2018 November
Equities in Banking Field: Look for strong performer in NIM and dividends
Asian banks posted mixed results. Some negative quarterly earnings growth in line with expectations, while another registered positive quarterly earnings growth and hence was above expectations. We believe investors may focus on three aspects of the results which can determine the relative performance among the banking field. One is net interest margin (NIM), and the other is their ability to increase dividends. The third is fee income, which remains a wild card to downside surprise, given the current volatile environment.
There are high hopes that the banks can benefit from NIM expansion as interest rates have been rising. However, competition for deposits was also strive, leading to rising costs of funds. It remains to be seen whether loan yields can outpace the increase in cost of deposits. This would depend on the Current-Account-Saving-Account, so-called CASA, mix, as well as geographic and currency mix in loans, and pricing strategy, in our view.
The attractiveness of the Singapore Banking sector lies in its asset quality as compared to that of other countries, and its high dividend yield. The sector currently trades at a 4.3% dividend yield, which is higher than the market’s 3.9%. We are positive on Singapore Banks and look for those that can expand their NIM as well as raise dividends.
Welcome to contact with DBS Treasures Private Client Relationship Manager to see how should portfolios navigate these market gyrations.
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Issued by DBS Bank (Hong Kong) Limited
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