Big banks report lower earnings in unison

DBS, OCBC, and UOB all saw their profits fall 10% year-on-year.

All three of Singapore’s biggest banks’ net profits fell 10% in Q1 compared to the same period a year earlier.

Compared to the fourth quarter of 2021, the net income at DBS and OCBC surged more than 30% on margin expansion and low credit allowances. UOB reported lower profits, the latter bank being more impacted by volatile non-interest income compared to its peers. 

Overall, Singapore’s banks maintained solid credit fundamentals in Q1 2022, which bodes well for their performance for the remainder of the year, according to analysts.

“We expect profitability to increase further as upcoming interest rate rises will boost margins. A key risk to our stable credit view is a potential surge in inflationary pressure,” said Eugene Tarzimanov, vice president, Financial Institutions Group, Moody’s Investors Service.

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Jefferies’ equity analyst Krishna Guha noted that all three banks were hit with volatile non-interest income, resulting in lower fee growth. In fact, only DBS managed to grow fees sequentially, partly thanks to its wealth management business.

“DBS outperformed on non-interest income but the guide on loan growth and fees need a watch,” Guha added.

A steep drop in credit cost was the highlight for OCBC along with better performance of associates, he added.

UOB, like DBS, reported better-than-expected loan growth, and exhibited better cost management as well as stable core net interest income, Guha said.