DBS Building

SINGAPORE: Singapore’s two major banks, DBS and OCBC are expected to announce stable net profits for the first quarter of the fiscal year, although slightly lower compared to the same period last year, according to a report by UOB Kay Hian (UOBKH).

According to Singapore Business Review, analyst Jonathan Koh from UOBKH projects predicts DBS will disclose a Q1 net profit of S$2.49 billion, up 10% from Q4 2023 but down 3% from Q1 2023. Despite this, the bank is expected to experience a minor increase in loan growth, up by 0.8% compared to Q1 2023.

Mr Koh notes a positive trend in corporate loans, which expanded by 1.6% month-on-month in February 2024, indicating a softening in corporate loan weakness and customer repayments. However, the net interest margin (NIM) is forecasted to decrease by 4 basis points to 2.09%, attributed to lower margins from Hong Kong dollar-denominated loans, which make up 11% of total loans.

Ml Saw s1 aThis is due to a reduction in the Hong Kong Interbank Offered Rate (HIBOR) by 43 basis points to 4.72% in Q1.

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The wealth management sector is expected to make a significant contribution, with a 10% increase from the previous year to S$400 million. This growth is attributed to the “initial euphoria over potential rate cuts earlier during the quarter,” according to Mr Koh.

DBS is likely to maintain benign bad loans, setting aside total provisions of S$213 million and incurring a credit cost of 20 basis points in Q1.

Similarly, OCBC is anticipated to report a rebound in net profit compared to Q4 2023 but a slight decrease from the previous year. Analysts expect a 12% quarter-on-quarter increase but a 3% year-on-year decline, amounting to S$1.82 billion for Q1.

However, OCBC’s loan growth is expected to be subdued, with only a marginal 1.4% year-on-year rise, attributed to some companies deleveraging in response to higher interest rates. The bank’s NIM is also predicted to decrease by 6 basis points to 2.23%, with Hong Kong dollar-denominated loans accounting for 13% of its total loans.

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Despite these challenges, net interest income is forecasted to grow by 4% in Q1, while fee income is expected to rise by 7% year-on-year to S$487 million.

OCBC’s non-performing loan (NPL) ratio is projected to remain stable at 1%, considering an expected 22 basis points credit cost in Q1. /TISG

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