As early as 4Q2022, it was evident that inflation was in the process of being tamed, and the US Federal Reserve had already made its largest rate hikes — usually a boon for banks. While the net interest margins (NIM) of both UOB and DBS in 2022 averaged 1.86% and 1.93% respectively, both banks are guiding higher levels this year with DBS forecasting 2.05%–2.1% and UOB forecasting 2.1%–2.2%, which means 1Q2023’s NIM represents a peak of sorts.
Despite reporting a record net profit of $2.57 billion in 1QFY2023 ended March after setting aside $99 million in general provisions and adding $200 million to its management overlays, analysts are not excited over DBS Group Holdings’ (SGX:D05
) results. This was also the case with United Overseas Bank (UOB) (SGX:U11) . It too had reported a record net profit of $1.58 billion in 1QFY2023 ended March.
In fact, analysts are giving the cold shoulder to banks. Goldman Sachs is perhaps the boldest. It has downgraded DBS to a “sell” and UOB to “neutral”. Some market observers are commenting that Goldman is late to the game. RHB has a “neutral” rating on DBS, downgraded from an earlier “buy”, while CGS-CIMB has kept DBS as “neutral”. Overall, there are still more “buys” than “neutral” or “sell” ratings. But increasingly, analysts, like investors, are concerned about the outlook.
