see market depth and interact with order books

  • Trade shares on margin

    Gain full exposure with a small initial deposit when you trade CFDs, but remember with leverage comes increased risk

Open an account now

It's free to open an account, takes less than five minutes, and there's no obligation to fund or trade.

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 (April 2017)

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.

See important Research Disclaimer.

Contact us

Our office is open 5 days a week Monday to Friday from 9am to 6pm. Support line is available 24hrs a day Monday to Friday.

+65 6390 5118

You can also email us helpdesk@ig.com.sg

Visit our storefront office at 9 Battery Road