Barclays expects 2Q profit slump for Singapore arms
(25 July 2012 – Singapore) Barclays has forecast a drop in Singapore banks’ profit by 18 percent for the second quarter of this year.
In a report Barclays stated that a lack of large trading gains would see the combined profit for its three Singapore banks to rise 3 percent year on year, but decline sequentially by 18 percent quarter on quarter as the large trading and investment gains in the first quarter were unlikely to be repeated.
The banks were expected to benefit from solid loan growth, a strong funding base and low credit costs.
Loan growth is still solid despite economic headwinds: Despite a potential contraction in Singapore’s economy (2Q GDP advance estimates of -1.1% q/q), regional demand for lending remains strong.
"System lending and deposits grew by 2.4 percent and 0.9 percent QTD May-12, respectively. For 2Q12, we estimate loan and deposit growth of 2-2.5 percent q/q and the loan-to-deposit ratio to remain stable.
"We believe funding costs were largely stable q/q but see scope for improvement going forward due to the growing reliance on longer-term sources of funding (e.g. medium term notes and commercial papers)," Barclays said.
The banks were expected to benefit from solid loan growth, a strong funding base and low credit costs.
Loan growth is still solid despite economic headwinds: Despite a potential contraction in Singapore’s economy (2Q GDP advance estimates of -1.1% q/q), regional demand for lending remains strong.
"System lending and deposits grew by 2.4 percent and 0.9 percent QTD May-12, respectively. For 2Q12, we estimate loan and deposit growth of 2-2.5 percent q/q and the loan-to-deposit ratio to remain stable.
"We believe funding costs were largely stable q/q but see scope for improvement going forward due to the growing reliance on longer-term sources of funding (e.g. medium term notes and commercial papers)," Barclays said.
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