Singapore banks' big 3 face muted trading gains in 1Q

But operating trends to remain stable.

According to Barclays Research, the three Singapore banks will report 1Q14 results on 30 March – DBS and OCBC before the market open, and UOB after the market close.

Barclays expects revenue growth to be affected by lower trading gains, while underlying operating trends shouldremain stable q/q.

"We also expect margins to be flat, loan growth to be reasonably robust at 2-3% q/q and asset quality to be sound. We continue to prefer DBS (OW) and UOB (OW) over OCBC (UW)," said Barclays.

Here's more:

Stable banking trends: We estimate loans grew 2-3% q/q in 1Q14, largely led by corporate and offshore loan demand. We expect stable margins, as higher loan yields from the bottoming-out of the downward loan repricing drag (on mortgages and corporate loans) and tighter liquidity conditions offset a slight increase in funding costs.

Sustained growth in fee income but muted trading and investment gains: We expect fee income growth (3% q/q) to be led by loans/credit cards, trade-related fees and some improvement in market-related income (Singapore stock market daily average turnover rose 9% q/q).

However, trading and investment gains are expected to remain muted due to difficult capital market conditions – especially on a y/y basis as 1Q13 was a record quarter, and in the absence of one-off large transactions in 1Q14.

Key themes to watch: 1) Management views on the impact of tighter liquidity conditions, some pick up in deposit competition and the outlook on margins in Singapore; 2) guidance on 2014 growth expectations, in particular loan growth, which may potentially surprise on the upside in our view, driven by demand from corporates and other ASEAN markets; and 3) updates on overseas expansion strategy, e.g. OCBC’s integration plans for Wing Hang Bank.