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Due to a sharp decline from the global interest, Singapore’s highest banks reported a sudden decrease in net profits during the second quarter. More challenges are anticipated compared to last year’s market.
The following banks — DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank — stated that there is no certainty in the global environment even though some business measures have been geared up since the lifting of quarantine guidelines and protocols.
Following NIM registration with 1.74% in the first half of 2020, DBS announces that it foresees a full-year net interest margin to come at 1.6%, compared to its net interest margin of 1.89% last year. It also mentioned dismissing payment for loan mishaps that could result from the economic influence of the pandemic.
The net interest margin covers the distinction between the profit paid to clients and income gained from investments.
In an exclusive interview with CNBC, DBS Chief Executive Piyush Gupta explained that profits in the upcoming quarters could increase following most businesses’ recovery as the lockdown measures ease.
“That’s because many governments are supporting the economy through measures such as allowing businesses to delay loan repayments… Once such support ends, the bank could experience an uptick in bad loans… (Digitalisation) creates an opportunity for many new income-generating businesses. We are actively working on several other things we could do in the digital space as economies and sectors are morphing to a new way of thinking.”DBS Chief Executive Piyush Gupta
Fortunately, digital transactions and the bank’s volume have been increasing over the past few months. As stated in The Strait Times, a broadsheet newspaper based in Singapore, Gupta said that the company “has been ahead of the game” in its digital contributions.
On the other hand, UOB’s NIM fell sharply to 1.6% during the first half of 2020. They also announced that their margins might develop in the second half of the year.
Meanwhile, OCBC reported NIM of 1.68% in the first six months this year; they stated afterward that it anticipates NIM to denote “slightly down” in the latter half of the year but resides in a 1.5% range.
“We reaffirm our Positive rating on the sector as the results were reassuring on the asset quality front, which is really what matters in a crisis, in our view.”Daiwa Capital Markets Analyst David Lum
“Notwithstanding the uncertainties, we are in a good position to continue supporting customers and the community through the difficult months ahead of us,” Gupta denotes.