Business

Interest rates rise to reduce impact on Asian banks from slowing economy According to Reuters


© Reuters. FILE PHOTO: A view shows the entrance to an HSBC Bank branch in New York, U.S. August 1, 2011. REUTERS / Shannon Stapleton / File Photo

By Anshuman Daga

SINGAPORE (Reuters) – Asia-focused lenders HSBC, Standard Chartered (OTC:) and Southeast Asian peers like DBS are expected to report improvements in net interest income the second quarter, a major source of revenue, benefited from higher interest rates.

But analysts warn that a growing credit crunch and weak financial markets could weigh on banks’ performance as the macro environment deteriorates.

According to JPMorgan (NYSE) analyst Harsh Wardhan Modi, Singapore banks are expected to report a quarter-on-quarter net margin expansion of 10 basis points, the highest in eight quarters, outperforming peers. Asian Bank.

“We are seeing the fastest rate hike in the shortest period of time in at least 20 years,” he said.

“My feeling is that not only will the second-quarter numbers meet our expectations, but guidance from management will reaffirm the outlook for a much better net margin in the second half of the year.”

United Overseas Bank (OTC:), the smallest lender listed in Singapore, announced results on Friday, followed by Overseas-Chinese Banking Corp on August 3 and DBS a day later.

Singapore’s central bank tightened monetary policy this month, saying the move would slow inflation. It projects city-state growth to be in the lower half of the 3-5% forecast range for 2022.

Morgan Stanley (NYSE:) analysts said the upgrade to their earnings estimates for Singapore banks was driven primarily by higher net interest income, driven by a faster-than-expected rate hike.

“However, the higher net interest income estimate is offset by the lower non-interest income estimate, as we expect difficulties for fee and interest income,” the analysts said. Trading will stay for a while,” the analysts said.

Refinitiv data shows analysts on average expect OCBC’s second-quarter net profit to grow 10% from a year ago, UOB’s to grow 9%, while DBS’s profit is expected to fall 1% .

IMPACT OF CHINA ASSETS

Analysts will also be eyeing banks’ exposure to China’s property sector, which has seen a string of developer defaults and outcry from homebuyers threatened to stop making mortgage payments.

Chinese banks report their half-year results next month.

HSBC and London-listed StanChart, both of which generate the bulk of their revenue in Asia, are set to report strong underlying net interest income as interest rates rise but decline and higher costs are likely to result. can be a major drag on outcomes.

European banks will point to their weaknesses as they update investors on their business this year.

Credit Suisse analysts said in a note that net interest income strength at HSBC would be offset by weaker asset sales and lower capital ratios during the quarter.

HSBC expects a 22% drop in pre-tax profit to $3.98 billion in the second quarter, based on consensus analyst estimates compiled by the bank. It reported results on August 1.

StanChart, which releases its numbers this Friday, is expected to report a pre-tax profit of $989 million, down 14% on the year, according to copper analyst estimates. agreement compiled by the bank.

Beyond the numbers, investor focus will be on HSBC’s response to a breakup proposal put forward by its largest shareholder, Ping An Insurance Group Co of China.

In India, HDFC Bank, the country’s largest private lender, kicked off banks’ results with a 19% increase in quarterly net profit as provision for bad loans decreased and increased. loan growth increased. But the results were below market estimates.

Source link

news7h

News7h: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, Sports...at the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button