DBS are set to report an improvement in second-quarter net interest income, a key source of revenue, benefiting from higher interest rates
$DBS Group Holdings (D05.SG)$ $OCBC Bank (O39.SG)$
But analysts warn that rising credit impairments and weak financial markets could weigh on banks’ performance as the macro environment deteriorates.
Singapore banks are expected to report 10 basis points net interest margin expansion on a quarter-to-quarter basis, the highest over the last eight quarters, outperforming Asian peers, according to JPMorgan analyst Harsh Wardhan Modi.
“We are seeing the highest pace of rate hikes in the shortest span of time in at least 20 years,” he said.
But analysts warn that rising credit impairments and weak financial markets could weigh on banks’ performance as the macro environment deteriorates.
Singapore banks are expected to report 10 basis points net interest margin expansion on a quarter-to-quarter basis, the highest over the last eight quarters, outperforming Asian peers, according to JPMorgan analyst Harsh Wardhan Modi.
“We are seeing the highest pace of rate hikes in the shortest span of time in at least 20 years,” he said.
Singapore’s central bank tightened its monetary policy this month, saying the action would slow inflation. It expects the city-state’s growth to come in at the lower half of the 3-5 percent forecast range for 2022.
Morgan Stanley analysts said their earnings estimates upgrades for Singapore banks were mainly due to higher net interest income, driven by faster than expected rate hikes.
“However, higher net interest income estimates are offset by lower non-interest income estimates, as we expect headwinds for fee income and trading income to remain for a while,” the analysts said.
Refinitiv data shows analysts on average expect OCBC’s Q2 net profit to rise by 10 percent from a year ago, while DBS’ profit is set to ease by 1 percent.
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