DBS (D05); UOB (U11); OCBC (O39): Singapore Banks Dividend Yield And Share Price Performance

Singapore prides itself on being a financial hub with access to high-quality banking, finance and Fintech companies as well as talent within the space. Our trio of local banks – DBS (SGX: D05); UOB (SGX: U11); and OCBC (SGX: O39) – are also some of the biggest banks in South East Asia. They are also often cited as among the best, safest, strongest, or most innovative banks in the world as well.

Apart from boosting Singapore’s banking and finance hub credentials, DBS, UOB and OCBC are also among the largest companies listed on the Singapore Exchange (SGX). Together, they currently comprise about 44% of the Straits Times Index (STI) – Singapore’s benchmark index.

Banks	Market Cap *
DBS (SGX: D05)	$84.9 billion
OCBC (SGX: O39)	$55.2 billion
UOB (SGX: U11)	$46.8 billion
Total	$186.9 billion

* SGX Stock Screener (As at 6 August 2022)

This means that when we invest in the STI, almost half of our portfolio would be exposed to just the three local banks. Another thing the three local banks are known for is also paying relatively good and stable dividends to investors.

An increase in market interest rates appears to be positive news for the three local banks and will likely increase their net interest margins. That’s because as interest rates increases, banks are able to charge more for lending and financing. Of course, it also means they may have to pay higher interest on the amount they borrow. However, in general, the additional income they get from lending should be higher than the interest costs they pay for borrowing.

Banks	Share Price	Dividends Per Share In 1H 2022	Implied Dividend Yield
DBS (SGX: D05)	$32.84	$0.72 ($0.36 per quarter)	4.3%
OCBC (SGX: O39)	$12.24	$0.28	4.5%
UOB (SGX: U11)	$27.81	$0.60	4.3%

Information accurate as of 6 August 2022

In 2020, the Monetary Authority of Singapore (MAS) put a cap on the banks’ dividends at 60% of their FY2019 dividends. This was mainly a pre-emptive measure to ensure that the local banks maintained a strong lending capacity to support Singapore’s economy throughout the pandemic. On 28 July 2021, MAS lifted this dividend restriction. This has resulted in all three local banks now being able to provide a higher dividend payout, resulting in higher dividend yields that are above 4% based on current share prices.

DBS (SGX: D05)

DBS (SGX: D05) is the largest bank in Singapore and also Southeast Asia. It has operations in 18 markets including Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Myanmar, Philippines, Taiwan, Thailand, UEA, UK, USA and Vietnam.

Currently, DBS is trading at $32.84, giving it a market capitalisation of close to $84.9 billion.

For 1H2022, DBS achieved a net profit of SGD 3.62 billion and a return on equity of 13.3% for 1H2022. According to the company, business momentum was broadly sustained in the first six months of the year while net interest margin rose after three years of decline.

Net interest income increased 11% to SGD 4.64 billion from sustained loan growth and a higher net interest margin. Net interest margin was 1.52% compared to 1.47% a year ago. Net interest margin, which had been declining since 2019, rose in the first quarter with the start of interest rate hikes, and the improvement accelerated in the second quarter.

The gains were offset by lower wealth management fees due to weaker market conditions and a moderation in Treasury Markets income from the previous year’s high. As a result, total income was little changed and net profit declined 3% from the record a year ago.

In January 2022, DBS announced that it will be acquiring the consumer banking business of Citigroup in Taiwan, and will pay Citi cash for the net assets of Citi Consumer Taiwan plus a premium of SGD 956 million.

OCBC (SGX: O39)

OCBC also has a strong regional and global presence, in Australia, China, Hong Kong, Indonesia, Japan, Myanmar, South Korea, Taiwan, Thailand, UK, USA and Vietnam.

Currently trading at $12.24, OCBC has a market capitalisation of $55.2 billion. OCBC share price has increased by about 7.3% since the start of 2022.

For 1H2022, OCBC reported a net profit after tax of $4.86 billion for FY2021, up about 7% compared to the same period last year. This is largely driven by higher net interest income and lower allowances. Net interest income of S$3.20 billion was 10% above the previous year,

UOB (SGX: U11)

UOB (SGX: U11) also operates regionally and in major global financial centres including Australia, Brunei, Canada, China, France, Hong Kong, India, Indonesia, Japan, Malaysia, Myanmar, Philippines, South Korea, Taiwan, Thailand, UK, USA and Vietnam.

For its 1H2022 results, UOB reported a net profit of $2 billion for FY2021, a similar figure to the year before. Currently trading at $27.81, UOB has a market capitalisation of $46.8 billion. UOB’s shares have increased about 3% since the start of 2022.

The big news for UOB investors early this year is that UOB will be acquiring Citigroup’s consumer business in Indonesia, Malaysia, Thailand and Vietnam for about $4.915 billion. Excluding one-off transaction costs, UOB believes the acquisition will be expected to be immediately accretive to UOB’s earnings per share (EPS) and return on equity (ROE).

The post DBS (D05); UOB (U11); OCBC (O39): Singapore Banks Dividend Yield And Share Price Performance appeared first on DollarsAndSense.sg.

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