Jefferies sees QoQ bottom line decline for UBS, OCBC, and DBS in 4Q21

Among the reasons for the decline is the weaker non-intertest income of banks.

Financial services firm Jeffries said Singapore's top banks, DBS, OCBC, and UOB will likely see a quarterly decline in its bottom line in 4Q21.

In its report, the analyst cited seasonal factors such as weaker non-interest income, higher costs, and slight higher provisions as the reasons for the expected decline.

Non-interest income, in particular, is expected to drop by 17% QoQ for DBS, 5% QoQ for OCBC, and 5% QoQ for UOB.

On a year-on-year comparison, the firm sees a compound growth of 5% YoY in the non-interest income of the three banks. The growth is still “sequentially lower due to seasonal factors and lower gains from investment securities portfolio,” said Jeffries.

Based on the firm’s estimates, DBS and UOB will see a 5% YoY and 9% YoY growth in their non-interest income. On the other hand, OCBC’s will drop by 1% YoY.

The analyst, however, said it expects a 30% YoY growth in the bottom line on average and are seeing a 1% to 1.5% QoQ loan growth and stable margins for the three banks.

Here are other insights from Jeffries:

“Local banks (in line with global/regional peers) have rallied in anticipation of reflation and rate hikes and now, micro (loan growth, write backs) needs to support the macro. Sector forward PEs/PBs are just shy of 1SD above mean since 2010 while risk premiums are getting tighter. Monthly stats are encouraging.

Continuation of the same will put the growth narrative on a firmer footing. Sector EPS revisions are still positive, up 1.8% and 3.8% since the start of the year, implying EPS growth of 8.4% and 13.3% for FY22 and FY23, respectively.”