* What: Singapore banks' Q1 earnings, Malaysia's Maybank's Q3
* When: UOB & OCBC May 6, DBS May 8, Malaysia mid-to-late May
* Bad debt charges, slowing loans to hit profits
* Singapore banks increased market share in Q1
By Saeed Azhar
SINGAPORE, May 4 (Reuters) - Singapore's three banks could
post sharp declines in quarterly profits this week as bad debt
charges soar, and investors will be keen to see how much market
share they are gaining from battered foreign players in Asia.
Malaysian banks are also likely to be hurt by a squeeze in
interest rate margins following hefty rate cuts by the country's
central bank and as loan growth stutters.
Southeast Asian banks survived the initial phase of a global
financial crisis relatively unscathed due to minimal toxic debts
on their books, but began to feel the effects of an Asian
economic downturn from the second half of 2008.
DBS Group Holdings <DBSM.SI>, Southeast Asia's biggest bank,
could see its profit slide 47 percent in the Jan-March period
from a year earlier, according to an average estimate by five
analysts in a Thomson Reuters poll.
"NPLs have only just started to rise in the fourth quarter of
2008 and are likely to continue on an uptrend as the recession
feeds through into the banking system," Kar Weng Loo, an analyst
at Banc of America Securities-Merrill Lynch, wrote in a note to
clients, referring to non-performing loans.
Despite the gloomy year-on-year forecasts, analysts expect
some bright spots in the first quarter, such as higher trading
gains quarter-on-quarter as banks bet on volatile foreign
exchange and stock markets.
Singapore banks, which are capturing market share from
foreign lenders, are also gaining pricing power, which may boost
interest rate margins compared with the October-December period.
"A steeper yield curve and better loan pricing should provide
upside support for net interest margins despite negative loan
growth," said CLSA banking analyst Thilan Wickramasinghe.
These expectations and a renewed global appetite for
risk-taking have boosted shares of Singapore banks since they hit
multi-year lows in early March. Singapore's index for financial
stocks <.FTFSTAS8000> has gained almost 46 percent since hitting
a year-low of 323.51 points on March 10.
But CLSA's Wickramasinghe warned the "overarching concern"
for Singapore banks is asset quality, which may translate into
higher bad debt charges.
Moody's Investors Service last month cut its ratings outlook
on Singapore's three banking groups to "negative" from "stable",
saying the global recession would hurt earnings and asset
quality.
Thai banks kicked off the earnings season for Southeast Asian
lenders earlier this month, with Bangkok Bank <BBL.BK>, the
country's biggest, reporting a 13.5 percent drop in quarterly
profit [ID:nBKK496559].
Analysts in Malaysia do not provide quarterly forecasts, but
Malaysian bank earnings are likely to take a hit from a slowing
economy and lower interest rate margins due to the central bank's
150 basis points interest-rate cut since the fourth quarter.
But a significant deterioration in overall asset quality is
unlikely because of the absence of any large corporate defaults,
said Loong Chee Wei, analyst at CLSA in Kuala Lumpur.
SINGAPORE - ESTIMATED Q1 NET PROFIT AVG (S$ mln)
Q1 2009 CHANGE (PCT) VS Q1 2008 ANALYSTS
DBS 321 -47 603 5
UOB 387 -27 529 4
OCBC 293 -53 622* 5
*OCBC's core earnings in Q1 2008 excluding a tax refund and
gains from asset sale were S$460 million.
(Data based on a Reuters poll)
MALAYSIA FULL YEAR FORECAST (bln ringgit)
2009 CHANGE (PCT) VS 2008 ANALYSTS
Maybank 2.44 -16.7 2.93 16*
Bumiputra-Commerce 1.89 -3.0 1.95 16
* Maybank's financial year runs from July to June.
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