Singapore banks' markets-related-income seen to tumble in 3Q13

Due to trading and investment slump.

"We expect stable margin and loan growth, but markets-related income may be a potential source of disappointment," said Barclays, noting that the Singapore stock market’s average daily turnover was down 18% q/q in 3Q.

Barclays anticipates weaker fee and investment-related income q/q, as investor sentiment declined in 3Q.

Singapore banks should see lower investment, wealth management, bancassurance and brokerage fee income q/q, the research firm added.

"Moreover, we forecast sequentially lower trading and investment gains. The Straits Times Index fell 4% q/q, while average daily turnover fell 18% q/q in 3Q. OCBC will likely be significantly affected by mark-to-market losses on Great Eastern’s life insurance bond portfolio as 10Y UST yields were largely stable during 3Q (vs a steepening in 2Q)," said Barclays.

"We expect steady growth in non-market related fee income (loan and credit card-related), as banks’ increasingly focus on fee income in the low interest rate environment," it added.

The prediction of weaker markets-related income led Barclays to lower its FY13-14E EPS for Singapore banks to 1-3%. The forecast came as the 3Q13 reporting season for Singapore banks is set to start with DBS and OCBC on 1 Nov, followed by UOB on 4 Nov.