Singapore Bank Profits Beat Estimates; DBS Sees Pickup

Singapore’s biggest banks posted third-quarter profit that beat estimates, signaling they are withstanding the impact of the pandemic as it takes a toll on the economy and loan quality.

DBS Group Holdings Ltd. saw net income fall 20% from a year earlier and Oversea-Chinese Banking Corp. posted a 12% drop as lending income slumped and provisions rose, results for the three months ended Sept. 30 showed Thursday. Yet revenue increased in some businesses such as wealth.

The banks join smaller rival United Overseas Bank Ltd. in posting better-than-expected results, providing good news for Singapore officials as they pump billions into the shrinking economy and extend loan relief measures to support households and businesses.

“The three banks overall have reported very encouraging numbers,” said Diksha Gera, a Bloomberg Intelligence analyst. Provision levels are healthy and the Singapore government’s stimulus “may help the banks ride the wave.”

DBS and OCBC shares rose more than 3% in Singapore morning trading and were among the biggest gainers on the benchmark Straits Times Index.

Asia Rebound

DBS Chief Executive Office Piyush Gupta said in a presentation that “business momentum improved,” with wealth management and a pickup in credit card spending among the bright spots. He expects a “strong economic rebound in Asia” to fuel loan growth and fee income.

OCBC CEO Samuel Tsien struck a more cautious tone, saying the challenging economic environment will persist as the virus remains. Loan repayments once the moratorium expires “may be better than expected,” but sustainability is not yet certain, he said in a presentation.

Still, even Tsien was upbeat about the bank’s wealth management business, which saw income climb to a record in the first nine months of 2020. OCBC is looking to expand its onshore wealth operations in Southeast Asian nations including Malaysia, Tsien told reporters at a briefing. There are no plans for acquisitions at the moment, he said.

DBS’s profit of S$1.3 billion ($957 million) exceeded the S$1.12 billion average estimate of analysts surveyed by Bloomberg. OCBC’s earnings came in at S$1.03 billion, higher than the projected S$850 million.

While both banks reported higher loan allowances from a year earlier, they fell from the previous quarter.

Taken together with a quarterly increase in return on equity, “it means they could have afforded putting more away and didn’t see the need to, as of now,” said Kevin Kwek, a banking analyst at Sanford C. Bernstein in Singapore. “The earnings give reason to believe 2021 will be better.”

Other Highlights

  • DBS’s net interest margin shrank to 1.53%, while OCBC’s fell to 1.54%.
  • OCBC’s net interest income declined 11% from a year earlier, and DBS posted a 12% drop.
  • Wealth management fees at DBS totaled S$380 million, the second-highest quarterly amount, according to the bank.
  • For more on DBS’s results, click here. More on OCBC here.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.