Singapore Banks - 1Q22 Preview ~ Weighed Down By Risk-Off Sentiment
- We expect banks to report relative modest 1Q22F earnings as risk-off sentiment had weighed on wealth management and treasury income amid heightened market volatility .While meaningful NIM expansion from the 50bp Fed fund rate hike in Mar 22 will likely materialise only later in the year, upward asset pricing pressure from rising S$ rates could have spurred NIMs up ~1bp in 1Q22F.
- Loan demand appeared mixed across the banks; corporate demand likely sustained but housing loans were flattish. We expect other fee income drivers to have held steady with trade, transaction and loan-related fees tracking the pick-up in business activity, while credit card fees captured rising travel-related spending.
- We believe opex crept upwards in line with revenue growth and some wage pressures, but CTI likely remained broadly stable.
- We understand that asset quality across various portfolios remained benign and that there are no indications of systemic risk from elevated energy/commodity prices. Credit costs likely remained contained in 1Q22F, but we see risk of banks revising their guidance for the rest of FY22F upwards (negatively).
- We expect DBS (SGX:D05) to record 1Q22F net profit of ~S$1.7bn (+22% q-o-q, -15% y-o-y). We understand that DBS's loan growth is on track to meet its mid-single-digit target for FY22F. We project that while positive momentum in S$ rates likely pushed its NIM slightly higher, total income was ultimately weighed down by weak wealth and treasury income.
- We expect OCBC (SGX:O39) to record 1Q22F net profit of S$1.2bn (+23% q-o-q, -20% y-o-y). OCBC noted some weakness in loan demand in 1Q22F as corporate clients turned more cautious. Housing loan demand slowed as well. Some slight NIM upside could materialise from the up ard repricing of short-term trade loans.
- We expect UOB (SGX:U11) to post 1Q22F net profit of S$961m. UOB observed strong loan growth from sustained demand from property funds and financial institutions (FIs) as well as traders tapping larger credit lines amid higher commodity prices, although it remains selective on who it extends credits to, assessing exposures on a return on risk-weighted assets (RORWA) basis and not just on NIM.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2022-04-14 2022-04-14
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