Singapore banks this year face the challenging task of matching their earnings performance from last year, with a weak domestic economy and the prospects of global recovery clouded by a looming war in the Middle East, analysts said.
Pockets of positive signs have emerged in recent months but the economy, wounded by a recession in 2001, remains generally weak, placing Singapore in a vulnerable position should the world's major economies deteriorate, they said.
And that will likely have an earnings impact on DBS Group, United Overseas Bank (UOB) and Oversea-Chinese Banking Corp (OCBC), the city-state's three domestic lenders.
PHOTO: AFP
"In terms of operating environment, we think 2003 will be equally challenging," said Nancy Koh, associate director for financial services ratings at Standard & Poor's.
"In terms of top line growth, we don't expect that to register any significant improvements ... it is likely to remain subdued," she said.
The banks are still expected to turn profits this year but the key question is whether they will be able to match last year's figures.
"They are all very strong ... they are not losing money. It is just a question of whether it will be better than last year," said David Lum, a banking analyst at Daiwa Institute of Research.
Senior executives from UOB, which posted net profit of S$1.06 billion (US$609 million) for the year to December 2002 -- the biggest of all three banks -- were cautious on the bank's performance this year, citing the uncertain political situation in the Middle East.
"This year I think we'll be facing a lot of uncertainty worldwide. It's very difficult for me to predict what will happen this year because of the [possible] Iraq war," said Wee Cho-yaw, UOB's chairman and chief executive.
"I think our growth will be very minimal," he said of the bank's 2003 earnings outlook.
UOB's 2002 net profit rose 15.1 percent from higher interest and commission revenue as well as a bigger contribution from associate companies.
DBS Group, Southeast Asia's biggest lender, reported a smaller 1.9 percent increment in earnings to S$1.02 billion and management said it would concentrate on raising operational efficiency.
"Until we see near-term improvements in the environment, DBS will continue to focus on improving its operational and processing efficiency," Chairman S. Dhanabalan said.
In light of the sluggish economic conditions, the bank was also forced to set aside a bigger amount for provision charges totalling S$534 million, up 41 percent from a year ago.
"The current economic condition has dampened revenue and has required increases in provisions, thus holding back DBS' performance," Dhanabalan said.
OCBC, the smallest of the three banks, saw net profit drop 14.3 percent to S$666.71 million and senior management warned matching last year's performance would be tough.
"[This year] will no doubt be another challenging year for Singapore banks," said OCBC chief executive David Conner.
"Nothwithstanding this, OCBC will continue to focus on growing its revenue, improving its operating performance and enhancing returns to shareholders," he said.
The best bet now is to look beyond the highly saturated local market of four million where competition has increased sharply since the sector opened to foreign banks, analysts said.
"It is actually a saturated market and relatively mature. Going outside of Singapore is an avenue of growth for them and they have acknowledged that," Koh said.
Maintaining "an acceptable risk profile" for the Singapore banks as they expand will also be a challenge, Koh said.
Singapore banks have sought to build a foothold in the region, with DBS leading the way with its position as the fourth largest in Hong Kong after acquiring Dao Heng Bank and Kwong On Bank.
National Taiwan University (NTU) yesterday said it disqualified a person from an entrance examination for using AI smart glasses to cheat, along with two others for making untruthful statements in their curriculum vitae. The three applicants were given null scores, Taiwan’s highest-ranked university said, calling on prospective students to be honest in the admissions process. NTU registrar Lee Hung-sen (李宏森) said that the cheating applicant wore a hat and thick-rimmed glasses to the second written exam for medical school, claiming that they felt cold. Suspicions were aroused when the applicant stared oddly at the test for long stretches while steadily bringing the paper
A magnitude 7.8 earthquake struck off the southern coast of Mindanao in the Philippines at 7:38am today, prompting the US Tsunami Warning System to issue an alert for neighboring countries, including Taiwan. The system issued a purple alert indicating a "tsunami threat." The potential threat zone includes Taiwan, the Philippines, Papua New Guinea, Yap and Palau. Philippine authorities were assessing the damage from the quake, with the office of civil defense seeking to verifying initial reports that 15 people had been killed and 129 injured in the region, mostly from falling debris. Arlene Hollero, disaster chief of Maasim town in the Philippines' Sarangani Province,
‘GRAY ZONE’ PRESSURE: Beijing’s activities are intended to create the deceitful impression that China has jurisdiction over the area around Taiwan, the CGA said Taiwan’s rights over its territorial waters and exclusive economic zone must not be violated by any country, the Mainland Affairs Council said yesterday, adding that it will not accept any unprovoked actions. The council issued the remarks in response to the China Coast Guard conducting maritime enforcement drills near eastern Taiwan and claiming to fully exercise China’s maritime administrative law enforcement authority. The Coast Guard Administration (CGA) has been closely monitoring the situation and is taking concrete steps to defend the nation’s sovereignty and secure its waters, the council said. China has no sovereign rights over the waters off eastern
Heavy rain is expected to affect parts of Taiwan this week, the Central Weather Administration (CWA) said yesterday as a meteorologist said the active part of the annual plum rain season has started. A stationary plum rain front and southwesterly winds would bring unstable weather and abundant moisture to Taiwan from today for about a week, with the heaviest rainfall forecast for tomorrow and Wednesday, the CWA said. The agency said western and northeastern Taiwan, and mountainous areas in the east and southeast, could expect showers or thunderstorms on those two days, with localized heavy rain possible. Other parts of
RSS