Singapore Banks OCBC Investment Research, June 13

Banking stocks have performed well this year, up some 9 per cent year-to-date at the high, as measured by the FTSE ST Financial Index. While share prices have come off and the index is now off the year's high of 1,112.15 in May 2018, we believe that most of the positive drivers are still intact despite current equity market softness. The outlook is definitely improving as the banking sector saw several quarters of improvement as allowances declined, non-performing loans plateaued and margins started to reverse up.

In general, quarterly profitability trends have also shown good improvements in the past few quarters. For DBS, 1Q18 was also a record quarter for the group. This was similarly the case for the other banks, stripping out exceptional items. In terms of pre-tax profits, the three banks reported combined total profits of S$4.4 billion, the highest level historically.