To The Moon

On Thursday and Friday, three big banks in Singapore will release earnings.

As of November 5, 2024, they have delivered strong performances year-to-date. $DBS Group Holdings(D05.SI)$ has led the pack with a 34.96% gain, followed by $ocbc bank(O39.SI)$ at 25.13%, and $UOB(U11.SI)$ at 21.70%. All three have notably outperformed the Straits Times Index (STI), which has risen by 12.91% over the same period.

1. How do three giants perform in last quarter?

In the previous quarter (Q2 2024), all three banks delivered solid results.

• DBS' net interest margin (NIM) remained stable, while OCBC saw a slight decline of 7 basis points in NIM. UOB, on the other hand, recorded a 3 basis point improvement in its NIM. This was amid rising concerns about a potential slowdown in interest income as Fed signaled the beginning of its rate-cut cycle.

• $DBS Group Holdings(D05.SI)$ Q2 net profit hit S$2.69 bln vs S$2.41 bln estimate. ROE hit new quarterly high of 19.2%, up from 13.4% a year ago.

• $ocbc bank(O39.SI)$ net profit rose to S$1.94 billion from S$1.71 billion a year earlier, beating estimates of S$1.82 billion.

• $UOB(U11.SI)$ net profit rose to S$1.43 billion, lower than the mean estimate of S$1.44 billion from estimates.

The dividend yield for DBS stands at 5.1%. OCBC’s dividend yield stands at 5.6%, while UOB stands at 5.3%.

2. A strong Q3 amid Fed rate cut impact?

Looking ahead, analysts expect all three banks to report a robust set of results for Q3 2024, largely driven by non-interest income streams.

• DBS is expected to post a 6.3% increase in net profit to 2.795 billion Singapore dollars.

• It’s expected UOB’s NIM to be stable, while OCBC’s NIM is likely to see a smaller decline q-o-q.

• Additionally, trading and investment income are expected to remain strong, particularly for OCBC and UOB, who have seen solid performance from both customer and non-customer flows.

The Fed's decision to lower interest rates is expected to have a muted effect on the banks’ earnings in the short term. However, long-term yields are expected to remain elevated, which will help support banks' earnings and NIMs.

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