These are the 3 biggest things to watch for in Singapore banks' earnings results

Who will lead the earnings race?

According to Barclays, the three Singapore banks will all report FY13/4Q13 results on 14 Feb – DBS and OCBC before market open, and UOB after market close.

Here's more:

We expect revenue growth to be driven by loan growth of ~3% q/q (17% y/y for the three banks combined) and stable margin but partially offset by weaker markets-related income. We also expect slightly higher credit cost q/q and seasonally higher operating expenses.

DBS (OW) remains our top pick, given its strong deposit franchise and positive leverage to rising interest rate.

Reasonably strong loan volumes and stable margin trends: We revenue growth to be driven by reasonably strong loan growth in 4Q of 3% q/q (although slower than system growth of 5.9% q/q) driven by corporate, trade and non-housing retail loans.

Margins will likely remain stable, in our view, as downward loan repricing (mortgages and corporate loans) is bottoming out, offset by slightly higher funding cost driven by some deposit competition.

Markets-related income affected by weaker investor sentiment: We expect fee income to be broadly flat q/q, on weaker market-related income (wealth management, brokerage and funds management) offset by steady growth in loan/credit card and trade related fees.

The Straits Time Index was flat in 4Q13, but daily average turnover fell 25% q/q to less than S$1bn. We expect profit contribution for OCBC from its life insurance subsidiary, Great Eastern, to remain volatile from changes in value of its bond investments.

Earnings estimate changes: We lower our earnings forecast for UOB and OCBC marginally by up to 2.2% to reflect lower markets-related income, though offset by slightly higher loan growth. For DBS, we raise our earnings forecast by ~6% to reflect a one-off S$447m gain on disposal of its stake in the Bank of the Philippine Islands (BPI), half reflected in 4Q13 and half in 1Q14. Our price targets are unchanged.

Key things to watch: 1) Guidance on 2014 growth expectations, in particular loan growth which may potentially surprise on the upside in our view, driven by demand from corporates; 2) potential for higher dividends for DBS going forward (vs current guidance of 56c per year) and lower dividend payout for OCBC pending the acquisition of Wing Hang Bank which will be a drag to capital; and 3) views on the impact of tapering on bank operations, funding and loan to deposit ratio.