Analysts predict small drag from UOB, OCBC Indonesian business

No thanks to 19% IDR depreciation.

According to Barclays, investor sentiment declined in 3Q and they expect lower investment, wealth management, bancassurance and brokerage fee income q/q. Moreover, they 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).

Here's more from 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.

Limited impact from Indonesian rupiah depreciation: We expect a small drag (<1%) from UOB and OCBC's Indonesian business on currency translation, as the IDR depreciated 19% q/q vs the SGD in 3Q.

IDR loans only account for 2.8% and 3.3% of UOB and OCBC's loan book in 2Q, respectively. For DBS, the currency drag is immaterial, as most of its Indian and Indonesian loans (each c4-5% of total loans) are US$-denominated.