- After the stellar performance in 2024, with the 17.6% gain for the STI, it will be more challenging to expect another year of strong double-digit performance in 2025.
Singapore market valuations remain undemanding.
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- Valuations for the STI are also not excessive based on current price-to-earnings (P/E) and price-to-book (P/B) ratios. In terms of earnings growth, a modest single-digit earnings per share (EPS) growth is likely in 2025.
Singapore Banks: Slight decline in margin will be mitigated by higher fee income.
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- While the net interest margin (NIM) has stayed above 2% since 4Q22, with two cuts projected for 2025, this could mean that margins could ease off from the 2024 levels. This is likely to be mitigated by higher fee income from growing regional operations and wider footprint in the wealth and credit card businesses. Loans growth is likely to improve by single-digit growth, while fee income is likely to increase by double-digit growth.
- Most local banks continue to exercise cost discipline and cost-to-income ratios are likely to stay near FY24 levels. Greater intra-regional trades will also position Singapore banks to leverage on their regional operations to continue to undertake more cross-selling opportunities to expand loans books and grow fee income. However, with the challenges in 2025 largely from geopolitical risks and policy changes at key economies, we are projecting a slight dip to a flat FY25 net profits for DBS and UOB.
- In addition, banks are also looking at initiatives to explore capital management opportunities. DBS has announced a S$3b share buyback programme and it has commenced the buying programme in Nov 2024, while UOB has shared that it has about S$2b to S$2.5b in excess capital. These initiatives should provide strong near to medium share price support. Read also: DBS Group - Share Buybacks, With More To Go…
- Another key price support will come from the healthy dividend payouts which will appeal to long-term yield seekers.
- Read more at SGinvestors.io.
Above is the excerpt from report by OCBC Investment Research.
Clients of OCBC Securities may be the first to access the full report in PDF @ https://www.iocbc.com/.
OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2024-12-16
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