Investors are keeping a close eye on earnings of major banks across Asia as traders look to assess the possibility of further rate hikes that have vexed smaller lenders to the benefit of some larger banks.
(Bloomberg) — Investors are keeping a close eye on earnings of major banks across Asia as traders look to assess the possibility of further rate hikes that have vexed smaller lenders to the benefit of some larger banks.
Key banks, including HSBC Holdings, Macquarie Group and DBS Group, may signal an optimistic outlook in their lending businesses when they report results next week. Major bank earnings in Asia have so far shown some upside. Standard Chartered Plc reported better than expected results earlier, while UOB profits beat estimates on rising lending income. UOB’s lending jump mirrored gains at JPMorgan Chase, Citigroup and Wells Fargo in the US following Federal Reserve rate hikes that have roiled smaller lenders.
HSBC will be in particular focus for comments on its purchase of the UK arm of Silicon Valley Bank. HSBC has drawn significant deposit inflows from global clients since the acquisition, according to CEO Noel Quinn.
Asian central banks should complete the current rate-hike cycle in the second quarter, Bloomberg Intelligence analysts Stephen Chiu and Chunyu Zhang wrote in a note. They may even get ready to start cutting, the analysts added, if the current global banking turmoil evolves into a larger-scale crisis. Elsewhere, Fed officials backed another interest-rate increase as the US central bank eyes economic fallout from bank strains. The Bank of England is expected to raise terminal rate to the peak of 4.75% in June, according to Bloomberg Economics.
Meanwhile, core companies under Indian billionaire Gautam Adani’s conglomerate, including Adani Green Energy Ltd. and Adani Ports and Special Economic Zone Ltd., will report earnings after the first debt buyback since it was targeted by a short seller in January.
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Highlights to look out for:
Monday: Adani Green Energy (ADANIGR IN), one of the most leveraged firms in the group, may report fourth quarter results after market hours. The green power producer has close to $3 billion maturities by March 2025, according to Bloomberg Intelligence, with the Adani Group facing high refinancing risk in the next two years. Still, Adani Green’s rapid capacity addition, with a near 50% jump in the year ended March, boosted energy sales by 58% and may expand profit significantly. The company is the largest winner of India’s complex renewable auctions. Sanford C. Bernstein, the only brokerage covering the company, predicts a more than 60% surge in fourth quarter net income.
Tuesday: HSBC (HSBA LN) will report quarterly results at noon Hong Kong time. Investors would be keen to get an update on its plan to resume buybacks and pay a special $0.21 dividend. HSBC is expected to announce a $2.5 billion buyback for the first quarter followed by another $2.5 billion buyback the next quarter, Jefferies analysts wrote in a research note in March. Meanwhile, any further comments by HSBC’s management to address the concerns from Ping An Insurance Group will be closely watched. Ping An’s call for a strategic restructuring of HSBC, including a separate listing of its Hong Kong-based Asia business, is sensible as a move to improve its long-term investment value, BI analyst Steven Lam wrote in a note. For Ping An, that’s among the many drivers of its valuation, he said.
- Singapore’s largest lender DBS (DBS SP) will report its first-quarter results before market open. Investors are keeping a close eye on its net interest income after the bank issued softer guidance on outflows to treasury bills in the results last quarter. The bank is expected to report net income of S$2.36 billion and net interest margin of 1.94% for the first quarter, estimates compiled by Bloomberg show. DBS could see growth in wealth assets under management in the first quarter, particularly in view of Credit Suisse’s outflows in the same period, according to BI analysts Sarah Jane Mahmud and Diksha Gera. Despite a partial offset on higher funding costs, margin should have widened on asset repricing as the Fed continues to hike rates, BI added. DBS may face questions related to digital disconnection in March, which prompted the Monetary Authority of Singapore to pledge action against the bank.
Wednesday: Titan Co. (TTAN IN) likely to announce fourth quarter earnings during trading hours. Analysts expect strong growth across categories to help the jewelry and watch maker report a 45.9% jump in net income from a year earlier, albeit on a low base with demand rebounding after a Covid-19 led slump. The company saw “double digit” growth across all key businesses in the quarter, with higher contributions from watches and wearables. Weak macro economic environment and soaring gold prices amid rising competition is expected to cause margin pressure, according to analysts at Emkay. The company has introduced affordable jewelry ranges and is banking on its gold-exchange program to alleviate the impact of high gold prices.
Thursday: Adani Ports (ADSEZ IN) is set to report fourth quarter earnings amid an ongoing buyback of bonds, its first debt repurchase since a short seller in January raised concerns over the group’s finances. With strong cash flows, Adani’s flagship firm is seen less pressured than other group firms. S&P Global Ratings says the ports operator has “adequate liquidity.” Still, more clarity on Adani Ports’s plans to fund the buyback is needed as more than 63 billion rupees of liabilities will be due next year, its biggest maturity wall in the near term. The company, covered by few analysts, is seen reporting a more than 60% year-on-year surge in net income for the quarter, after cargo volumes at its ports rose to a record in the year ended March.
Friday: Macquarie (MQG AU) is set to announce results on Friday. The Australian financial giant is expected to post a 6% increase of full-year net income, according to Bloomberg consensus estimates. Macquarie’s profit in fiscal 2023 ended March received a boost of about A$1 billion from the tanking Australian dollar, BI analyst Matt Ingram and Jack Baxter wrote in a note. While investors are worried whether the banking crisis would extend to the Australian lenders, Macquarie’s businesses and the growth prospects are better than widely perceived, according to Jefferies. Earlier, the Australian firm is considering selling a portfolio of nine highway projects in India and may seek at least $1.5 billion. In March, Macquarie is reportedly weighing a takeover of UK fund manager M&G Plc in a deal that would further expand its investment bank that’s impacted less by volatile global markets. The deal could help sustain returns above 17%, according to BI calculation.
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