The Federal Reserve's September surprise, which postponed the tapering of its asset purchases, dented otherwise solid earnings at two of Singapore's banks.
OCBC and DBS, two of Singapore's banking trio, reported solid earnings Friday, beating analysts' expectations amid solid lending growth and resilient asset quality, but both noted taper-related dents to trading and Treasury income. UOB is due to report earnings on November 5.
"We basically got the call on Fed tapering wrong. We were quite sure that there would be Fed tapering in September and effectively positioned for that," said Piyush Gupta, CEO of DBS, at a press conference. "We put on hedges on some of our Treasury positions. Clearly, when the Fed didn't taper and rates went the wrong way, our hedges started going out of the money," he added.
(Read more: Is Asia facing a housing debt crisis?)
"While we were conservative from a liquidity management standpoint, that also put some pressure on our income for the quarter," Gupta said.
While Gupta didn't say if DBS had reversed the trades, he said, "I don't think that the Fed is likely to taper anytime soon," noting "if you look at the (U.S.) data coming through, it's not that strong."