Singapore banks surprise with tolerable Q2 results

Non-performing loan ratios were at or near all-time lows of 1% in the face of an extremely volatile market environment.

Despite thinner interest margins and the unsettling volatility, Oversea-Chinese Banking Corporation, United Overseas Bank and DBS Bank Ltd reported second quarter earnings that exceeded analysts' expectations.

The trio’s combined net profit fell 11% in the quarter to S$2.17 billion. Compared to a year ago, however, net profit was 11% higher.

Loan growth will probably fall to 10% or less this year compared to earlier projections of over 10%, said the CEO’s of DBS and OCBC.

"I think the rest of this year is going to be very, very uncertain," said DBS CEO Piyush Gupta.

Interest margins, which had shown some signs of recovery in the first quarter of the year, again weakened with little hope of improvement later this year. Trading and investment income at all three banks was substantially lower in the second quarter compared to the quarter as market conditions worsened.

Net interest income at all three banks fell compared to Q1 as the squeeze in net interest margins offset growth in loans. The banks' combined net interest income slid 1% over the quarter to S$3.24 billion. On the other hand, their combined non-interest income dropped 20% to S$1.85 billion from S$2.3 billion in Q1.

Despite the volatility, there was no sign of trouble in the banks' portfolios, with non-performing loan ratios at or near all-time lows of around 1%.