Singapore Banks - DBS Research 2019-11-12: A Resilient Quarter

Singapore Banks - DBS Group Research | SGinvestors.io DBS GROUP HOLDINGS LTD (SGX:D05) OVERSEA-CHINESE BANKING CORP (SGX:O39) UNITED OVERSEAS BANK LTD (SGX:U11)

Singapore Banks - A Resilient Quarter

  • Non-interest income shows strength; net interest margin (NIM) expected to decline from hereon.
  • New NPL formation continues to be on the rise; uptick in credit costs across the board.
  • Loan growth trajectory remains varied.
  • Remain neutral on sector; UOB our preferred pick.



Non-interest income shows strength; NIM expected to decline from hereon.

  • Singapore banks’ 3Q19 earnings were mixed, though non-interest income continued to show strength, with strong wealth management income growth across all banks, amidst a slowing growth in net interest income alongside increased allowances.
  • Net profit:
  • As expected, amidst a falling interest rate environment, NIM declined 1- 4bps across the banks and we believe that NIM will continue to decline from hereon with the banks now guiding for a 5-10bps decline in NIM into FY20F.


New NPL formation continues to be on the rise, uptick in credit costs.

  • Notably, new NPL formation has increased across the Singapore banks with the exception of UOB.
  • According to OCBC, its new NPL formation of S$683m (c.S$340m for last two quarters) is largely related to two corporate accounts in transportation and offshore vessel.
  • DBS’s new NPL formation of S$367m (c.$190m for last two quarters) was largely related to a transportation account. 3Q19 credit costs ticked up across the board as higher special allowances were observed across the banks. In particular, DBS and OCBC also buffered additional general provisions to account for Hong Kong’s situation.
  • For 9M19, total credit costs ranged from 17-25bps across the banks as we expect credit costs to continue normalising into FY20F.


Loan growth trajectory remains varied.

  • In 3Q19, loan growth was largely flat across the banks in part due to ongoing uncertain economic outlook. Year-to-date (since Dec-18), Singapore banks’ loan book expanded c.2-5% with varying loan growth trends, as UOB continues to guide for high single-digit loan growth for FY19, with DBS and OCBC guiding for c.4% and low single-digit loan growth respectively.
  • For FY20, UOB is targeting mid-single-digit loan growth as it starts to slow down big chunky loan growth for Financial Institutions and Real Estate-related exposures. DBS and OCBC are guiding for similar levels as in FY19.


Remain neutral on sector; UOB our preferred pick.






Rui Wen LIM DBS Group Research | https://www.dbsvickers.com/ 2019-11-12
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000
HOLD MAINTAIN HOLD 11.500 SAME 11.500
BUY MAINTAIN BUY 29.200 SAME 29.200



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