Check out this fearless earnings forecast on Singapore banks' Big 3

Who will outperform in 3Q?

The Singapore banks will report their 3Q13 results on 1 Nov (OCBC, DBS) and 5 Nov (UOB). CIMB noted its earnings forecast on Singapore's three biggest banks.
 

Here's more:

Expectations for DBS results (on 1 Nov)

We expect DBS to report 3Q13 net profit of S$880m (-1% qoq), higher than consensus expectations of S$823m. 2Q13 earnings (S$887m) were slightly inflated because of the one-off gains from the sale of certain Hong Kong properties, which results in a high base effect that makes it harder for 3Q13 net profit to beat that of 2Q13.

Back then, the tailwinds from 2Q13 that was supposed to carry over to 3Q13 include a recovery in trade finance loan growth, along with the associated trade fees and treasury income.

Although management guidance earlier in 3Q stated that these trade drivers were still valid, we believe that the slowdown in Asian trade means that DBS is likely make a less sanguine guidance of its trade finance activity.

On credit costs, we factor in similar levels of provisioning (40bp of loans). We are keen to see if stresses in the small Indian SME segment have affected the rest of its Indian loan book.

Expectations for OCBC results (on 1 Nov)

We expect OCBC to report 3Q13 profit of S$660m (+11% qoq), above consensus expectations of S$626m. We are more optimistic than the market as we believe that 2Q13 earnings (S$597m) were overly depressed by the lack of earnings contribution from GEH due to the MTM losses of the non-par funds.

With bond markets stable in 3Q13, we believe that GEH will show qoq earnings recovery.

This is a key driver of our expected 11% qoq earnings growth for OCBC. Wealth management fee growth, which registered some momentum in earlier quarters, is likely to remain robust.

While the drag from ‘disappearing’ insurance earnings will fade, the new negative is that OCBC’s Indonesia will likely see lower translated earnings.

OCBC does have the highest Indonesian exposure amongst the trio of banks. Although Bank NISP is known to be a high-quality SME bank (one of the few Indonesian banks that emerged unscathed from the Asian Crisis period) we reckon that there are valid concerns about Indonesia’s ongoing deposit competition and likely NPL deterioration as inflation materialises.

Expectations for UOB results (on 5 Nov)

We expect UOB to report 3Q13 net profit of S$756m (-4% qoq), higher than consensus expectations of S$685m. UOB’s 2Q13 earnings (S$783m) were slightly inflated because of investment gains from associates.

Nonetheless, its core revenue trends were promising in early-2013 and we expect the momentum to sustain. This is reflected in the 6% qoq revenue growth and 9% PPOP growth expected for 3Q13.

We think that 3Q13 bottomline will look weaker only because of the higher loan loss provisions (as 2Q13 writebacks will normalise) and the absence of one-off ‘bumps’ in associates contributions.

The key question that investors will ask is whether the ASEAN regionalisation strategy will keep growing, as the regional economy slows.