Singapore's top three lenders beat expectations for 2014 earnings

While some China, South Korea banks disappointed.

Most major banks in China and South Korea missed analysts' estimates for their 2014 earnings, while the top three Singaporean lenders all beat expectations.

According to a research note from SNL Financial, it reviewed the financial results of 28 Asia-Pacific banks or banking groups for the year ended Dec. 31, 2014, each with total assets of greater than US$100 billion, comparing their EPS adjusted by FactSet to exclude nonrecurring items against mean estimates.

A company was excluded if fewer than three estimates for its EPS were available or if it uses an odd fiscal year.

The list comprises 12 companies based in China, five in South Korea, four in Taiwan and three in Singapore, as well as two in each of Malaysia and Hong Kong.

All of the Chinese entries, except for Bank of Communications Co. Ltd., China CITIC Bank Corp. Ltd., Hua Xia Bank Co. Ltd. and Ping An Bank Co. Ltd., missed EPS expectations.

Among them, the largest company, Industrial & Commercial Bank of China Ltd., which is listed both in Hong Kong and Shanghai, had an adjusted EPS of 97 Hong Kong cents for the year ended Dec. 31, 2014, lower than the mean estimate of 99 cents, although the latest annual figure is higher than the 96 cents for 2013.

The other three of the four largest Chinese banks also fell short of earnings expectations, even as they boosted their 2014 EPS by as much as 6.15% from the previous year.

Here's more from SNL Financial:

For 2015, analysts are bullish on all Chinese banks on the list, other than Bank of Communications, expecting them to report higher earnings on a per-share basis.

As of April 23, the mean EPS estimate for Bank of Communications, also listed in Hong Kong and Shanghai, was HK$1.09 for 2015, compared to actual EPS of HK$1.11 for the previous year.

One development Chinese banks may benefit from in 2015 is a recent easing of reserve requirements.

In Singapore, profit at DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. Ltd. and United Overseas Bank Ltd. all exceeded estimates. DBS Group Holdings Ltd.'s adjusted EPS for 2014 was S$1.63, surpassing the mean estimate of S$1.62.

Their EPS grew in the range of 7% to 36%. OCBC was the top performer with a 35.53% gain in EPS, which rose to S$1.03 in 2014.

Fitch Ratings said in February that while Singapore's banking sector will likely face challenges stemming from higher credit costs, banks in the city state are capable of handling such risks, thanks to solid profitability, strong capital buffers, sufficient reserves and proven management track records.

While all five South Korean companies on the list reported increases in earnings in 2014, they still lagged behind estimates.

Shinhan Financial Group Co. Ltd.'s adjusted EPS grew to 4,288.00 South Korean won for 2014 from 3,935.50 won for the prior year, missing the mean estimate of 4,445.30 won.

Analysts expect them to post higher profit in 2015, with the exception of Woori Bank, which is forecast to see its EPS drop to 1,293.83 won in 2015 from 1,795.00 won in 2014.

Still, Moody's expects South Korean banks to have difficulty in defending their interest margins and managing asset quality due to interest rate cuts by the central bank and exposure to highly leveraged industries.

On a positive note, Fitch Ratings said in March that tighter regulation has helped to enhance the stability of the country's banking system, as authorities monitor loan quality, liquidity and funding at banks more closely.

The four Taiwanese banks on the list, Cathay Financial Holding Co. Ltd., CTBC Financial Holding Co. Ltd., Fubon Financial Holding Co. Ltd. and Mega Financial Holdings Co. Ltd., stand out because of their strong earnings growth in 2014, which averages 62.83%.

The trend, however, may reverse, with analysts expecting earnings at three of them to decline in 2015. The only exception is Mega Financial Holdings, which is estimated to increase EPS by 1.2% in 2015.

Analysts are still optimistic about Taiwan's financial sector, pointing to reasonable lending growth and widening interest margins.

Also, Moody's said in January that Taiwanese banks' already robust liquidity profiles will be further strengthened by the introduction of a liquidity coverage ratio requirement.

Overall, FactSet estimates show 20 of the 28 select banks are expected to boost EPS in 2015.