Singapore’s top banks could see stock prices surge as earnings rebound

View of the central business district of Singapore.

Suhaimi Abdullah | Getty Images News | Getty Images

SINGAPORE – Singapore’s three largest banks are expected to post improved profits as the global economy recovers from the Covid-19 pandemic, analysts said.

The banks are expected to publish their first quarter results in the coming days. The largest trio, DBS Group Holdings, will do so first on Friday, while smaller peers United Overseas Bank and Oversea-Chinese Banking Corp will report on May 6 and 7, respectively.

According to estimates by Refinitiv on Friday, the analysts expect the following from the financial reports of the banks.

Profit estimates for banks in Singapore

Banks Net income Earnings per share
DBS 1.44 billion SGD (+ 23.1% YoY) SGD 0.56
OCBC 1.12 billion SGD (+ 59.8% YoY) SGD 0.26
UOB 891.4 million SGD (+ 4.26% compared to the previous year) SGD 0.52

Investors were more optimistic about the banks’ outlook. All three stocks rose more than 15% that year at close of trading on Friday, outperforming the Straits Times benchmark index, which rose 12.3% over the same period.

Krishna Guha, an equity analyst at investment bank Jefferies, said in a report earlier this month that a better earnings outlook could propel the city-state’s banking stocks higher.

The analyst has a buy rating for all three banks and raised his price targets at the beginning of April.

  • DBS: 33 Singapore dollars which is an upward trend of around 14% from Friday’s close.
  • OCBC: Singapore $ 13.50 which is an upward trend of 13%.
  • UOB: 29.50 Singapore dollars, up 12%.

Guha said growth in banks’ lending business is accelerating while credit margins may recover. Brisk business activity in financial markets could also increase service fees for banks, he added.

David Lum, an analyst at investment bank Daiwa Capital Markets, said he was “positive” about banks in Singapore – but less optimistic about the sector compared to many of his peers.

Lum said in a report earlier this month that net interest margins – a measure of the profitability of lending – would remain weak even if bank profits rebound. He explained that competition in the Singapore home loan market is one factor that could keep credit margins under control.

The banks’ shares also look “almost fully valued,” said Lum.

Daiwa’s top pick among the three banks in Singapore is OCBC, which was rated “Outperform”. Both DBS and UOB have a “Hold” rating.

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