Banks

What to expect when Singapore’s top banks report third-quarter earnings this week

Key Points
  • Singapore's top three banks are expected to report further hits to earnings due to sustained low interest rates globally and the pandemic-induced economic recession, Refinitiv estimates showed.
  • But some analysts said the results could show improvements in specific areas as Singapore and other Asian economies have reopened from earlier lockdowns to contain Covid-19.
  • United Overseas Bank will report earnings on Wednesday, while DBS Group Holdings and Oversea-Chinese Banking Corp will release their report cards on Thursday.
A cyclist rides before the city skyline at Marina Bay in Singapore.
Roslan Rahman | AFP | Getty Images

SINGAPORE — The top three lenders in Singapore are scheduled to release their third-quarter financial results this week, with analysts expecting further hits to earnings from sustained low interest rates globally and the pandemic-induced economic recession.

The smallest of the trio, United Overseas Bank, will report earnings on Wednesday. The other two banks, DBS Group Holdings and Oversea-Chinese Banking Corp, will release their report cards on Thursday.

Analyst estimates compiled by Refinitiv showed that DBS — Southeast Asia's largest bank by assets — would report the smallest decline in net income, while UOB would experience the biggest fall.

Here are the forecasts for several main financial metrics, according to Refinitiv:

  • Net income: DBS is forecast to report a 28.2% year-on-year fall, while OCBC and UOB are projected to record declines of 31.5% and 49%, respectively.
  • Loan-loss provisions: DBS is expected to set aside an additional 561 million Singapore dollars ($411.2 million) – the largest amount among the trio; while OCBC and UOB are forecast to book 407 million Singapore dollars ($298.3 million) and 537 million Singapore dollars ($393.5 million), respectively.  
  • Net interest margin: Lending margins of all three banks are expected to be around 1.5%. That represents further compression for DBS and OCBC, but a slight climb for UOB.

Despite the expected earnings hit, some analysts said the results may show improvements in specific areas. That's because Singapore and several other Asian markets that the banks operate in have reopened much of their economies following earlier lockdowns aimed at containing Covid-19.

Potential bright spots include higher wealth management activity and credit card spending, which could boost the banks' fee income in the third quarter, said analysts.

"Stronger fees and lower credit charges may position DBS with the highest potential of surprising on the upside, while UOB with the least," said Thilan Wickramasinghe, an analyst from brokerage Maybank Kim Eng.

Concerns about bad loans building up have also abated for now, as home market Singapore allows certain cash-strapped individuals as well as small- and medium-sized companies to defer loan repayments for longer than initially planned.

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Beyond the third-quarter financial metrics, analysts said they're watching for the banks' commentary on business prospects in the coming months.

Krishna Guha, an analyst from Jefferies, singled out the outlook for loan growth — particularly for Hong Kong and the so-called Greater Bay Area — as one area that he's watching. The Greater Bay Area refers to a cluster of Southern Chinese cities and the two special administrative regions of Hong Kong and Macao.

"We look forward to commentary on loan growth in HK/GBA and broader themes such as infrastructure, supply chain shifts and digitalization," he said in a recent report.