Why Singapore banks won't be surprising analysts with impressive gains

Blame it on volatile capital markets.

Singapore banks are due to release their 4Q14 results, and it has been noted that in contrast to recent quarters, there may not be nice earnings surprises.

According to a research note from Maybank Kim Eng, unlike recent quarters, it sees limited room for positive earnings surprises when banks release their results.

First, consensus earnings have been raised several times. Second, T&I income likely was weak from volatile capital markets.

This implies risks of earnings shortfalls. Such income was behind banks’ strong earnings deliveries in the past few quarters, among others, said Maybank Kim Eng.

It also noted that as it is, T&I income is historically the weakest in 4Q.

Here's more from Maybank Kim Eng:

Take a leaf from global investment banks. JP Morgan Chase, Morgan Stanley, Citigroup and Bank of America reported results recently. Most fell short of expectations in part due to stifled trading income. Their results may provide clues on the earnings of Singapore banks.

DBS most at risk. Of the three, DBS is most dependent on T&I income. This accounted for an average 29% of its PBT in the past four years, towering above UOB’s 18% and OCBC’s 13%. This means DBS’s 4Q14 earnings could have the highest earnings risk. Given volatile capital markets in 4Q14, we think T&I income could be uncharacteristically weak.

No trend breakouts expected. The following trends should have been intact:

Resilient NIM. We expect sequential expansions in lending yields to compensate for marginally higher costs of funds.

Modest loan growth. Loan growth likely was the weakest for UOB. DBS’s loans could have been inflated by favourable currency translation for its outsized USD and HKD loans. These collectively accounted for 45.9% of its loans as at end-Sep 2014. In constant currency, we are looking at net loan growth of 1.7% QoQ or 7% YoY.

Limited asset-quality risks. The slight deterioration in DBS’s Indian loans since 1Q13 could persist. However, we do not expect housing-loan slippages.

Weaker market-related income, due to more choppy and feeble capital markets. Fee-based income likely was affected too.

Also Read

Bangkok Bank logs net profit of $1.05b for 9M 2024

Banks face value creation challenge despite record revenues

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

I want to download the media kit