Skip to content
Alpha Edge Investing

Alpha Edge Investing

"Investors operate with limited funds and limited intelligence, they don’t need to know everything. As long as they understand better than others, they have an edge.” – George Soros

  • Home
  • Earnings Updates/ Corporate Actions
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trust/ ETF
  • News
  • My Opinions/ Views
  • Others
  • About Me
  • Contact
  • Disclaimer
  • Community and Support Forums
  • Toggle search form

Maybank: Singapore Banks

Posted on October 17, 2022October 17, 2022 By alanyeo No Comments on Maybank: Singapore Banks
3Q22: What to expect
Margins set to accelerate. Watch out for China risks

UOB is set to report 3Q22 on 28 Oct, DBS 03 Nov and OCBC 04 Nov. We expect the NII tailwinds seen last quarter to intensify with accelerating NIM expansion following aggressive Fed rate hikes. NOII is likely to remain muted, although wealth management has likely bottomed. A critical risk to watch out for is deteriorating asset quality from North Asia, which could drive credit charge guidance higher. Contrastingly, asset quality in Singapore and ASEAN should be benign. Overall, we expect earnings momentum for the sector to remain positive. DBS top pick given lower funding cost advantage, strong provisions and potential capital release.

NIMs set to accelerate. Expect funding costs to rise

2Q22 sector NIM expansion accelerated to +12bps QoQ compared to just +2bps in 1Q. With two 75bps Fed hikes within 3Q (plus another 75bps in the tail end of June), we expect NIM expansion momentum to accelerate. Of course, higher interest rates are likely to tighten spreads as cost of funding increases. We note in 1H22, 1%-4% of CASA shifted to fixed deposits. Nevertheless, we expect asset yields to have significantly outpaced funding cost increases. Loans expanded 7.6% YoY for the sector in 1H22. The pace of growth may likely moderate, especially in manufacturing, SMEs, private banking related lending as macro conditions slow. Mortgages should continue to remain supported from drawdowns on past launches. While wealth management fees likely bottomed in 2Q, we expect sequential growth to be muted amidst market volatility. AUM growth should be positive given Singapore’s safe haven status. Credit cards
could be a bright spot from re-opening.

North Asia exposure, NPLs, trading: issues to watch

North Asia NPLs increased 8% – 191% QoQ in 2Q. While some of this were one offs, continuing stress in the Chinese property sector and potential contagion impacts landing on balance sheets cannot be ignored. In addition, continued Covid lockdowns adds further risk of stress. Potentially renewed guidance for higher credit charges need to be watched. At the same time, continued weakness in markets could result in downside surprises to trading and investment income. Wage inflation is likely to keep
opex growth momentum positive, although at a slower pace than 2Q where seasonal adjustments take place. However, stronger NII growth should keep cost-to-income ratios in check. While we do expect positive dividend surprise in 2022E, given large capital buffers, this is likely only in 4Q.

SG-Banks-1Click here to Download Full Report in PDF

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Telegram (Opens in new window)
  • Click to share on WhatsApp (Opens in new window)
Research - Equities Tags:DBS Group Holdings, OCBC, Singapore Banks, UOB

Post navigation

Previous Post: DBS: Vitasoy International Holdings Ltd – Hold Target Price HK$14.40
Next Post: China Galaxy: Wuxi Biologics – Initiation with Add Target Price HK111.60

Related Posts

DBS: OCBC – Buy Target Price $15.00 Research - Equities
UOBKH: Oversea-Chinese Banking Corp – Buy Target Price $18.28 Research - Equities
UOBKH: Banking – Singapore (Overweight) Research - Equities
CIMB: OCBC – Add Target Price $13.70 (Previous $15.50) Research - Equities
CIMB: Singapore Banks (Overweight) Research - Equities
PhillipCapital: Singapore Banking Monthly Research - Equities
Maybank: OCBC Bank – Buy Target Price $14.39 Research - Equities
Maybank: United Overseas Bank – Buy Target Price $32.28 Research - Equities
Maybank: DBS Group – Buy Target Price $42.18 Research - Equities
CIMB: Singapore Banks (Overweight) Research - Equities
Maybank: OCBC Bank – Buy Target Price $14.39 Research - Equities
Maybank: United Overseas Bank – Buy Target Price $32.28 Research - Equities

Leave a Reply

You must be logged in to post a comment.

Login

Log In
Register Lost Password
Get new posts by email
Chat on WhatsApp
  • Earnings Updates/ Corporate Actions
  • My Opinions/ Views
  • News
  • Others
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trusts/ ETF

Copyright © 2023 Alpha Edge Investing.

Powered by PressBook Grid Blogs theme