Singapore Big 3 banks' profit to jump 16%

But here is the catch.

According to Barclays, 4Q12 underlying profit down by 2% q/q. The firm forecasts the combined underlying profit for the three Singapore banks to rise 16% y/y in FY12E but decline sequentially by 2% q/q in 4Q12E (some 4Q seasonal weakness and continued margin pressure, -2bps q/q).

Barclays tweaks its full year FY12-14E profit estimates up by 0-4%, reflecting slightly better returns on investment securities and lower credit costs, offsetting the impact
from slower mortgage growth.

Here's more from Barclays:

We cut our mortgage growth estimate to 5% in FY13E and 0% in FY14E (from 10% previously). Results will be announced on 6 Feb for DBS, 15 Feb for OCBC and 27 Feb for UOB.

Expect falling dividend payout for DBS: The Singapore banks are among the best capitalized in the region with core Tier 1 ratios in excess of 11%+ on a fully loaded Basel III basis, on our estimates.

We expect no change to the dividend payout ratio of 40% for UOB and 45% for OCBC. However, we forecast DBS to maintain 56c full year DPS between FY12 and FY14E (i.e. declare 28c final dividend in 4Q12), implying the dividend payout ratio falls to 35% in FY12E (from 45% in FY11), in order to conserve capital in preparation for the acquisition of Danamon (which is still pending regulatory approval).

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