Singapore’s big lenders have been breaking record after record. Oversea-Chinese Banking Corporation is the latest to join the trend for earnings leaps, reporting its best-ever quarterly profits. Billionaires are seeking a haven in the city-state amid geopolitical uncertainty. That will be a lasting trend.
With Hong Kong on the wane, Singapore is strengthening its credentials as an offshore centre. That means plentiful inflows for Singapore banks. Property is the preferred investment for incomers.
Singapore has long been a favourite for wealthy mainland Chinese, who accounted for 31 per cent of all property purchases by foreigners last year. They like the city-state’s independence, the widespread use of Mandarin Chinese and the strong record of capital appreciation of local real estate.
In recent years, Singapore has also lured more investors from the US, Malaysia and India. Nearly 30 per cent of Singapore’s population are foreigners without permanent residency.
OCBC, which is south-east Asia’s second-biggest bank, lifted profits 39 per cent to S$1.9bn ($1.4bn), beating expectations. Net interest income jumped 56 per cent. The net interest margin was an impressive 2.3 per cent, up from 1.55 per cent the previous year. OCBC has upgraded NIM guidance. Return on equity rose more than 4 percentage points to 14.7 per cent.
Last week, larger rival DBS Group reported a 43 per cent jump in first-quarter profits. Last month, smaller peer United Overseas Bank posted a 74 per cent earnings surge.
Rents have risen nearly a third last year at the fastest rate in 15 years. The government recently increased the tax foreigners pay on residential purchases from 30 per cent to 60 per cent in an attempt to check rising prices.
Inflows of new money should benefit wealth management services which sprawl from the banks into niche funds and family offices. Local lenders already trade above tangible book value. They have scope to go higher, given Singapore’s financial momentum.
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