Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Singapore banks’ earnings Q1 2022 round-up

Overall, all three banks saw a 9-10% fall in net profits year-on-year but high-base effect needs to be taken into account.

Singapore banks' earnings Q1 2022 Source: Bloomberg

Overview

This morning's key highlight was the release of the Singapore banks earnings (OCBC, UOB, DBS). Overall, all three banks saw a 9-10% fall in net profits year-on-year but high-base effect needs to be taken into account. Compared to market expectations, DBS and OCBC have delivered an earnings beat whereas UOB missed expectations.

1. Interest income to see tailwinds ahead

There are pockets of optimism, where net interest income continues to show positive momentum. Net interest margins have ticked slightly upwards across the banks, reflecting some improved loan yields as the tighter policy ahead provide room for further upward revision towards its pre-Covid level of 1.7%-1.8%. Current net interest margin is hovering around 1.46%-1.58%, with signs of bottoming-out. Singapore may follow the lead from the Fed’s tightening pace, which is expected to pick up over the coming months. Loan growth also maintained its pace with a high single-digit year-on-year increase, reflecting improved lending momentum despite Covid-19 challenges in Q1.

Singapore banks' net interest margin Source: DBS, OCBC, UOB
Singapore banks' net interest margin Source: DBS, OCBC, UOB
Total gross loans Source: DBS, OCBC, UOB
Total gross loans Source: DBS, OCBC, UOB

2. Loan loss provisions reflect economic resilience

Loan loss provisions remained largely steady with the banks’ prudent approach over the previous quarters. With the huge build-up in loan losses provision for OCBC in Q4 2021, paring down on further provisions in Q1 2022 may provide some relief that economic risks have been factored in for now, which also contributed to its earnings outperformance. Overall loan portfolio also stayed resilient, with non-performing loans maintaining at healthy levels of between 1.3%-1.6%.

3. Non-interest income highlights some risks but positive catalysts remain on watch

The headwinds this time round may come from the non-interest income, where geopolitical developments and the higher-inflation, slower growth environment translate to a double-digit fall. All three banks saw softer net fee income from a year ago, with DBS and UOB delivering a 6-7% decrease year-on-year while OCBC saw a 10% fall. The lower year-on-year comparison for trading income did not aid to provide any relief as well. That said, a key catalyst on watch will be the further push in economic reopening and easing travel borders, which may drive pent-up consumer spending on credit and debit cards, along with improving economic activities across the region. There has also been a positive tone coming from DBS as it signalled that China’s lockdown has no material impact.

4. Dividends/Fund flow

Based on current dividend projection, dividend yield for all three local banks ranges from 4%-4.5% at the time of writing. OCBC may deliver the highest yield at 4.5%, followed by DBS at 4.2% and UOB at 4%. The SGX fund flow data over the previous week has shown net institutional outflows from the financial sector over the past two months before the results release. The outflows may come on the back of newly-added risks from geopolitical conflict and China’s virus lockdowns, which may drive some paring of positions from institutional investors in light of increased uncertainty.

Cumulative Institutional Fund Flow Source: SGX, IG

5. Straits Times Index (STI) technicals

Coming after the banks’ result release, the STI is once again retesting the upper range of a consolidation zone at the 3,360 level. This is from the four-hour chart, where some resistance has capped the index on at least four occasions this month. One may potentially look out for any upward break to suggest a longer-term shift in sentiments to the upside.

Singapore Index Source: IG charts
Singapore Index Source: IG charts

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.