Asia Tea Time - Cup 34 ☕

This week, I cover the Q3 earnings for Singaporean banks, maximizing your air miles, and the Bored Ape NFT event.

Macro in Asia

Singapore’s big banks wrap up Q3 earnings season

Two of Singapore’s “Big Three” banks reported their latest Q3 2023 earnings this week, with DBS Group – Singapore’s largest bank – reporting a better-than-expected profit.

That was followed up by OCBC, Singapore’s second-largest bank, which took DBS’s lead by also posting net profit that was ahead of expectations.

Share prices of both banks ended the week down slightly.

Why it’s happening

• A big jump in profits from Singapore’s big banks were widely expected, with DBS and OCBC reporting an 18% and 21% year-on-year increase, respectively, in net profit.   

• Given the stock market is forward-looking, a lot of the increase in the Singapore banks’ share prices over the past two years have reflected the expectation of higher profits.

• Higher profits for banks in Singapore have mainly been driven by higher interest rates in the US, set by the Federal Reserve (Fed).

Why it matters

• Singapore’s big three banks play a critical role in the benchmark Straits Times Index (STI) in Singapore, as they make up over 50% of the index.

• Their earnings are generally seen as a bellwether for the local Singapore economy – if they do well then the economy does well.

• Signs that the Fed may be done hiking interest rates – and might even start cutting in 2024! – means there are concerns that banks’ record profits may be at risk. 

What’s next?

• Look out for any more signs that there’s distress in the global economy which could impact the banks’ earnings in the quarters ahead.

Tim’s Take 

Singapore’s banks have clearly had another stellar quarter with record profits being posted. UOB reported in late October and saw some strong numbers.

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One positive thread among all three banks has been the strength of its cards businesses, which have been strong on robust spending and overseas travel – a trend that looks likely to continue if we look at Singapore Airlines and its packed flights.

Many investors are understandably looking at the impact of lower interest rates in 2024, which would negatively impact banks’ earnings. That’s because they can lend money out at a higher rate versus what they pay for deposits.

Another area of potential growth, which could accelerate if interest rates come down, is the banks’ wealth management businesses. A lot of high net woth individuals (HNWIs) park their money with the banks’ private banking arms.

However, given the poor state of investment markets in the past year or so, many aren’t deploying their cash into anything. That could turn around if sentiment shifts, helping the banks earn more fees.

Slowing loan growth, though, could temper expectations for banks in the short term. Given banks are generally tied to the economic cycle, many investors will be wary in the short to medium term. 

But with Singapore banks offering dividend yields of 6-7%, many are understandably willing to wait as they get paid. 

Tim's Money Tip of the Week

With maximising our air miles always on the agenda – given the crazy prices of flights nowadays – it’s worth optimising how we spend on our credit cards.

One worry for many miles chasers is meeting any “minimum spend” requirements on credit cards that allow you to earn the holy grail of miles earning: 4 miles per dollar (4mpd).

Take the UOB Visa Signature credit card, which can give you 4mpd on all contactless spending but requires you to spend a minimum of S$1,000 per statement month to get this. 

If there are worries you might not reach it in a certain month, you could always pick up cash vouchers at a place (using contactless, of course) you’d always end up spending at – say a FairPrice supermarket.

Another option is to be the person who offers to be the one who pays if you’re out with a big group of friends, letting them pay you back their share via PayNow.

When it comes to miles accumulation and maximising that miles potential, it pays to be creative! 

Story of the Week

So crypto and non-fungible tokens (NFTs) haven’t garnered the best reputation in recent years.

The movement didn’t help itself last week when a Bored Ape NFT event in Hong Kong used some seriously strong lighting.

The result? A whole bunch of attendees ended up reporting symptoms such as burning eyes and even temporary vision loss.

Thankfully, it didn’t appear as though anyone had any permanent damage. But the next time you’re at an NFT event, it might be worth checking what type of light they’re using.