Singapore banks top estimates but flag caution in weak markets & More News Here

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

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.

Though rising rates of interest and the total re-opening of Singapore’s trade-dependant financial system after restrictions throughout the pandemic spell excellent news for banks, inflation dangers are weighing on their prospects.

“We expect profitability to increase further as upcoming interest rate rises will boost margins,” mentioned Eugene Tarzimanov, a senior credit score officer at Moody’s Investors Service, referring to DBS, OCBC and smaller rival United Overseas Bank (UOB) (UOBH.SI). “A key risk to our stable credit view is a potential surge in inflationary pressure.”

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

Net revenue at DBS fell to S$1.8 billion ($1.30 billion) in January-March from a report S$2 billion a yr earlier. The internet revenue was above a mean estimate of S$1.63 billion from six analysts, in accordance with Refinitiv information.

Second-ranked OCBC posted a first-quarter internet revenue of S$1.36 billion, down from S$1.5 billion a yr earlier, but this was additionally larger than a mean estimate of S$1.2 billion.

Both banks have construct up a few of the greatest wealth administration companies in Asia over the previous decade, and each warned of weak spot in the profitable section because of wobbly markets.

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

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

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

Earlier this week, international financial institution Standard 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

MARKET RISKS

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

“When you put all of these together, it’s quite clear that the outlook for the next year or so is going to be difficult to forecast,” he advised reporters.

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

Earlier this yr, DBS and UOB individually snapped up retail belongings offered by Citibank (C.N) in Southeast Asian markets and Taiwan.

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

“The market will also look ahead for signs, and see the beginnings of benefits on margin uplift, and decent loan growth of 8-9%,” mentioned Kevin Kwek, senior analyst at Sanford C. Bernstein.

($1 = 1.3868 Singapore {dollars})

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

Our Standards: The Thomson Reuters Trust Principles.

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