Singapore Banks - Maybank Research 2023-10-12: What To Expect For 3Q23 Earnings?

• UOB (SGX:U11) is set to report 3Q23 on 26 Oct, DBS (SGX:D05) 06 Nov and OCBC (SGX:O39) 10 Nov 2023.

Slowing more. Asset quality benign. NEUTRAL

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• Fees are unlikely to provide much growth with wealth management still in the doldrums.
• While asset quality should remain benign, we expect increasingly cautious guidance and a potential uptick in cautionary provisions.
• On the other hand, dividend guidance is likely to keep to an optimistic tone, especially with further capital releases with BASEL IV in 2024E.
• UOB could marginally surprise on the upside from stronger ASEAN consumer growth, but need to watch FX translation.

Flattish net-interest margins (NIMs), weak loans.

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• With the sector flush with liquidity (loan-deposit ratio ~81%), we expect similar trends to persist in 3Q23. Hence, NIMs should remain at current levels.
• On the other hand, loans fell -1% y-o-y in 2Q23. Weak demand for trade-related debt was a key driver. Continued weakness in China, plus accessibility of cheaper domestic funding (2.65% China MLF (medium term lending facility) rate vs 3.71% 6-month SORA), could likely drive further contraction in volumes. We expect to see further downgrades to Management guidance for 2H23.

Non-interest income (NoII) recovery tepid.

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Thilan Wickramasinghe Maybank Research | https://www.maybank-ke.com.sg/ 2023-10-12 SGinvestors.io

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