DBS and UOB earnings to show impact of SORA, credit costs

DBS should have good earnings, whilst the effect of SORA is a point of interest.

UOB's net interest margin and DBS’ credit costs from Hong Kong property exposure will be two of the items to look out for in their upcoming earnings’ reports this week, according to Morningstar senior equity analyst Michael Makdad.

For UOB, Makdad said that he is watching how much net interest margins (NIMs) contracted, if at all, with the decline with SORA.

“UOB has relatively larger exposure to some ASEAN countries than DBS and OCBC, so I'll be watching to see if economic slowdown in places like Thailand affects overall results,” he said.

For DBS, Makdad expects good earnings from DBS with “neither a flareup of credit costs nor a huge decline in NIM.”

The main thing to look out for is whether DBS has any elevated credit costs from Hong Kong property, similar to HSBC and its subsidiary Hang Seng Bank.

“OCBC did not, and DBS HK has generated quite high returns without hitting such problems to date, but I think it’s one thing to check for this time,” Makdad said.

Another question will be how much DBS’ net interest income is affected by lower SORA.