Singapore Banks - Maybank Kim Eng 2020-10-16: What To Expect For 3Q20

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

Singapore Banks - What To Expect For 3Q20


Less bad, but not great

  • UOB (SGX:U11) will be reporting its 3Q20 trading update on 04 Nov, followed by DBS (SGX:D05) and OCBC (SGX:O39) on 05 Nov.
  • We expect provisioning costs – while remaining high – to see q-o-q deceleration. NPLs may see some upward movement following 1H20 lockdowns. Fees should see positive momentum led by improving wealth management volumes and credit card spending. Trading income may also see buoyancy.
  • NIMs may remain under pressure, although we expect loan growth to remain positive. We will be watching out for Management guidance on moratorium trends as well as risks of dividend caps extending to 2021E.
  • Stronger fees and lower credit charges may position DBS with the highest potential of surprising on the upside, while UOB with the least.



Slower credit charge momentum

  • Credit charges in 2Q20 were almost flat q-o-q for the sector, although y-o-y it has 5x higher. Largely this was driven by front-loaded cautionary provisioning from adjustments to macro-economic variables (MEV) and management overlays.
  • While we expect an element of this to remain, given improved economic activity in 3Q, it should be sequentially lower.
  • The biggest unknown delta may be specific provisions as some credits (especially in frontline COVID-19 sectors) get downgraded. However, ongoing loan moratoriums and government support schemes may delay and offset some of these moves, we believe.


Inflection in non-interest income

  • Rising economic activity and branch openings post the 1H lockdowns should translate in to positive momentum in wealth management fees as well as credit card spending, we believe. Stronger market conditions in 3Q should also be supportive of trading income, although these may be several notches below growth level seen by US banks reporting so far.

Weak NIMs, loans and flat CIRs











Thilan Wickramasinghe Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-10-16
SGX Stock Analyst Report BUY MAINTAIN BUY 22.900 SAME 22.900
HOLD MAINTAIN HOLD 9.060 SAME 9.060
HOLD MAINTAIN HOLD 20.790 SAME 20.790



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