UOB "may surprise" with better net interest margins and lower credit costs, one analyst has said.
Signs of improved earnings momentum from better net interest margins (NIM), loan growth, wealth and trading income should be expected ahead of Singapore banks’ trading updates, a Maybank Kim Eng report noted.
Analyst Thilan Wickramasinghe predicts that UOB “may surprise” due to better NIMs and lower credit costs. DBS will report first on 30 April, followed by UOB on 6 May and OCBC the next day.
Q1 should set a trend of sequential operating improvements, the report said, which could accelerate into H2 as herd immunity is established regionally. Sluggish deposit growth, a steepening yield curve and a pick-up in lending should mark the bottoming of NIMs in Q1 with the potential for per-quarter improvements.
“We expect to see some lending market share gains in Singapore, particularly from mortgages and financial institutions. Non-interest income is likely to be mixed. Wealth management and loan related fees should see sequential growth,” the report said.
OCBC’s wealth management and North Asia operations have the strongest potential to deliver, Maybank added, whilst improvements to UOB’s NIM in Q4 from better funding cost management should continue to Q1. The continued stimulus support for SMEs should also lower credit costs.