Banks in Singapore will probably see some growth in their revenue in the coming results season in the third quarter. However, analysts said that it is expected that their net profits will remain flat because of the tight margins as well as the continued risk of the provisions of loan.
Recently, Singapore’s economy has been showing early recovery signs, which according to analysts, is helping to improve growth of loans at banks.
Based on the most recent figures given by the Monetary Authority of Singapore (MAS), it is expected that bank loans will have a marginal growth of one percent by the end of the year as consumers continue their spending.
Analysts also said that it will possibly lead to a number of top line growth for the three large banks in Singapore during the third quarter, especially for DBS because it is the most aggressive among the banks in terms of disbursal of loans.
“DBS has a good regional reach, and DBS has been pretty prudent in managing their businesses. And if you look at the recent situation where there has been an increase in demand for property and mortgage loans, DBS is the place to go to for many consumers”, stated SIAS Research Vice President Roger Tan.
However, analysts added that the greater loan disbursement of DBS means that a risk – wherein some will become non-performing – is increased, which will eventually make it for the said bank to be more difficult in converting its revenue to profit. DBS is bound to post about S$437 million net profit as a market consensus.
Meanwhile, with S$463 million consensus coming, UOB may possibly overtake DBS during Q3 for having the strongest growth pace.
Co-head of research Leng Seng Choon of DMG & Partners said, “Some banks have been more conservative. For example, UOB has made more provisions in the second quarter of this year. On that basis, I think they have a bigger buffer and higher loan loss coverage”.
OCBC, on the other hand, is also expected by the market to post S$291 million net profit in the third quarter.
Looking forward, the current buying activity in the property sector is something to watch for. Over the following few quarters, higher revenues could be seen by banks as developers and individuals start to seek financial support for their latest purchases.