SINGAPORE (Oct 29): United Overseas Bank is due to report 3QFY2019 earnings on Nov 1, Oversea-Chinese Banking Corp on Nov 5 and DBS Group Holdings on Nov 11.
With the US Federal Reserve cutting the Fed Funds Rate twice this year, the banks’ net interest margins are likely to be flat-to-lower q-o-q, says Credit Suisse in a curtain raiser to the banks’ reporting season. As a result of Fed rate cuts, the average three-month Singapore interbank offered rates and three-month swap offer rates have decline by 6bps and 20 bps respectively, q-o-q. This could put downward pressure on asset yields, Credit Suisse says in a report dated Oct 24.
There is usually a time-lag between asset yields and funding costs catching up. “DBS has the highest CASA (current account savings account) and hence should have the least relief from CASA repricing while UOB has the lowest CASA and hence has the most room to see support from funding cost,” Credit Suisse says.
Markets have been buoyant and this should support fees from wealth management. In addition the Monetary Authority of Singapore data indicates that deposits from residents outside Singapore rose by $4.6 billion in the June to Aug period. DBS and OCBC have large private banking and wealth management franchises.
Credit costs are the unknown. Given the slower growth trajectory in Singapore and north Asia, credit costs are likely to be higher.
DBS is expected to announce a net profit of $1,579 million for 3QFY2019, OCBC is expected to report earnings of $1,162 million for the third quarter, and UOB to report $1,078 billion for the same period, based on estimates in a Bloomberg poll.
