Singapore Banks See Silver Lining
Third-quarter results for the Singaporean banks showed healthy business momentum. They have also turned slightly more optimistic compared with three months ago.
DBS, UOB, and OCBC all had double-digit profit growth in the third quarter, extending the momentum seen in the second quarter. Earnings growth was mainly driven by a robust increase in net interest income, while they maintained their cost discipline. A combination of loan growth and an increase in the net interest margins underpinned net interest income growth.
OCBC Chief Executive Samuel Tsien's statement summed up nicely the common thread running through the statements of the three banks: «Record quarterly and year-to-date net profit were achieved through improved net interest margins, continued loan growth, and continued cost management discipline.»
Improved Outlook
All three bank chiefs sounded a tad more upbeat than in previous quarter, while all the same they expact a slower loan growth environment going forward. At the time of the second-quarter publications, U.S.-China trade tensions and weakening regional currencies had been named as key concerns for the economy.
DBS Chief Executive Piyush Gupta said that U.S.-China trade tensions had affected market sentiment in the third quarter, but not the real economy. He pointed to «tailwinds» that the bank could enjoy as higher interest rates got passed onto borrowers in subsequent quarters. Meanwhile, OCBC's Tsien pointed to the strong liquidity and capital base that could position it well «for prudent and sustainable growth».
«Our disciplined management of capital and diversified funding base enable us to navigate near-term uncertainties,» said Wee Ee Cheong, chief executive of UOB in the results statement.
Asia's Prospects Remain Bright
The banks remain confident for the medium- to long-term prospects of Asia, which allows them to invest in regional markets and digital capabilities for growth. Profit contributions from OCBC's key markets in Asia – Singapore, Malaysia, Indonesia and the greater China region were higher than in the previous year.
«Despite the weakened regional market sentiments as a result of global trade tensions, the growth in our wealth management franchise continued, with sustained net new money inflows that drove our assets under management to an all-time high,» said Tsien.
UOB believes it can create distinct banking experiences for its customers through various initiatives including «collaborating with ecosystem partners to create financial solutions». For DBS, China's economy, the second-largest in the world, will still provide ample opportunities for its Hong Kong business, even if economic growth were to slow to 6 percent next year.
Technology Payoffs
DBS and OCBC have credited technology and digitization investments for their improving returns-on-equity. «Our technology and digital investments have strongly contributed to our franchise expansion, the deepening of relationships and the increase in customer loyalty,» said OCBC's Tsien in a media statement.
DBS CEO Gupta believes that four to five years of investments into digitization strategies would make it hard for competitors to «catch up». Its digital banking strategy in Indonesia has started to pay off, making it a profitable business geography.
