Shares of Oversea Chinese Banking Corp (OCBC) fell 1.7 percent, and United Overseas Bank (UOB) slid 1.9 percent, the biggest decline this year that occurred on the same day.
With this, the Singapore Banks are bracing themselves for the newer challenges from slowing economy, and China-U.S. trade tensions. Moreover, after fourth-quarter results missed estimates, Wee Ee Cheong, Chief Executive Officer of UOB told reporters that we expect that ‘global uncertainties’ will have an effect on the business continuously.
While, Samuel Tsien, CEO, Oversea Chinese Banking Corp said loan growth will slow down this year. Tsien also predicted that the Asian Markets will remain affected as various geopolitical strains have an effect on the overall global economy.
Later in a news briefing, he said the trade tensions reduce the trade flows and affect the whole regional market. There are some corporate clients who have built the stocks ahead of traffic increases, and are taking longer than expected to turn them down.
Further, China’s slump has also reduced liquidity. Singapore’s exports fell to the most than two years in January. Other Asian economies from Japan to South Korea are also affected from the slump that came in global trade.
The banks’ did not express the outlooks strongly on how the trading disputes and economic slowdown slam Southeast Asia’s finance, shipping hub, and Singapore.
Lenders challenges are easing as expectations of interest rate increases, which support loan margins.
Affect of Loans Growth on Both UOB and OCBC
The growth in loans led to a higher net interest income in the quarter for both UOB and OCBC. UOB’s net margin was on a decline from the previous quarter, while the OCBC’s remain unchanged. But due to slow interest rate increases in the United States, the perspective on lending profitability is still being clouded.
OCBC blamed the slump at its insurance unit for its profit decline. The bank also added $205 in million allowances (four times as much as in the previous quarter), which suggested that the loan quality may be deteriorating.
According to Marcus Chua, an analyst at Nomura Holdings Inc. in Singapore said in a report that Oversea Chinese Banking Corp’s weak results are coming from every part of the business along with a massive rise in its non-oil non-performing loans.
United Overseas Bank disappointed the investors who were looking for improvement in their net margin, Chua added.
OCBC KEY FIGURES
- Net income fell 11 percent to $926 million, missing the $1.12 billion average analyst estimate.
- Wealth Management dropped by 13 percent.
UOB KEY FIGURES
- Net income rose by 7 percent to $916 million, missing the $980 million average estimate.
- Wealth Management dropped by 20 percent.