Aerial view of the central business district and Singapore Bay.
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SINGAPORE – Singapore's top 3 banks will be releasing their second quarter results this week, and investors will watch out for announcements about dividend payments.
Oversea-Chinese Banking Corp and United Overseas Bank will release their results on Wednesday, while the country's largest bank, DBS Group Holdings, will do so on Thursday.
According to Refinitiv estimates, analysts expect the following from banks' financial reports:
Profit estimates for banks in Singapore
Bank Net profit Q2 Turn of the year DBSSGD 1.42 billion + 14.2% OCBCSGD 1.12 billion + 53.4% UOBSGD 948.05 million + 34.9% Source: Refinitiv
The results reports come as Singapore reports a renewed spike in daily Covid-19 infections. The stricter social distancing measures imposed in early May led to a 2% decline in the economy in the second quarter compared to the previous three months, according to official preliminary estimates.
Given the ongoing threat of Covid – especially the Delta variant – to the economy, Singapore banks would likely keep provisions they've made for potential loan defaults, analysts said.
"We don't think banks will write back general provisions given the uncertain macroeconomic outlook," said Rui Wen Lim, equity analyst at DBS Group Research.
Some banks in the US and Europe began writing provisions in the second quarter, which increased their profitability. HSBC announced Monday that it had released $ 719 million net, largely thanks to a better economic outlook.
All three Singapore-listed banks saw double-digit gains this year as the global economic recovery from a pandemic-induced recession led investors to prefer "cyclical" stocks.
Markets or stocks that are “cyclical” rise and fall in connection with economic fluctuations.
OCBC stock is up 22.3% this year through Monday – the biggest gains among the banking trio. DBS and UOB are up 21.3% and 15.7%, respectively. All three banks outperformed the Straits Times Index's previous 11.2% increase this year.
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Analysts said stocks could get another boost from higher-than-expected dividends.
Singapore's financial regulator, the Monetary Authority of Singapore, said last week it would not extend restrictions on dividend payments from banks. Last year, MAS urged banks to cap dividends amid economic uncertainties during the Covid-19 pandemic.
Krishna Guha, equity analyst at investment bank Jefferies, said the MAS announcement came as a surprise.
"We expected the caps to be gradually lifted, so the full reinstatement is a positive surprise," Guha wrote in a report last week. He predicted that this year the three banks would raise dividends at least to pre-pandemic levels.
Jefferies has a "Buy" rating on all three Singapore banks.