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 2021 earnings – Looking ahead to reopening

Company Earnings Report Date
DBS Group Holdings Ltd 5 November 2021 (Before market)
United Overseas Bank Ltd 3 November 2021 (Before market)
Oversea-Chinese Banking Corp Ltd 3 November 2021 (Before market)

The three local banks are set to report their Q3 2021 earnings in the upcoming week. Since the start of October, there have been some renewed sentiments for the local banks, aiding to lift the Straits Times Index (STI) near its one-year high. With the three local banks taking up close to 40% weightage in the index, the upcoming banks’ earnings will be closely observed to fuel further upside for the STI.

All three banks continue to outperform the broader market, delivering an average year-to-date return of 21.2%, compared to the STI’s 12.7%. DBS continues to pull ahead among the trio, delivering the highest year-to-date return of 25.2%. This is followed by OCBC and UOB, which came in at 19.3% and 19.0% respectively.

DBS OCBC UOB
Q2 Revenue (billion) 3.59 2.57 2.42
Q3 Revenue estimate (billion) 3.56
(-0.53% YoY)
2.61
(+2.7% YoY)
2.46
(8.6% YoY)
Q2 EPS Adj. 0.655 0.252 0.588
Q3 EPS Adj. estimate 0.589
(19.0% YoY)
0.264
(14.8% YoY)
0.587
(52.5% YoY)
Q2 Net income (billion) 1.70 1.16 1.00
Q3 Net income estimate (billion) 1.56
(20.1% YoY)
1.19
(15.6% YoY)
0.98
(47.1% YoY)

Source: Refinitiv

Bank lending

As of the latest data in June, overall Singapore bank lending has remained robust with a 3.5% year-on-year increase. While there may be concerns that recent Covid-19 restrictions could pose a risk to loan momentum, bank lending has remained resilient through previous Phase 2 (heightened alert) measures. This potentially implies that overall sentiments for economic outlook remain optimistic and while the timeline for current restrictions has been extended, the restrictions are less constraining as compared to previous phases. For August, overall loans may see a slight slowdown on a sequential basis but resilience in resident loans are aiding to cushion some impact.

As of Q2 2021, the economic recovery continues to bode well for the overall percentage of non-performing loans, coming in at 2.3% and marking its third consecutive quarter of decrease. That said, a surge in cases in late-3Q saw some virus restrictions being implemented. While that may drive some uncertainty on the non-performing loans near-term, some business adjustments in the likes of digital shifts during previous periods of restrictions could aid in cushioning some impact. A potential impact may include the banks taking on a more cautious approach while releasing their loan loss provisions, which may put a cap on their earnings performance near-term but point to subsequent outperformance once Covid-19 risks eventually abate.

The current low interest rate environment could possibly continue to weigh on the average net interest margin (NIM) for banks, with Singapore’s 3-month SOR and SIBOR largely trending at low levels. That said, some lift-off in the 3-month SOR in mid-October does suggest some easing of pressure on NIM and that the longer-term trend points towards more upside, as central banks continue to shift towards normalisation in monetary policies. Similarly to major US banks, investors may continue to look towards some resilient performance for the wealth management and fees segment to underpin its upcoming results.

While there are possible concerns regarding China’s Evergrande contagion risks on Singapore’s local banks, the risks of any impact may be relatively soft. Direct exposures to China's property sector are less than 1% of non-bank loans, while exposures to Singapore’s property developers with operations in China are 2.5% of loans to non-bank customers. In the event of greater financial risks in China, overall revenue exposure to Greater China also accounts for approximately 7.6% for DBS, 13.7% for OCBC and 9.8% for UOB, which seems relatively limited.

DBS share price: technical analysis

After a period of consolidation over the past months, DBS share price seems to be finding some renewed sentiments. There has been a bullish gap-up above a key resistance level last week, which has weighed on prices on previous four occasions. This seems to indicate bullish momentum to the upside, reinforced by the upward-sloping MACD above the zero-mark. Near term, prices may potentially seek to re-test its previous high in August 2021 at S$31.77.

Source: IG Charts

OCBC share price: technical analysis

OCBC share price has broken above a descending triangle pattern in early-October, and a further re-test of the upper trendline was met with a confirmation rebound. The higher lows on the MACD during a previous period of consolidation suggests that downside momentum is weakening, bringing out some renewed sentiments to the upside. Near-term support could possibly be at S$11.73, where the Fibonacci 23.6% retracement level has been supporting prices on previous four occasions. Resistance ahead may be at S$12.20.

Source: IG Charts

UOB share price: technical analysis

UOB share price is currently re-testing its pre-Covid high at the S$27.00 level, which will be a level of resistance to overcome. A consolidation at its key resistance could indicate that buyers are jumping in to absorb the increased selling pressure, which generally bodes well for further upside. Near-term support may be at S$26.35, where a previous resistance level will now serve as support.

Source: IG Charts

  • DBS
  • OCBC
  • UOB

Market Capitalisation: 81.2 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 25 October 2021
Live DBS prices

Market Capitalisation: 54.2 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 25 October 2021
Live OCBC prices

Market Capitalisation: 45.3 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 25 October 2021
Live UOB prices

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