Singapore banks top estimates but flag caution in weak markets

A emblem of DBS financial institution is seen in Taipei, Taiwan, January 28, 2022. REUTERS/Ann Wang

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SINGAPORE, April 29 (Reuters) – Singapore lenders DBS Group (DBSM.SI) and OCBC (OCBC.SI) gave cautious outlooks on Friday after reporting 10% declines in quarterly earnings amid weaker financial progress, although their performances nonetheless beat analysts’ estimates.

Although rising rates of interest and the complete re-opening of Singapore’s trade-dependant economic system after restrictions in the course of the pandemic spell excellent news for banks, inflation dangers are weighing on their prospects.

“We anticipate profitability to extend additional as upcoming rate of interest rises will enhance margins,” mentioned Eugene Tarzimanov, a senior credit score officer at Moody’s Buyers Service, referring to DBS, OCBC and smaller rival United Abroad Financial institution (UOB) (UOBH.SI). “A key danger to our secure credit score view is a possible surge in inflationary strain.”

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Shares in DBS, Southeast Asia’s largest financial institution, rose 4% whereas OCBC jumped 3.6%. The broader market (.STI) gained 1%.

Web revenue at DBS fell to S$1.8 billion ($1.30 billion) in January-March from a report S$2 billion a 12 months earlier. The web revenue was above a median estimate of S$1.63 billion from six analysts, based on Refinitiv information.

Second-ranked OCBC posted a first-quarter internet revenue of S$1.36 billion, down from S$1.5 billion a 12 months earlier, however this was additionally increased than a median estimate of S$1.2 billion.

Each banks have construct up among the largest wealth administration companies in Asia over the previous decade, and each warned of weak point within the profitable phase attributable to wobbly markets.

At DBS, wealth administration charges fell 21% within the quarter, whereas wealth administration revenue at OCBC dropped 26%.

UOB additionally posted a ten% fall in internet revenue, nevertheless it missed market estimates. Its shares fell 1%.

Singapore banks final 12 months benefited from a powerful restoration in previously pandemic-hit markets and from financial progress of seven.6%. This 12 months the central financial institution expects solely 3% to five% progress.

Earlier this week, international financial institution Customary Chartered (STAN.L) beat expectations for first-quarter revenue and flagged a strong outlook, whereas HSBC (HSBA.L) reported an surprising hit to its capital. learn extra

DBS CEO Piyush Gupta warned about lingering dangers from a spike in commodity costs, increased inflation and muted financial progress.

“Once you put all of those collectively, it is fairly clear that the outlook for the following 12 months or so goes to be troublesome to forecast,” he informed reporters.

DBS earns most of its revenue from Singapore and Hong Kong, whereas OCBC’s key markets are Singapore, Higher China and Malaysia.

Earlier this 12 months, DBS and UOB individually snapped up retail property bought by Citibank (C.N) in Southeast Asian markets and Taiwan.

Revenue at DBS, OCBC and UOB jumped from the fourth quarter whereas credit score prices remained muted. UOB’s revenue was decrease than within the fourth quarter.

“The market may even look forward for indicators, and see the beginnings of advantages on margin uplift, and respectable mortgage progress of 8-9%,” mentioned Kevin Kwek, senior analyst at Sanford C. Bernstein.

($1 = 1.3868 Singapore {dollars})

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Reporting by Anshuman Daga; Enhancing by Shri Navaratnam and Bradley Perrett

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