Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

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<ul>
<li>
Recent rotation from Momentum to Value stocks has seen DBS, OCBC and UOB recipient of S$670 million in combined net institutional inflow in the November month-to-date. This has coincided with the trio averaging 16% gains for the eight sessions.  
	 </li>
	<li>
For their 3QFY20, DBS, OCBC and UOB reported a combined S$5.1 billion in Net Interest Income (NII). The three banks have consecutively and resiliently reported combined NII above S$5.0 billion since 1QFY18. 
	 </li>
	<li>The trio also maintain an average ROE of 11% compared to the median ROE of the top quartile of globally listed banks by market value at 7%.  The trio average a NPL ratio of 1.6% as of 3QFY20, up from 1.5% in the year-ago period. Their NIM averaged 1.53%, down from in 3QFY19.</li>
</ul>
 

In the first week of November, DBS Group Holdings (DBS), Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB) unveiled their business updates for the three months ended 30 September 2020. Recent rotation from Momentum to Value stocks has seen DBS, OCBC and UOB recipient of S$670 million in combined net institutional inflow in the November month-to-date. This has coincided with the trio averaging 16% gains for the eight sessions. Earnings Highlights 
For the three months ended 30 September 2020, the three banks averaged a net profit of S$998 million, down an average 24.3% YoY. DBS reported the highest net profit of S$1.3 billion, while OCBC registered the smallest YoY decline in earnings – down 12.3% to S$1.0 billion. 
Net interest income averaged S$1.7 billion, down an average 11.9% YoY. DBS registered the highest net interest income for the period – at S$2.2 billion.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			3Q2020 Net Profit (S$M)
			</td>
			<td>
			YoY Growth (%)
			</td>
			<td>
			3Q2020 Net Interest Income (S$M)
			</td>
			<td>
			YoY Growth (%)
			</td>
		</tr>
<tr>
<td>
			DBS
			</td>
			<td>
			1,297
			</td>
			<td>
			-20.4
			</td>
			<td>
			2,171
			</td>
			<td>
			-11.8
			</td>
		</tr>
<tr>
<td>
			OCBC
			</td>
			<td>
			1,028
			</td>
			<td>
			-12.3
			</td>
			<td>
			1,421
			</td>
			<td>
			-11.2
			</td>
		</tr>
<tr>
<td>
			UOB
			</td>
			<td>
			668
			</td>
			<td>
			-40.3
			</td>
			<td>
			1,474
			</td>
			<td>
			-12.6
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			998
			</td>
			<td>
			-24.3
			</td>
			<td>
			1,689
			</td>
			<td>
			-11.9
			</td>
		</tr>
</tbody></table>
 

<ul>
<li>DBS’s 3Q 2020 net profit was up 4% QoQ, with improved business momentum as fee income rebounded 17% to pre-Covid levels, softening the impact of lower interest rates as well as a decline in trading income from a high base</li>
	<li>OCBC’s performance reflected the robustness of its customer franchise and diversified business model – while net interest income was impacted by lower market rates, its banking and wealth management businesses saw strong QoQ fee-based growth</li>
	<li>UOB’s performance was hit by declining margins, slower customer activities and pre-emptive credit provisioning in view of the uncertainties from the COVID-19 pandemic</li>
</ul>
 

The trio averaged a Non-Performing Loan (NPL) ratio of 1.6% as of 3Q 2020, up from 1.5% in the year-ago period. Net interest margin (NIM) averaged 1.53%, down from 1.81% in the year-earlier period.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			3Q20 NIM (%)
			</td>
			<td>
			3Q19 NIM (%)
			</td>
			<td>
			3Q20 NPL Ratio (%)
			</td>
			<td>
			3Q19 NPL Ratio (%)
			</td>
		</tr>
<tr>
<td>
			DBS
			</td>
			<td>
			1.53
			</td>
			<td>
			1.90
			</td>
			<td>
			1.6
			</td>
			<td>
			1.5
			</td>
		</tr>
<tr>
<td>
			OCBC
			</td>
			<td>
			1.54
			</td>
			<td>
			1.77
			</td>
			<td>
			1.6
			</td>
			<td>
			1.6
			</td>
		</tr>
<tr>
<td>
			UOB
			</td>
			<td>
			1.53
			</td>
			<td>
			1.77
			</td>
			<td>
			1.5
			</td>
			<td>
			1.5
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			1.53
			</td>
			<td>
			1.81
			</td>
			<td>
			1.6
			</td>
			<td>
			1.5
			</td>
		</tr>
</tbody></table>
 Source: Company data

 

Outlook

DBS

<ul>
<li>Expect strong economic rebound in Asia from low base to support mid-singledigit loan growth and double-digit fee income growth in 2021; partly offsets fullyear impact of lower NIM</li>
	<li>Cost-income ratio for 2020 at 43%. Expect to hold 2021 expenses flattish to 2019</li>
	<li>Some episodic corporate NPL formation, while consumer delinquencies declined with improved collections</li>
	<li>Overall NPA formation expected to trend upwards as government relief programmes expire in 2021</li>
	<li>Guidance for total allowances of S$3 billion-$5 billion over two years remains
	<ul>
<li>S$2.5 billion already taken, reflecting conservative approach</li>
		<li>Amount in 2021 expected to be lower than 2020</li>
	</ul>
</li>
	<li>Loan moratoriums increased marginally for corporates, unchanged for consumers
	<ul>
<li>Corporates increased to S$13.5 billion from S$12.6 billion in 2Q, mostly secured</li>
		<li>Consumers unchanged at S$5.7 billion, mostly owner-occupied Singapore housing loans with loan-to-value (LTV) ratios well below regulatory thresholds</li>
	</ul>
</li>
</ul>
 

Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/VQL042GR3BGPGNS1/638003_3Q20_trading_update.pdf">here</a> for full results release.

 

OCBC 

<ul>
<li>While 3Q20 saw a recovery from the trough of the previous quarter, we may not have seen the full extent of the lagging economic impact of the crisis yet, which will have more visibility next year</li>
	<li>We are proactively following and responding to the government relief programme exits in all markets</li>
	<li>With the outlook still uncertain, we continue to strengthen our capital and balance sheet to position us well for the crisis, and enable us to emerge well-prepared for new opportunities when the market recovers</li>
	<li>We have set aside prudent levels of allowances including management overlays on top of the ECL model requirements on a forward-looking basis</li>
	<li>We will stay vigilant in managing the credit portfolio and are working closely with our customers to ensure a smooth and disciplined transition out of the moratorium programmes</li>
	<li>While cost has been tightly managed, the Group will continue to invest in digital transformation to boost customer engagement, increase productivity and achieve greater cost efficiencies</li>
</ul>
 

Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/RNNS7M77E75VRBX0/638008_OCBC_3Q20_Results_Update.pdf">here</a> for full results release.

 

UOB 

<ul>
<li>While there are early signs of recovery across the global economy, the trajectory remains uneven and unclear</li>
	<li>Given the evolving geopolitical and pandemic situation, we remain vigilant, especially in our key regional markets</li>
	<li>However, our asset quality is manageable and we are adequately provisioned even with the expiry of moratorium programmes across the region</li>
	<li>Our healthy balance sheet, fortified with additional allowance and backed by robust capital and liquidity positions, ensures we are well-placed to help our customers to weather this crisis</li>
	<li>COVID-19 has presented an opportunity for us to accelerate our omni-channel approach and to open up new customer service models</li>
	<li>Our digital services such as UOB Mighty and TMRW have seen a rise in engagement and transactions; we also recently launched UOB Infinity, our enhanced digital service for corporate customers</li>
	<li>As of 30 September 2020, outstanding O&amp;G loans represented 3% of total loans as compared with 4.7% at 30 June 2018</li>
	<li>Approximately 70% of O&amp;G exposure is to downstream players and traders, of which around two thirds are to national oil companies (NOCs) and global firms, while short-term structured loans account for a significant share of the remainder</li>
	<li>A significant portion of upstream exposure is to NOCs and international oil companies, while vulnerable accounts were already classified and their collateral value marked down (by as much as 90%) by end-2017 
	 </li>
</ul>
 Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/T9VMMAFTCBIDZ1H5/637796_3Q20%20Performance%20Highlights.pdf">here</a> for full results release.
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Recent rotation from Momentum to Value stocks has seen DBS, OCBC and UOB recipient of S$670 million in combined net institutional inflow in the November month-to-date. This has coincided with the trio averaging 16% gains for the eight sessions.  
	 
	
For their 3QFY20, DBS, OCBC and UOB reported a combined S$5.1 billion in Net Interest Income (NII). The three banks have consecutively and resiliently reported combined NII above S$5.0 billion since 1QFY18. 
	 
	The trio also maintain an average ROE of 11% compared to the median ROE of the top quartile of globally listed banks by market value at 7%.  The trio average a NPL ratio of 1.6% as of 3QFY20, up from 1.5% in the year-ago period. Their NIM averaged 1.53%, down from in 3QFY19.

 

In the first week of November, DBS Group Holdings (DBS), Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB) unveiled their business updates for the three months ended 30 September 2020. Recent rotation from Momentum to Value stocks has seen DBS, OCBC and UOB recipient of S$670 million in combined net institutional inflow in the November month-to-date. This has coincided with the trio averaging 16% gains for the eight sessions.  Earnings Highlights  
For the three months ended 30 September 2020, the three banks averaged a net profit of S$998 million, down an average 24.3% YoY. DBS reported the highest net profit of S$1.3 billion, while OCBC registered the smallest YoY decline in earnings – down 12.3% to S$1.0 billion.  
Net interest income averaged S$1.7 billion, down an average 11.9% YoY. DBS registered the highest net interest income for the period – at S$2.2 billion.




			Name
			
			
			3Q2020 Net Profit (S$M)
			
			
			YoY Growth (%)
			
			
			3Q2020 Net Interest Income (S$M)
			
			
			YoY Growth (%)
			
		


			DBS
			
			
			1,297
			
			
			-20.4
			
			
			2,171
			
			
			-11.8
			
		


			OCBC
			
			
			1,028
			
			
			-12.3
			
			
			1,421
			
			
			-11.2
			
		


			UOB
			
			
			668
			
			
			-40.3
			
			
			1,474
			
			
			-12.6
			
		


			Average
			
			
			998
			
			
			-24.3
			
			
			1,689
			
			
			-11.9
			
		

 


DBS’s 3Q 2020 net profit was up 4% QoQ, with improved business momentum as fee income rebounded 17% to pre-Covid levels, softening the impact of lower interest rates as well as a decline in trading income from a high base
	OCBC’s performance reflected the robustness of its customer franchise and diversified business model – while net interest income was impacted by lower market rates, its banking and wealth management businesses saw strong QoQ fee-based growth
	UOB’s performance was hit by declining margins, slower customer activities and pre-emptive credit provisioning in view of the uncertainties from the COVID-19 pandemic

 

The trio averaged a Non-Performing Loan (NPL) ratio of 1.6% as of 3Q 2020, up from 1.5% in the year-ago period. Net interest margin (NIM) averaged 1.53%, down from 1.81% in the year-earlier period.




			Name
			
			
			3Q20 NIM (%)
			
			
			3Q19 NIM (%)
			
			
			3Q20 NPL Ratio (%)
			
			
			3Q19 NPL Ratio (%)
			
		


			DBS
			
			
			1.53
			
			
			1.90
			
			
			1.6
			
			
			1.5
			
		


			OCBC
			
			
			1.54
			
			
			1.77
			
			
			1.6
			
			
			1.6
			
		


			UOB
			
			
			1.53
			
			
			1.77
			
			
			1.5
			
			
			1.5
			
		


			Average
			
			
			1.53
			
			
			1.81
			
			
			1.6
			
			
			1.5
			
		

 Source: Company data

 

Outlook

DBS


Expect strong economic rebound in Asia from low base to support mid-singledigit loan growth and double-digit fee income growth in 2021; partly offsets fullyear impact of lower NIM
	Cost-income ratio for 2020 at 43%. Expect to hold 2021 expenses flattish to 2019
	Some episodic corporate NPL formation, while consumer delinquencies declined with improved collections
	Overall NPA formation expected to trend upwards as government relief programmes expire in 2021
	Guidance for total allowances of S$3 billion-$5 billion over two years remains
	
S$2.5 billion already taken, reflecting conservative approach
		Amount in 2021 expected to be lower than 2020
	

	Loan moratoriums increased marginally for corporates, unchanged for consumers
	
Corporates increased to S$13.5 billion from S$12.6 billion in 2Q, mostly secured
		Consumers unchanged at S$5.7 billion, mostly owner-occupied Singapore housing loans with loan-to-value (LTV) ratios well below regulatory thresholds
	


 

Click here for full results release.

 

OCBC 


While 3Q20 saw a recovery from the trough of the previous quarter, we may not have seen the full extent of the lagging economic impact of the crisis yet, which will have more visibility next year
	We are proactively following and responding to the government relief programme exits in all markets
	With the outlook still uncertain, we continue to strengthen our capital and balance sheet to position us well for the crisis, and enable us to emerge well-prepared for new opportunities when the market recovers
	We have set aside prudent levels of allowances including management overlays on top of the ECL model requirements on a forward-looking basis
	We will stay vigilant in managing the credit portfolio and are working closely with our customers to ensure a smooth and disciplined transition out of the moratorium programmes
	While cost has been tightly managed, the Group will continue to invest in digital transformation to boost customer engagement, increase productivity and achieve greater cost efficiencies

 

Click here for full results release.

 

UOB 


While there are early signs of recovery across the global economy, the trajectory remains uneven and unclear
	Given the evolving geopolitical and pandemic situation, we remain vigilant, especially in our key regional markets
	However, our asset quality is manageable and we are adequately provisioned even with the expiry of moratorium programmes across the region
	Our healthy balance sheet, fortified with additional allowance and backed by robust capital and liquidity positions, ensures we are well-placed to help our customers to weather this crisis
	COVID-19 has presented an opportunity for us to accelerate our omni-channel approach and to open up new customer service models
	Our digital services such as UOB Mighty and TMRW have seen a rise in engagement and transactions; we also recently launched UOB Infinity, our enhanced digital service for corporate customers
	As of 30 September 2020, outstanding O&amp;G loans represented 3% of total loans as compared with 4.7% at 30 June 2018
	Approximately 70% of O&amp;G exposure is to downstream players and traders, of which around two thirds are to national oil companies (NOCs) and global firms, while short-term structured loans account for a significant share of the remainder
	A significant portion of upstream exposure is to NOCs and international oil companies, while vulnerable accounts were already classified and their collateral value marked down (by as much as 90%) by end-2017 
	 

 Click here for full results release.



DBS, OCBC & UOB Average 16% Gains in Early Nov