Singapore’s largest lender DBS announced its third quarter earnings, which came in below market expectation mainly due to continuous weakness in the oil and gas sector.

Its 3Q earnings per share (EPS) fell to SGD 0.313, a big miss from consensus forecast of SGD 0.426. The group registered quarterly net profits of SGD 822 million after a deduction specific allowance of SGD 815 million due to residual weak oil and gas support services exposure.

The group accelerated the recognition of the non-performing loan (NPL) in the oil and gas sector. The measurement is painful and probably inevitable in the short term, but will remove uncertainties about asset quality outlook in the future.

Beside the drawdown in specific allowance, the group’s core business demonstrated strong performances in the third quarter. Total income rose 4% yoy to a record high of SGD 3.06 billion. Net interest income increased 9% to SGD 1.98 billion and loans rose 8% to SGD 314 billion. The group also achieved strong net fee income growth through the sales of investment products and wealth management fees.

Net interest margin (NIM) declined by 4 basis points to 1.73%, which is largely in line with its peers. NIM is expected to improve next year with the outlook of further Fed tightening in Dec and more interest rate hikes in 2018.

Last week’s US non-farm payroll number came in at 261k, which was below market consensus of 310k but still the highest reading observed since July 16. The unemployment rate fell further to 4.1% from 4.2% while wage growth was flat from a month ago. Despite of mixed jobs report, market still stood firm on expectations of Dec rate hike. The implied probability of 25bps Fed hike in Dec, according to CME’s FedWatch tool, remains at 96.7%.

The US dollar continued to ride its upward-trend after the jobs data. USD/JPY has broken out above key resistance level of 144.0 and is trading at 114.6 area this morning.

Technical Analysis:

DBS Group

  • The 10-Day Simple Moving Average and SuperTrend (10,3) are both sloped upwards, suggesting uptrend remains intact
  • Facing strong resistance level at around 22.98 area, which is the 161.8% Fibonacci Extension level
  • Immediate supports can be found at 22.23, followed by 21.73 area.

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