Earnings forecast for Singapore banks' Big 3 slashed by 3%

Here's what could drag growth.

According to Barclays Research, the 3Q13 reporting season for Singapore banks is set to start with DBS and OCBC on 1 Nov, followed by UOB on 4 Nov.

Barclays expects stable margin and loan growth, but markets-related income may be a potential source of disappointment (the Singapore stock market's average daily turnover was down 18% q/q in 3Q). It lowers its FY13-14 EPS forecasts by up to 3% for all three banks.

Here's more from Barclays:

UOB (OW) remains our top pick, given its high fee income generation, sound risk management track record and strong core capital position relative to peers

Stable volumes and margin in 3Q13: We estimate loan growth in 3Q of 2-3% q/q, driven by corporate and short-term trade loans, and stable margin q/q, in line with guidance.

Downward pressure on loan pricing from the shift into lower yields trade finance loans is offset by slightly lower funding cost on short-term wholesale funding (commercial paper). Our FY13-14E EPS are 1-3% lower after adjusting for weaker markets-related income.