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SINGAPORE: DBS has reported better-than-expected third quarter earnings. The bank's net income increased in Q3 by 49 per cent on-year to S$563 million or about US$404 million.
The bottomline was boosted by improved net interest income, which hit a record S$1.14 billion for the quarter. While analysts remain optimistic about the outlook for Singapore banks, they said on Friday some challenges lie ahead.
Singapore's three big lenders – UOB, OCBC and DBS – have all booked earnings that beat expectations. Analysts said the strong results place Singapore banks in a positive valuation position.
Wong Sui Jau, general manager, Fundsupermart.com, said: "We think that they are quite reasonably valued at this point in time. They are not really expensive and they are not cheap like a couple of months ago (when) they were undervalued.
"If earnings continue to take off... we think the earnings improvement is sufficient to bring up the prices of the banks."
Overall, analysts are optimistic on the outlooks for Singapore banks next year, expecting earnings of around 30 per cent for the full year 2010.
But while things may be looking up, they said banks should continue to move with caution as governments begin to unwind stimulus measures.
Alfred Chan, associate director, Financial Institutions, Fitch Ratings, said: "There are certain weaknesses that they need to address at this moment, that's why we still continue to be very cautious with 2010.
"It is going to be a manageable year from our point of view. There are certain risk areas that we would like to look out for – one is the property sector and the other is the consumer sector."
Going forward, DBS is looking to expand its private banking arm in the coming months. While it will continue its organic growth strategy, the lender said it is open to opportunities.
DBS will have a new CEO later this month when former Citibank executive Piyush Gupta comes on board.
- CNA/vm/so
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