StockTalk(7.25): Local banks face weaker Q2 performance - How will they overcome rising costs and provisions?
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As the Q2 earnings season for banks approaches, analysts predict a weaker performance from the trio of local banks due to a rise in costs and provisions. Earnings for the three banks are expected to peak this year as loan growth tapers off and the market braces itself for another potential round of rate hikes by the Fed.
Analysts expect the banks' net interest income to decelerate further due to higher funding costs and lower loan volumes. Meanwhile, costs are catching up as depositors shift into higher-yielding fixed deposits.
Despite these challenges, analysts expect asset quality to remain "benign" in Q2 and credit costs and expenses to remain manageable. The Q2 earnings season will begin with UOB on July 27, DBS on Aug 3, and OCBC on Aug 4.
Will the banks be able to manage capital as interest rates continue to rise? How will the market react to the Q2 updates from the local banks? Do you have any expectations or thoughts on the Q2 performance of the banks?
Join us and share your thoughts on today's topic. Please leave a comment below to share your opinion with us. Your feedback is valuable, and we appreciate your participation.
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Do you have any expectations or thoughts on the Q2 performance of the banks?
Join us and share your thoughts on today's topic. Please leave a comment below to share your opinion with us. Your feedback is valuable, and we appreciate your participation.
ZnWC : I remember one local bank has too much cash that it has to loan money to MAS. This is because of the high interest rate prompt more people to deposit their money in the bank. Loan has also fallen due to economy slow down. Investment returns are also not profitable due to FED rate hike and slow down in global economy especially China and US.
Despite the negative sentiment, some banks will strive better than the other. Banks with a broad based customers and diversified investment will be able to perform better. I don't see local bank performance spiral down but may just meet expectations in Q2.
MAS proposing a framework of PBM (Proposed Bound Money) commonly know as bank digital currency caught my attention recently. PBM may help bank to lower cost through digitalisation.
Wonder : Local banks are forward looking n have lowered deposit rates (FD) in May or June despite 1 or 2 more expected U.S. rate hikes n rates to remain elevated this year. At the same time, as far as consumer banking is concerned, housing loan rates are progressively lower than the peak abt 4.2% , presumbly to attract consumers n balance risk rewards in the hot property market. On the broader scale, the banks have diversified business in many segments n I do expect the banks will meet expectations in Q2 with the moderation of borrowing n lending rates.
Kopikarp : The looming Q2 earnings season presents an intriguing situation for the local banks. With potential rate hikes, increased costs and tapering loan growth on the horizon, the banks are facing considerable headwinds. The shift of depositors to higher-yielding fixed deposits is another factor that could weigh on their earnings. However, it's encouraging to see analysts projecting benign asset quality and manageable credit costs. As we await the release of the results, it will be fascinating to see how these banks navigate these challenges and what strategic measures they implement to maintain profitability and capital.