Earnings season is here again.
Next week, a host of companies will be providing updates on their final quarters of 2018. Among them are two of the largest financial institutions in Singapore: DBS Group Holdings Ltd (SGX: D05) and Great Eastern Holdings Limited (SGX: G07).
Here’s what investors should keep an eye on when these companies release their earnings scorecards.
Can DBS end 2018 as well as it started it?
DBS Group, the largest bank in Singapore, will be the first among the three major banks to release results next week.
Like the other two banks, DBS Group has had a fantastic first nine months of 2018. The bank achieved record high income, profit before allowances, and net profit during that time. Compared to the previous year, total income and net profit increased by 12% and 36%, respectively.
The improved performance was in part due to a higher net interest margin (NIM), which rose to 2.08% in the third quarter of 2018.
Source: DBS Group Holdings Ltd 2018Q3 CFO Presentation
With the central bank of America, the Federal Reserve, raising rates again in December, it is probable that interest margins could continue to rise in 2019.
Loan volume has also risen sequentially each quarter so far in 2018, which has added to the bank’s bottom line.
Investors will be hoping DBS Group can end the year with a bang. As a shareholder, I will be watching the trends in both interest and fee income. There should also be useful updates on what can drive business momentum in 2019 and how the Fed’s more dovish stance will affect net interest margin down the road.
All eyes on investment income
Great Eastern Holdings Limited’s results from the third quarter of 2018 did not make for easy reading. Despite 14% higher total weighted new sales (a measure of new premiums earned), the group’s profit attributable to shareholders plunged 26%. The lower profit was due to less favourable market conditions in 2018 that resulted in a lower non-operating profit. The poorer markets in the third quarter of 2018 resulted in lower equity gains and a narrowing of credit spreads.
In the next reporting quarter, investors should look for updates on Great Eastern’s insurance business and investment income. In the fourth quarter of 2018, the group recorded a large spike in investment income from shareholders funds, which might not be replicable in 2018.
Source: Great Eastern Holdings Limited FY2018 Q3 Earnings Supplementary Information
Due to the high investment earnings last year, investors should expect lower year-on-year investment earnings from the company in the upcoming reporting quarter.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Jeremy Chia own shares in DBS Group Holdings Ltd. The Motley Fool Singapore has a recommendation for DBS Group Holdings Ltd.