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 Q3 earnings – outlook trumps?

Company Earnings Report Date
UOB Fri, 26 Oct 2018 (Before market)
OCBC Thu, 1 Nov 2018 (Before market)
DBS Mon, 5 Nov 2018 (Before market)

Singapore’s Q3 bank earnings will kickstart with United Overseas Bank on Friday, 26 October, prior to the latter two’s November releases. Strong expectations had once again been pencilled in by analysts, though the question would be whether the delivery of these can give prices a jolt as it had with their US counterparts.

Q3 market downturn

Taking up the lion’s share on the Straits Times Index (STI), prices had fallen alongside the broad market since their heights between the end-April to early May period. An amalgamation of external and domestic factors all played a part in weighing upon local banking stocks. This ranged from the uncertainty in loan growth, on the back of higher interest rates and trade tensions, to the surprise introduction of fresh property cooling measures in the quarter. Despite the evident rise in rates boding well for banks and their interest margins, there were little that could affect a change in the sentiment that pulled markets lower. The resultant impact to date had been year-to-date declines for the broad STI, UOB and OCBC. DBS barely scraps through with near neutral gains when last checked (17 October 2018).

Rosy Q2 expectations

As seen in the table below, earnings are expected to continue with the strong growth pace from the previous quarters. In particular, DBS which had conducted their kitchen sinking in the same period last year may well find supernormal year-on-year results being reflected in the upcoming release with the better credit costs situation. Comparing quarter-on-quarter performances, some disparity may still be seen as the impact of trade tariffs and property cooling measures affect loans.

As it is, loan growth in the first two months of Q3 had reflected a slight slowdown with an average growth rate of 5.6%, compared to the 5.7% in Q2. Advanced estimate of Singapore’s Q3 GDP while having slowed to the 2.6% year-on-year growth rate from Q2’s 3.8% previously, perhaps is best shown to be resilient via the improved 4.97% quarter-on-quarter reading in light of the high YoY base. Separately, the 3-month Singapore Interbank Offered Rate (SIBOR) rate had also ticked up 1.64% when last checked (17 October 2018), which is a positive leading indicator for the banks’ net-interest margins (NIMs). NIMs are a measure of the difference between the income generated and costs on interest earning assets relative to its total amount and hence representative of the banks’ lending businesses.




Q2 Revenue (SGD billion)




Q3 Revenue estimate (SGD billion)


(+10.5% YoY)


(+6.6% YoY)


(+8.8% YoY)

Q2 EPS Adj.




Q3 EPS Adj. estimate


(+79.4% YoY)


(+6.8% YoY)


(+18.7% YoY)

Q2 Net income (SGD billion)




Q3 Net income estimate (SGD billion)


(+78.4% YoY)


(+8.8% YoY)

(+18.7% YoY)

Source: Reuters

Clouded outlook

In case you have yet to notice, we have adopted the same sub-headings in this quarter’s Singapore bank earnings preview as the previous in light of the protracted uncertainty going into the end of the year. The challenge in surmounting the Street’s estimate for local bank earnings may not be deemed as much a driver for prices as compared to the guidance and outlook to accompany the releases.

Across Asia markets, there lies multiple risks that had perhaps been well discussed in the latest annual IMF meeting in Bali. Rising trade tensions had certainly seen its impact rolling in once again following the exchange of tariffs between US and China in late September. Into December, any escalation in trade tariffs amount may further threaten China’s growth and see its impact trickle down to the rest of Asia. Meanwhile, while rising interest rates add to the profitability of the lending business, the higher borrowing costs could erode loan demand as we move into 2019 that sees little clarity at present. All the above may dull the impact from earnings, prompting the views on future quarters’ performance to potential take precedence in guiding prices.

The recent pullback does, however, increase the attractiveness of local bank stocks with favourable valuations. At 12.8x price-to-equity ratio, this is again near the 1-year lows for DBS. A similar situation cuts across the remaining two. With the gap opened between the current and 12-month target prices, it is also no surprise finding buy ratings affirmed of late. The most stable asset quality for local banks should make them comparatively favourable picks compared to regional counterparts, though the timing of any reversal would be the question.

Technical Analysis

As the first to release its Q2 results, UOB may be the best to capture the reactions, though the impact will likely ripple across the local banking sector. Prices have found support ahead of the $25 handle amid the short-term downtrend. While unlikely, any disappointments in earnings or overt pessimism from management could see prices test the support and a break here could provide further downward momentum.

On the flipside, a flip back above the $25.84 support-turned-resistance could bring prices back into the consolidation zone warranting different short-term strategies.



Market Capitalisation: 45.59 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.

Live OCBC prices


Market Capitalisation: 62.20 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.

Live UOB prices


Market Capitalisation: 42.57 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.

Live DBS prices

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