DBS vs OCBC: Which bank will post a higher net profit in Q2?

According to UOB Kay Hian, both banks' net profits will decrease.

DBS and OCBC will post lower net profits in Q2 despite a lift in their respective net interest margins (NIM) on the back of rising interest rates, UOB Kay Hian said.

In a report, UOB Kay Hian said DBS will likely post a  5% YoY and 10% QoQ decline in its net profit, despite its NIM increasing by 7bp QoQ to 1.53%.

The analyst said the decline was due to a “high base with huge write-back in general provisions of S$112m in 1Q22.”

Whilst posting a bigger QoQ and YoY decrease, DBS’s net profit of $1.614b still surpassed OCBC’s $1.127b, which translates to a 2% YoY and 16% QoQ drop.  

OCBC’s NIM increase of 4bp QoQ to 1.59% is also lower than DBS.

“The pullback on a sequential basis was due to low total provisions of S$44m in 1Q22,” UOB Kay Hian said.

Both banks also suffered from lower wealth management fees amidst the Russia-Ukiran war during the quarter.

Contribution from wealth management is expected to decline 17% YoY and 10% YoY for OCBC and DBS, respectively.