Singapore Bank 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.

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Singapore bank Q3 2020 earnings – guidance in focus

Company Earnings Report Date
United Overseas Bank Ltd 4 November 2020 (Before market)
DBS Group Holdings Ltd 5 November 2020 (Before market)
Oversea-Chinese Banking Corp Ltd 5 November 2020 (Before market)

The trio of local banks reports third quarter (Q3) 2020 earnings across the first week of November, commencing with United Overseas Bank Ltd on Wednesday, November 4, while DBS and OCBC follows a day later, all prior to the market open. Broadly, the earnings are expected to paint a picture of local banks still trudging along into Q3 while we continue to scrutinise the guidance into 2021 on both the outlook and asset quality expectations.

Besides the earnings and guidance to watch, the releases also coincide with the US presidential election results period particularly for OCBC set to be releasing results as the polls close in the US. This may see to added volatility for the bank shares and the local Straits Times Index should there be surprises packed into the election results.

DBS OCBC UOB
Q2 Revenue (billion) 3.726 2.625 2.260
Q3 Revenue estimate (billion) 3.408
(-10.8% YoY)
2.439
(-8.1% YoY)
2.294
(-12.1% YoY)
Q2 EPS Adj. 0.490 0.165 0.421
Q3 EPS Adj. estimate 0.473
(-25.8% YoY)
0.209
(-26.6% YoY)
0.359
(-46.5% YoY)
Q2 Net income (billion) 1.247 0.730 0.703
Q3 Net income estimate (billion) 1.169
(-28.2% YoY)
0.859
(-26.7% YoY)
0.570
(-49.0% YoY)

Source: Refinitiv

Subdued loan growth, NIMs

Singapore banks had borne the brunt of the Covid-19 hit in Q2 2020 as one would recall the period of extended circuit breaker period amid the global pandemic. Severe disruptions had been the case cutting across various industries and such a phenomenon remains the case across many travel and leisure related sectors even as the services sector had broadly been on the mend.

Going into the Q3 earnings reporting season, the longer-than-expected stay of the Covid-19 pandemic continues to serve as dampener on economic activity when compared on a year-on-year basis. This is evident with the consensus expectations for bank earnings in the third quarter as shown above where net income declines continue to be expected at double-digit percentage changes.

Looking at the net interest income (NII) portion of things, the key factors to consider here are the subdued loan growth and net-interest margins (NIMs) conditions. Singapore’s bank lending had stayed weak in the early part of Q3 after plunging in Q2 with the latest three months of bank lending data up to August 2020 reflecting YoY declines. Meanwhile, Singapore’s 3-month SIBOR had maintained at multi-year lows after falling through the first half the year, also reflecting the pressure on NIMs with only UOB the exception in providing guidance for some upsides to NIM.

Such an outlook may remain the picture looking further out into 2021, especially with the virus situation still a pertinent issue on hand and the downturn expected to be more prolonged than past recessions as outlined as well by the MAS.

Fees recovery, outlook in question

All the above said, some bright spots may be noted particularly across the likes of wealth management with fees recovery here likely to boost the non-interest income for local banks. Trading income is expected to fare positively in the quarter as well.

On the other hand, the extension of Singapore’s debt moratorium beyond end-2020 and alongside other support schemes had also been heralded as reliefs both to the hard-hit industries and bank’s NPL performance. DBS seen ranking the best amongst the bank on this end with the 5% of loans under moratorium and the relatively more ample buffers on hand. Comparatively, DBS share prices had also performed relatively better, compared to the broad market as well. It will be of interest to watch how management will be outlining the outlook for the trio of local banks, reflect on the asset quality and also make further adjustments to provisions, if any.

OCBC share price: technical analysis

OCBC share prices appeared to have found a floor around the 76.4% Fibonacci retracement level at approximately $8.33 seeing bulls stepping in to defend the level earlier in September. Steepening of the US yield curve into October had helped to send share prices climbing higher. Although, gains had again stopped short of breaking past the 100-day simple moving average which had served as a strong resistance for OCBC.

Pre US election jitters coupled with global virus concerns had weighed on OCBC ahead of the earnings release but barring any sudden downturn in conditions, the $8.33 support may continue to hold. A break below would open room up to the March $7.80 lows. Consensus 12-month target price for OCBC seen at $9.62 according to Bloomberg tally.

Source: IG Charts

DBS share price: technical analysis

Singapore’s largest bank, DBS, had been one relatively favoured amongst the trio of local banks. Share prices had outperformed both OCBC and UOB and also the broad Straits Times Index. While the 200-day simple moving average had kept a lid on share prices since the March plunge, prices had also found good support thus far. An asymmetrical triangle pattern looks to be the case with prices pending clearer direction from here. Momentum remains positive and the clearance of the US election risk could see to cyclicals once again picking up in the next stage of recovery. Consensus 12-month target price for DBS seen at $22.94 according to Bloomberg tally.

Source: IG Charts

UOB share price: technical analysis

Rangebound trade between the 76.4% Fibonacci retracement level at around $18.90 and 50% level of $20.44 had been the case for UOB since August. Prices had once again slipped towards support, one to watch for any earnings induced moves here. As with OCBC, bulls had stepped in at support level each time since the first plunge in March and may well continue to defend the level. A break below will however open up room on the downside. Consensus 12-month target price for UOB seen at $21.94 according to Bloomberg tally.

Source: IG Charts

  • DBS
  • OCBC
  • UOB

Market Capitalisation: 51.87 billion*

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.

* as of 30 October 2020
Live DBS prices

Market Capitalisation: 37.79 billion*

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.

* as of 30 October 2020
Live OCBC prices

Market Capitalisation: 31.83 billion*

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.

* as of 30 October 2020
Live UOB prices

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