SINGAPORE, July 28 (Reuters) - Most banks in Singapore and
Malaysia could report weaker quarterly profits, hurt by the
global financial crisis, which has slashed income from the sale
of stocks, bonds and wealth management products.
But loan growth in Southeast Asia has remained buoyant,
underpinned by infrastructure projects such as Singapore's
multi-billion dollar casinos, and power projects, which may
partly offset the severity of the market slump in Asia.
Banks could see smaller losses from their complex debt
portfolios after taking big writeoffs last year related to the
global credit crunch, but analysts were more worried about
weakening growth in the second half of the year and beyond as
Asian economies slow and higher prices hurt consumer demand.
"There are sensible reasons to believe the credit cycle may
turn sharply in the next year: a function of weaker global
growth, higher interest rates, sustained inflation, property
market correction, increased unemployment," said Matthew Wilson,
an analyst at Morgan Stanley.
Jaj Singh, an analyst at UBS, said net interest income has
sustained double-digit growth, but weaker markets will crimp
non-interest income. For a table on Asian stock performance in
the second quarter, click on [ID:nSP235321].
Singapore bank loan growth has defied expectations of a
slowdown, expanding in May by 26 percent from a year earlier, the
highest since the onset of the 1997 Asian financial crisis.
Thai banks kicked off the earnings season earlier this month,
with Bangkok Bank <BBL.BK>, the country's biggest bank, reporting
a 5.8 percent fall in second-quarter net profit as rising
expenses outweighed strong loan growth and higher margins.
Fitch Ratings said Thailand's weakening economic outlook and
falling consumer and business confidence will likely impact
growth and asset quality in the second half of the year.
DBS CEO
In Singapore, home to Southeast Asia's biggest banks, the
second-quarter figures of DBS Group <DBSM.SI> will be the first
set of results released under new Chief Executive Richard
Stanley, who joined the bank in May from Citigroup China.
DBS, Southeast Asia's biggest lender, is likely to report
that quarterly profit rose by 1.6 percent from a year earlier to
S$569 million ($418 million), according to the average forecast
from a Reuters poll of five analysts.
Core profit will be lower than last year's S$664 million,
which excluded an impairment charge for the falling value of DBS
stake in Thailand's TMB Bank <TMB.BK>.
United Overseas Bank <UOBH.SI>, Singapore's No. 2 lender, is
likely to report an 9.4 percent drop in second-quarter profit to
S$530 million, according to four analysts polled by Reuters, hit
by lower fees and weak trading income.
UOB will report its earnings on Aug 5, while DBS and OCBC
will report on Aug 7.
Analysts said Singapore lenders could boost provisioning
against potential bad loans in the months ahead after enjoying a
period of strong economic growth and relatively low defaults.
DBS bank's total provisioning against its gross loans was
1.24 percent as of March 31, with UOB's at 1.96 percent and
OCBC's at 1.88 percent.
"While the global slowdown should lead to lower loan growth
and higher NPLs, the emergence of a steeper yield should cushion
the bottom line," said UBS' analyst Singh.
"More importantly, we expect NPLs to be largely confined to
regional SMEs (small- to medium-size firms) and corporates."
MALAYSIAN BAKS
Analysts in Malaysia said they expect weaker markets to
undermine earnings in the April-June quarter and the second half
of the year. Malaysian analysts do not provide quarterly
forecasts.
Maybank <MBBM.KL>, Malaysia's biggest bank, is expected to
report full-year profit of 3.27 billion ringgit ($1 billion) in
the financial year ended June 30, up from 3.178 billion a year
earlier, according to 14 analysts polled by Reuters Estimates.
"There are still earnings risks because of the acquisitions,
especially the interest cost, which may bring down their earnings
next year by 10-11 percent," said Sue Lin Lim, analyst at DBS
Vickers Securities, who expects a slight drop in Maybank earnings
in the last financial year.
Maybank bought a 15 percent stake in Pakistan's MCB Bank
<MCB.KA> for $680 million in May and paid $2.7 billion for a
controlling stake in Bank Internasional Indonesia <BNII.JK>.
DBS' Lim said Malaysia's second-biggest bank
Bumiputra-Commerce <BUCM.KL> could be vulnerable to market
turmoil because of its strong reliance on capital markets.
"Overall, for the full-year numbers, we can still look at
further weakness because of the capital markets," she said.
SINGAPORE - FORECAST Q2 NET PROFIT AVG (S$ mln)
Q2 2008 CHANGE (PCT) VS Q2 2007 ANALYSTS
* DBS 569 1.6 560 5
UOB 530 -9.4 585 4
OCBC 500 -6.0 532 4
(Based on a Reuters poll)
(*DBS's Q2 2007 result included an impairment charge of S$159
million on its stake in Thailand's TMB Bank)
MALAYSIA FULL YEAR FORECAST($ bln ringgit)
2008 CHANGE (PCT) VS 2007 ANALYSTS
* MAYBANK 3.27 bln 2.8 3.18 bln 14
* BUMIPUTRA 2.6 bln 6.8 2.79 bln 16
(* Maybank's reporting period is July-June)
(Data based on Reuters Estimates)
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