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 Q2 earnings – outlook cloudy?

Company Earnings Report Date
DBS 2 Aug 2018 (Bef market)
UOB 3 Aug 2018 (Bef market)
OCBC 6 Aug 2018 (Bef market)

Following a spectacular first quarter, Q2 earnings performance will be assessed alongside the forward guidance for the trio of Singaporean banks in the upcoming reports. While there appears to be little doubts for growth to continue in a mixed pace in the second quarter, the latest set of property cooling measures serves as weights upon the banking sector. Not to forget, the macro picture remains murky on the back of the protracted dispute between US and major trading partners, including Asia’s anchor China, that undermines the confidence of our local market. The question would be whether the local banks are likely to hold on to the current growth pace as we dive deeper into H2 2018.

Year-to-date changes finds DBS remaining the only of the trio holding its head above water when computing percentage changes, an occurrence that eludes even the Straits Times Index (STI). Certainly, the abovementioned bank remains the most favoured according to brokers’ ratings polled by Reuters. The question would be on outlook for our forward-looking market.

Rosy Q2 expectations

Consensus for banks’ Q2 earnings growth does not pale in comparison with the Q1 as seen in the table below with double-digit net income estimations seen for all but OCBC. Healthy earnings per share growth are likewise expected. In line with Q1, leading indicators are once again showing that the factors remain supportive of positive Q2 growth performance. While Singapore’s advanced Q2 GDP estimate had missed the market consensus, the number nevertheless arrived at a strong 3.8% year-on-year (YoY) which alongside the first quarter’s 4.3% tops the Ministry of Trade and Industry’s (MTI) 2.5% to 3.5% full year estimation. This amalgamated to rather consistent loan growth, at an average of 5.58% YoY for the first two month of Q2, compared to the 4.85% in Q1, despite the on-going trade spat. Local businesses had also maintained their optimism on growth based on a recent survey conducted by Ernst & Young, topping even that of global standards, supportive of healthy loan demands.

Over and above the factors pointing towards a healthy loan base, the interest rate trajectory likewise stands to play its part in boosting the banks’ net interest income. With the latest 3-month SIBOR ticking up by approximately 10 basis points to 1.63% levels into end July, banks’ net interest margins are similarly expected to continue the climb, reinforcing the expectation for strong Q2 performance.





Q1 Revenue (billion)




Q2 Revenue estimate (billion)


(+13.7% YoY)


(+2.1% YoY)


(+7.6% YoY)

Q1 EPS Adj.




Q2 EPS Adj. estimate


(+24.8% YoY)


(+3.74% YoY)


(+12.9% YoY)

Q1 Net income (billion)




Q2 Net income estimate (billion)


(+30.0% YoY)


(-10.1% YoY)


(+17.6% YoY)

Source: Reuters

Clouded outlook

While US banks saw a string of positive numbers that had helped the financial sector select ETF (XLF ETF) to the highest level in over a month into late July, local banks may react more to the tune of the outlook instead. The latest introduction of additional property curbs, where the Additional Buyer’s Stamp Duty (ABSD) and borrower’s loan-to-value (LTV) ratio were both amended effective July, looks to cast some shadows upon the banks’ performance going into the second half. Little concerns are allotted to the non-performing loans’ (NPL) end though upcoming housing borrowings is expected to be dampened moving forward. From amongst the trio of local banks, UOB is widely known to have the highest proportion of its books accounted for by home loans, with levels that are reported to top one-fourth of their total loans, likely to suffer the biggest loss of confidence on this end. Watch any management guidance in relation to this change.  

As things stand, the recent bout of macroeconomic factors including the trade tensions and the impact from the domestic property curb have brought prices down for all three local bank shares, away from their 12-month target price. That said, the string of brokers’ revision of late continued to reinforce their positive outlook for the local banks so do look to what guidance have to provide.

Technical Analysis

As the first to release its Q2 results, DBS Group Holdings Ltd. may be the best to capture the reactions, though the impact will likely ripple across the local banking sector. Prices have found support at the $25.84 horizontal support of late, which will likely retain its strength in the face of any further declines from here. On the upside, the $28.00 level is seen with prices struggling in the reversal as seen on the MACD. Outstanding earnings may still have the potential to send prices past the level, one to follow.

The 12-month target price is sighted at $31.81 according to Reuters consensus.



Market Capitalisation: 49.20 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: 46.13 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: 69.83 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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