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Virus outbreak to take centre stage at local banks' FY19 results briefings Continued from Page 1

Continued from Page 1

DBS analyst Lim Rui Wen concurred, saying that a worse-than-expected virus outbreak which will affect tourism and retail businesses could "unwind expectations of credit cost and NPL (non-performing loan) declines", posing risks to bank earnings.

Ongoing trends such as margin compression and flattish loan growth are likely to continue, and should show up in the Q4 earnings.

Analysts believe that earnings in the last quarter of 2019 could have eased quarter-on-quarter on the back of weakening net interest margins (NIMs) as falling interest rates get reflected in asset yields.

Fee income is also likely to ease due to seasonal factors, but wealth management is still expected to grow while card-related fee income should benefit from the year-end festivities.

Maybank Kim Eng analyst Thilan Wickramasinghe also flagged that credit charge guidance could also come in higher - an area that should be closely watched for additional cautionary provisioning on the backdrop of the virus outbreak as well as further woes from Hong Kong.

Analysts suggested that the banks might increase dividends, given high capital ratios, and as the uncertainty over the reported interest from DBS and OCBC to acquire Indonesian lender Bank Permata has ended. Bank Permata was eventually sold to Bangkok Bank.

"DBS and OCBC have a higher likelihood of this, given CET1 (common equity tier one ratio) levels are well in excess of regulatory requirements," said Mr Wickramasinghe.

As of Q3 2019, OCBC's CET1 ratio - a measure of a bank's financial strength - was at 14.4 per cent and the highest among its peers. DBS stood at 13.8 per cent, and UOB, at 13.7 per cent. The ratios are all above previous indications of the optimal range of 12.5 to 13.5 per cent.

DBS will release its Q4 and full-year 2019 results on Feb 13; OCBC and UOB will report on Feb 21.

At the end of trading on Monday, DBS closed down 20 Singapore cents to end at S$25.11, OCBC closed down 14 Singapore cents to end at S$10.72, and UOB closed down 38 Singapore cents to end at S$25.57.

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