Banking stocks highest in nearly two years

DBS Group Holdings was the best performer yesterday (May 3), jumping 4.9 per cent to $20.83.
DBS Group Holdings was the best performer yesterday (May 3), jumping 4.9 per cent to $20.83.PHOTO: ST FILE

Local banking stocks have soared to their highest levels in over a year on the back of better than expected first quarter results turned in so far.

DBS Group Holdings was the best performer yesterday, jumping 4.9 per cent to $20.83. United Overseas Bank rose 1.93 per cent to $23.24, while OCBC Bank leapt 2 per cent to $10.18.

The stocks are at their highest levels since the Straits Times Index's collapse in July 2015.

Two of the three banks have released their results for the January to March period. UOB last Friday reported a 5.4 per cent year-on-year rise in net profit to $807 million. This beat the average forecast of $757 million by Bloomberg.

DBS said on Tuesday that its earnings inched up 1 per cent to a record $1.21 billion, well above the forecast of $1.09 billion by Thomson Reuters.

Over the past three trading sessions, DBS shares powered ahead 8.4 per cent, followed by UOB at 8.2 per cent and OCBC at 4.5 per cent.

CMC Markets analyst Margaret Yang said: "DBS and UOB results offered some positive surprises. The market was particularly encouraged by the slowdown in the formation of new non-performing loans, while the improving economy and the Trump... effect also helped."

Wall Street's banking stocks have rallied since Mr Donald Trump won the US presidential election.

"DBS' surge was the sharpest because it's commonly viewed as having the highest beta," Ms Yang said, referring to DBS as the fastest moving and most liquid of the trio.

In comparison, OCBC's relatively weak gain might be down to a "wait and see" attitude ahead of its results release next Tuesday, she said.

KGI Securities Singapore strategist Nicholas Teo said the surge may fizzle out as the banks hit their ex-dividend date - after which shares are not entitled to the latest dividend. "The buy-in now is something of a positive spiral - people are piling on the banking stocks because they realise that's what other people are after... But after the stocks go ex-dividend, they may take a similar course in the past two years when the stocks were sold off after the dividend entitlements."

UOB shares went ex-dividend on April 26. DBS will trade ex-dividend today; OCBC, on May 22.

A version of this article appeared in the print edition of The Straits Times on May 04, 2017, with the headline 'Banking stocks highest in nearly two years'. Print Edition | Subscribe