Singapore Banks - 1Q22 NIM Inflection Point; Credit Costs Low
- DBS’s and OCBC’s 1Q22 earnings beat consensus but UOB missed. NIM has started trending upwards. Wealth was decent while treasury dipped y-o-y.
- No indication of major asset quality issues; we watch out for revised credit cost guidance. Management overlays (~S$400m-S$1.5bn) seem intact.
- DBS (SGX:D05)'s 1Q22 net profit of S$1.8bn was 6% above our estimate but in line with consensus. Earnings were 10% lower y-o-y but 30% higher q-o-q. Generally, every line item was in line with our expectations with total income at S$3.75bn vs our S$3.7bn. Loan loss was the key difference at S$55m (5bp) vs our S$80m (8bp) due to general provision writebacks. Fee income fell 7% y-o-y but rose 9% q-o-q. NIM rose 3bp q-o-q to 1.46% in 1Q22. Wealth income slid 21% y-o-y as expected but came in within our estimate for 1Q22.
- OCBC (SGX:O39)'s 1Q22 earnings were 13% above our estimate but in line with consensus. Every line item beat our expectations, from NII to PPOP. Lower loan loss provisions were the key positive variance – at S$44m (6bp) vs our S$160m (22bp). There was a major reduction in specific provisions (SPs) to 4bp (4Q21: 54bp) while GP came in at 2bp. NII was steady at +1% q-o-q but NIM climbed 3bp q-o-q to 1.55% (vs. our expected 1.53%).
- UOB (SGX:U11)'s 1Q22 net profit of S$906m was 6%/20% below our/consensus estimates. UOB missed our forecasts due to higher tax expenses (~21% tax rate in 1Q22 vs ~17% in FY21). NIMs rose 2bp q-o-q to 1.58% in 1Q22 while loans grew 3% q-o-q. As a result, NII climbed 1% (+10% y-o-y). Fee income was flattish q-o-q (-10% y-o-y) in 1Q22 as credit card fees were seasonally lower and weak market sentiments hit wealth management and fund management fees.
- We expect OCBC's Share Price to trend positively given the positive credit cost surprise. We could see weakness in UOB's share srice given MTM losses.
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 2022-04-29 2022-04-29
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