Banks saved the day after dismal earnings season in Q3

Telcos are the next best performer.

Singapore banks provided the only silver lining in a landscape of dismal earnings reports in the third quarter. The banking sector posted a stunning 32% year-on-year earnings growth in Q3, emerging as the runaway winner in an otherwise lacklustre market.

According to DBS, the banking sector’s earnings were raised by 6.7% and 7.4% respectively for FY14F and FY15F, mainly due to maiden contributions from Wing Hang Bank boosting OCBC’s growth.

“This cushioned earnings cuts from the volatile sectors of oil and gas, transport and consumer services, which were affected by a weak global recovery. Ex-Banks, earnings would have been cut by 3.3% for FY14F and 1.5% for FY15F. As a result, earnings growth for STI companies still grow at a healthy rate of 7.6% and 8.7% respectively for FY14F and FY15F,” noted DBS.

Telcos also came in as a pleasant surprise, with earnings clocking in a 17% year-on-year growth in the third quarter.

“Despite the disappointing 3Q results, we expect STI companies to grow at a healthy rate of 7.6% and 8.7% for FY14F and FY15F respectively. Banks, which account for about 20% weightage by market cap, are one of the key pillars to the growth in earnings. Telecommunications, the next key sector which accounts for another 12% weightage in DBS’s coverage, is also expected to deliver stable growth of about 6% for both FY14F and FY15F,” the report stated.

Here’s more from DBS:

Net earnings of Singapore companies under DBS’s coverage rose by 9% y-o-y and 3% q-o-q in 3Q14. A weaker-than-expected global recovery affected sectors tagged to external growth, leading to earnings cut for oil and gas, consumer goods and services.

Domestic sectors held up, while banks and telecoms surprised on the upside, raking in earnings growth of 32% and 17% respectively.

The strong results for UOB were driven by non-interest income while NIM stabilised. OCBC is on track to meet its earlier guided targets: high single- to low double-digit loan growth, stable NIM (but higher vs FY13).