Singapore’s three banks will begin reporting their results for FY2024 ended Dec 31, 2024 next week, with DBS Group Holdings going first on Feb 10.
Over the past year, the banks' shares have outperformed the broader Straits Times Index (STI), which returned 22.7% as of Jan 31. Among the banking trio, DBS led with a 54.8% increase, followed by Oversea-Chinese Banking Corporation (OCBC) at 35.9% and United Overseas Bank (UOB) at 32.9%.
The bulk of banks’ earnings remains driven by net interest income, which is expected to stay resilient amid the higher-for-longer rate environment, says Yeap Jun Rong, market strategist at online trading provider IG.
“Thus far, market expectations have recalibrated to reflect a slower pace of rate cuts from the US Federal Reserve, given the need for further progress toward the 2% inflation target and the continued strength of the US labour market,” says Yeap. “This supports a more gradual decline in loan yields, with the spread between loan and deposit rates likely to narrow at a measured pace.”
For 4QFY2024, DBS’s net interest margin (NIM) is projected to hold steady at 2.11%, while OCBC’s NIM may ease slightly to 2.16% from 2.18%, says Yeap in a Feb 4 note. Meanwhile, UOB’s NIM is expected to “soften marginally” to 2.03% from 2.05%.
“Amid the slight softening trend, the banks’ NIMs will continue to stay well above 2022 levels,” he adds.
Uptick in loans
Yeap thinks loan momentum should see “some pick-up” in 4QFY2024, with data suggesting that overall loans have increased by 5.2% y-o-y in December 2024, up from a 3.3% increase in November 2024.
“This improvement in lending conditions may be supported by higher confidence around the economy, with Singapore’s low unemployment rate and strong labour conditions encouraging more borrowing for both housing loans and consumer financing,” says Yeap.
The ongoing digital transformation and the growing AI trend could also help support business investments and account for the increased business lending demand, he adds.
Institutional net inflows
Singapore Exchange (SGX) fund flow data shows more subdued net institutional flows for the financial sector in December 2024, and Yeap attributes this to the “quieter year-end holiday period”.
But over the past year, cumulative net institutional inflows are close to $1.19 billion since January 2024. “This reflects strong institutional confidence around the banks, with traction for its robust earnings, resilient credit quality and attractive dividends,” says Yeap.
See also: Jefferies targets DBS shares to hit $49; UOB to hit $42; OCBC to reach $19 ahead of 4QFY2024 results
DBS currently offers a dividend yield of 4.8%, while OCBC’s yield stands at 5.0% and UOB’s at 4.6%. All three are trading above their respective five-year historical averages.
What the charts say
DBS’s share price continues to trade within a near-term upward channel, with the lower trendline support at the $43.80 level on watch for some defending, says Yeap.
“Recent weeks have seen a loss of upward momentum, evident in the formation of lower highs on the daily relative strength index (RSI). However, with technical indicators now at more neutral levels, attention will turn to the upcoming earnings report to potentially catalyse a fresh leg higher,” he adds.
In the event where the channel support is breached, Yeap thinks DBS’s share price could head toward the $42.48 level for a retest.
Similarly, OCBC’s share price has been trading in a near-term pattern of higher highs and higher lows, with key trendline support at $16.96. Yeap thinks OCBC’s share price appears to be closing in on its previous record high at the $17.60 level, with any successful break potentially paving the way towards the $19.00 level next, based on the upward channel projection.
Finally, UOB’s share price seems to be trading more within a near-term range, “which may reflect some market indecision for now”, says Yeap.
UOB’s flat-lined daily moving average convergence/divergence (MACD) points to slowing upward momentum, with some wait-and-see in place, he adds. “Likewise, its share price is currently trading less than 2% below its previous record high at the $37.94 level, with any break potentially setting the next price target at the $39.90 level.”
Following DBS’s results on Feb 10, UOB will follow on Feb 19 before OCBC rounds up the trio on Feb 26.
As at 9.36am, shares in DBS are trading 4 cents lower, or 0.09% down, at $44.38; while shares in UOB are trading 4 cents lower, or 0.11% down, at $37.23; and shares in OCBC are trading 3 cents lower, or 0.17% down, at $17.23.
Charts: IG
