To The Moon

As an investor closely following the Singapore banking sector, I'm looking forward to the upcoming earnings releases from UOB $UOB(U11.SI)$  , DBS $DBS Group Holdings(D05.SI)$  , and OCBC $ocbc bank(O39.SI)$  , which are set to be announced since May 7, 2025. Based on the analysts' expectations, it seems DBS and OCBC are bracing for a decline in their net income year-on-year. Specifically, DBS is projected to see a 4.4% drop to $2.95 billion, while OCBC might face a 5% decline to $1.98 billion for 1QFY2025. On the other hand, UOB is expected to report a modest 1.1% increase in net income, though this growth is the slowest it has seen since 2QFY2024. I'm curious to see how these figures will play out and what they’ll mean for the banks' performance moving forward.

One key concern I have is the potential impact of rate cuts on the net interest margins (NIMs) of these banks. The report highlights that softer NIMs could weigh on interest income, which is a critical revenue stream for UOB, DBS, and OCBC. With global monetary policies shifting, rate cuts seem likely to squeeze the margins further, making it harder for these banks to maintain profitability through interest income alone. I'm particularly worried about DBS and OCBC, as their declining net income already signals some vulnerability. UOB's slight growth gives me a bit more confidence, but the slower pace still suggests challenges ahead.

When it comes to my expectations for the earnings, I think the banks might face a mixed bag of results. For DBS and OCBC, I anticipate the reported declines might align with the analysts' forecasts, as their exposure to interest rate fluctuations could indeed hurt their bottom line. However, I'm hopeful that they might offset some of these losses through non-interest income, such as fees from wealth management or trading activities, which have been strong for Singapore banks in the past. For UOB, I expect the modest growth to hold, but I’ll be paying close attention to their guidance on how they plan to navigate the potential NIM compression in the coming quarters.

I'm also wondering whether the declining NIMs are already priced into the stock prices of these banks. Given that the market often reacts to expectations, I suspect that much of the concern around softer NIMs might already be reflected in their valuations, especially since these rate cut expectations have been circulating for a while. Investors like me tend to price in such macroeconomic factors ahead of time, so I wouldn't be surprised if the stocks don't see a drastic drop post-earnings unless the results are significantly worse than anticipated. That said, if DBS and OCBC can show resilience through diversified income streams, their stock prices might even see a slight uptick.

Overall, I'll be keeping a close eye on these earnings reports to gauge how well these banks can adapt to the changing interest rate environment. While the declining NIMs are a concern, I believe the banks' ability to boost non-interest income and manage costs will be key to offsetting these pressures. As a cautious investor, I'm leaning toward a wait-and-see approach, but I'm optimistic that Singapore's big three banks have the resilience to weather this storm, even if the road ahead looks a bit bumpy.

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