Singapore’s largest lender, DBS Group, announced its 2Q earnings this morning.

Its net profit rose 20% y-o-y to S$1.37 billion in the second quarter, falling short of market consensus forecast of S$1.44 billion. On a q-o-q basis, its profit fell 10% from the previous record quarter largely due to the weaker trading performance and the absence of a property disposal gain. Overall earnings were underpined by higher Net Interest Margin due to rising local interest rates. The outlook for local lenders remains cloudy due to rising uncertainty and flattening yield curve, plus recent property cooling measures which might drag down loan growth in the months to come. DBS share price fell over 2% at market open.

In Singapore, we are halfway through the earning season and stock market performance is underpinned by mixed results, while some still missed the analysts’ forecast. Local shares were probably over-punished in the past few months on growth and trade concerns, therefore earnings season catalysed a long-waited rebound. The Straits Times Index has rebounded over 150 points to 3,328 from its recent low of 3,176 since the earnings season kicked off. The benchmark is traded at around 12 times trailing price-to-earnings, and 3.9% trailing 12-month dividend yield, marking it one of the cheapest stock markets in Asia.

Amongst the blue chips that announced results so far, Keppel Corp, SATS, Great Eastern and Jardine C&C stood out as the outperformers with impressive growth in net profit or sales. On the other side, Sembcorp Marine and SIA were amongst the underperformers due to ongoing cyclical downturn in the offshore & marine sector and rising fuel costs respectively.

Market participants are also mindful of the potential impact of property cooling measures implemented on 5th July on developers and banks. In view of cooling property prices, lesser transactions and slower loan growth are expected in the quarters to come, when reading their second quarter results.

Recent GDP forecast showed that slower pace of growth in the second quarter mainly came from the private sector construction activities, while we have yet to see any material impact on manufacturing activities due to escalating trade tensions globally.

Singapore’s economy grew by annualised rate of 3.8% percent in the second quarter, moderating from 4.3% in earlier of this year.

DBS Group

By Margaret Yang in Singapore

 

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