Singapore banks deliver strong earnings growth in Q1

OCBC outperformed with a net interest margin expansion of 75bp YoY.

The big three banks of Singapore –- DBS, OCBC, and UOB –- saw sizable expansions in their respective net interest margin (NIM) in the first quarter of 2023.

Amongst the three, OCBC recorded the highest year-on-year (YoY) NIM expansion at 75bp, followed by DBS which recorded a 66bp growth, and UOB with 567bp.

“Although NIM has plateaued, Singapore banks will benefit from the expanded NIM on a full-year basis in 2023. Shareholders will be rewarded with higher dividends in tandem with the strong earnings growth of 15% for DBS and 17% for OCBC in 2023,”  UOB Kay Hian reported.

OCBC also achieved their strongest growth in net interest income (57% YoY), followed by DBS (50% YoY), and UOB (43% YoY).

According to UOB Kay Hian, Singapore banks benefited from strong trading income, with DBS and UOB recording a 35% YoY ($814m) and 457% YoY ($563m) growth in their non-interest income, respectively.

“DBS benefited from strong customer flows and treasury market activities. UOB benefited significantly from trading and liquidity management activities,” UOB Kay Hian reported.

Meanwhile, the report also mentioned that DBS, OCBC, and UOB reported return on equity (ROE) of 18.6%, 14.9% and 14.7%, respectively.

“ASEAN countries have a large combined population of 680 million and account for about 8% of global exports. Many multinational companies have adopted the China+1 strategy and plan to set up alternative production facilities within the ASEAN region. Malaysia, Thailand, Indonesia and Vietnam are seeing growth in foreign direct investments. OCBC and UOB benefit from the reorientation of the supply chain due to their extensive network within ASEAN countries,” UOB Kay Hian reported.