I understand that banks have been a lacklustre of late given the whole COVID-19 Pandemic and how there has been huge provisions for loan impairments/dividend cuts amongst our 3 local banks. However, having reviewed the recent 3Q earnings release by DBS and OCBC, I wanted to comment on an interesting point I noticed.
Looking at the below 2 snapshots, it shows the net fees & commissions for 3Q the respective banks have made from their ancillary services.
The interesting point would be on both banks’ wealth management services that is recording much higher growth rates of mid-20%. The low interest rate environment is something that is already a given and has been priced into current valuations. However, with this new wealth management segment, it will be able to offset the decline in net interest rate income for the banks.
The last time where Singapore Banks were facing a low interest rate environment, which was 2007/08 Global Financial Crisis, they started building their wealth management segment. Recall, OCBC buying out ING Private Bank and DBS building out its wealth management business in-house.
In terms of the other aspects of the bank, I do believe everything are pretty much in-line and our Singapore Banks are well capitalised to ride this crisis out. However, I do believe that in terms of the negatives, we should have already priced in most of the negatives that could happen already.
I have written extensively on the Singapore Banks since the COVID-19 Pandemic, which I do not wish to rehash them. Readers who are interested in those article may check them out below:
October 2019: Investment Ideas: Singapore Banks
June 2020: Investing in STI ETF or Singapore Banks?
June 2020: A Note on Singapore Banks
July 2020: Thoughts on Singapore Banks’ Dividend Cut
The information provided by InvestingNook serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock.
Disclaimer: The Author has vested interest in OCBC at the time of writing.