Net trading income to boost Singapore banks' profits

The banks' trading income CAGRs were 15–33% between 2011-2016.

Over the years, DBS’s net trading income pulled ahead of peers. Maybank Kim Eng noted that in 2016, its net trading income were almost 1.7x-2.5x higher than UOB and OCBC, thanks to its larger trading position, which contributed to larger gains. Despite stronger capital markets in 1H17, DBS’s net trading income declined 9% YoY, in contrast to peers’ 12-22% increase.

"Notably, UOB’s value-at-risk (VAR) of its trading book had been trending higher since 2014. While the higher VAR seen in 2016 could partly reflect the uncertainties in the macro environment, UOB’s higher VAR contributed to higher trading gains. Trading income CAGRs were 15–33% between 2011-2016 for the three banks, with UOB the strongest. We believe UOB has a bigger scope to increase its trading income as: 1) it is more conservative and has a lower risk appetite; and 2) it looks to reposition its trading capabilities," said Maybank Kim Eng.