Headwinds ahead for local banks despite record Q1 profits

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http://www.channelnewsasia.com/news/business/singapore/headwinds-ahead-for-local/1090966.html

Singapore banks are at their most profitable ever, with all three lenders -- DBS, OCBC, and UOB -- reporting record quarterly profits in the first three months of 2014.

The performance was broadly due to improving interest rate margins and double-digit loans growth.

But behind the strong bottom lines, analysts said there are headwinds to earnings potential.

OCBC said new origination for home loans is down 40 per cent from its peak two years ago.

Meanwhile, DBS said that new home loan applications are down 45 per cent on-year. Despite the slowdown in the property market, DBS said it is still seeing good growth momentum in its key businesses.

It also said that it is gaining market share in the domestic housing loans market.

The tougher domestic conditions have made venturing overseas a greater priority for the banks.

Recent acquisitions announced by the banks are seen by analysts as part of their strategy to capture new markets and develop a new customer base. DBS recently bought French lender Societe Generale's Asian private bank, while OCBC has struck a deal to acquire Hong Kong's Wing Hang bank.

Share prices of all three banks rose following the record results announcements. OCBC shares closed at S$9.65 apiece, up 1.9 per cent. DBS gained 0.6 per cent to close at S$16.94, while UOB surged 2.7 per cent to close at S$21.76.