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Banks’ earnings estimates for 1Q2024 relatively muted

Analysts are cautious in estimating 1Q2024 net profit for the banks, with all 3 to be down y-o-y

On April 23, the three local banks enjoyed strong upmoves in their share prices. Since the start of the year, DBS Group Holdings is up 14.4%, Oversea-Chinese Banking Corp up 8.5% and United Overseas Bank U11 up 9.1%. But analysts appear to be downbeat on the banks’ financial performance.

Based on Bloomberg’s poll, the net profit for DBS when it reports on May 2, will be $2.439 billion. This is less than the actual reported net profit of $2.393 billion in 4Q2023 and the $2.57 billion recorded in 1Q2023. Indeed, going by the estimates for the other three quarters of 2024, DBS is unlikely to beat FY2023’s record-breaking $10 billion. Undoubtedly, analysts will revise their forecasts as the year moves along.

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OCBC’s net profit is likely to be higher q-o-q based on analysts’ forecasts of $1.71 billion in 1QFY2024. UOB’s 1QFY2024 net profit is forecast as $1.51 billion, higher q-o-q but lower y-o-y.

On the funding front, trends this year are somewhat different from a year ago when people were moving into higher-cost fixed deposits. With the anticipation of a rate cut, albeit shallower and later than expected, funding costs are unlikely to rise much. As such, net interest margins may remain stable since loan and asset yields are likely to stay at stable levels. The main negative is the lack of loan growth.

Elsewhere, fee income could recover as the year wears on. Other trends include caution in North Asia. Despite Chinese growth being higher than expected, the underlying economy remains subdued. Asean on the other hand, continues to attract both investment inflows and trade flows.

Since the banks are committed to paying out 50% of their earnings, with DBS stating that it would like to increase absolute dividend payouts in a year, the Singapore banks are likely to be yield plays analysts have said.

As the year wears on, all eyes and ears are likely to be fixed on the Federal Reserve and the messaging that comes out of wherever the Fed governors are likely to be.

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