DBS remains analysts’ pick ahead of Q3 earnings after Singapore banks’ share slump
Still, the lending environment remains ‘favourable’; calls on OCBC and UOB are mixed
Despite a significant sell-off in the local banking sector, DBS remains favored by analysts ahead of its Q3 earnings release. This follows a series of downgrades on Oct 7, specifically on OCBC and UOB, which collectively led to more than US$22 billion in market value loss. As of Oct 16, DBS shares were trading at S$74.17, with UOB up 0.4% at S$41.87 and OCBC at 0.5% higher at S$29.13.
Analysts predict that the banks' Q3 earnings might fall short of market expectations, citing higher interest rates that could squeeze their margins and pressure on their debt holdings due to rising bond yields. However, the lending environment is considered favorable, with loan growth up 16% year on year in August. DBS is expected to maintain relatively flat net interest margins (NIMs) for Q3, slightly lower than predicted due to fixed rate loan repricing.
Analysts expect DBS to record 2.9% year-on-year growth in non-interest income in Q3, driven by a 7.4% growth in wealth-management fees due to net new money inflow. Despite this, some analysts believe DBS' net interest income (NII) growth may not improve significantly in Q3, with a 2.4% decline year on year and a 2.5% decline quarter on quarter.
This is largely attributed to the bank's NIM narrowing by 10 basis points year on year and 1 basis point quarter on quarter. Regardless, DBS is expected to meet Q3 expectations as the only bank paying dividends, with an estimated 4.4% annualized yield. As for UOB, some analysts remain optimistic, citing its potential price-to-earnings discount and strong wealth fees growth.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
