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Singapore Banks Face Earnings Scare
13 Oct
Summary
- Singapore bank shares are declining due to earnings downgrade fears.
- The benchmark index has fallen significantly from its recent peak.
- Analysts warn of potential losses on bank holdings and trading books.
Fears of earnings downgrades have triggered a selloff in Singapore bank shares, challenging the city-state's standing as a safe haven and impacting its leading stock benchmark. The Straits Times Index has seen a notable decline from its recent highs, primarily due to significant market value losses by major lenders like DBS Group Holdings Ltd., Oversea-Chinese Banking Corp., and United Overseas Bank Ltd.
Analysts are flagging increased risks for these financial institutions. Elevated bond yields are diminishing the attractiveness of their dividend payouts, while mark-to-market losses on trading books are also a growing concern. Reports from major financial institutions indicate potential downside risks to upcoming earnings, with the results due in November expected to be a crucial test for the sector.
Despite the recent pullback, Singapore banks, particularly DBS, still trade at higher valuations compared to regional and global peers. However, some strategists remain optimistic, citing Singapore's economic growth prospects and government initiatives to boost the equity market. They point to the absence of concerning bad debt levels and healthy loan growth as mitigating factors.
