Singapore's top banks could see a boost in share prices as earnings bounce back

View of the Singapore Central Business District.

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SINGAPORE — Singapore's three largest banks are expected to report improved earnings as the global economy recovers from the Covid-19 pandemic, said analysts.  

The banks are scheduled to release first-quarter earnings in the coming days. The largest of the trio, DBS Group Holdings, will be the first to do so on Friday, while smaller peers United Overseas Bank and Oversea-Chinese Banking Corp will report on May 6 and May 7, respectively.

Here's what analysts are expecting from the banks' financial report cards, according to estimates compiled by Refinitiv as of Friday.

Earnings estimates for Singapore banks

Banks	Net income	Earnings per share
DBS	SGD 1.44 billion (+23.1% YOY)	SGD 0.56
OCBC	SGD 1.12 billion (+59.8% YOY)	SGD 0.26
UOB	SGD 891.4 million (+4.26% YOY)	SGD 0.52

Investors have appeared more optimistic about the banks' prospects, with all three stocks gaining more than 15% this year as of Friday's close — outpacing the benchmark Straits Times Index, which rose about 12.3% in the same period.

Krishna Guha, an equity analyst at investment bank Jefferies, said in a report this month that a better earnings outlook could send the city-state's bank stocks higher.

The analyst has a "buy" rating on all three banks and raised his price targets for them in early-April.

• DBS: 33 Singapore dollars, implying an upside of around 14% from Friday's close.
• OCBC: 13.50 Singapore dollars, which is a 13% upside.
• UOB: 29.50 Singapore dollars, an upside of 12%.

Guha said growth in the banks' loans business is picking up, while lending margins may recover. Buoyant deal-making activities in the financial markets could also boost service fees for the banks, he added.  

David Lum, an analyst at investment bank Daiwa Capital Markets, said he's "positive" on Singapore banks — but less bullish on the sector compared to many of his counterparts.

Lum said in a report this month that net interest margins — a measure of lending profitability — would stay weak even as bank earnings recover. He explained that competition in the Singapore housing loan market is one factor that could keep a lid on lending margins.

The banks' shares also look "close to fully valued," said Lum.

Daiwa's top pick among the three Singapore banks is OCBC, which it rated "outperform." Both DBS and UOB have a "hold" rating.

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