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 comprise about 47% of the Straits Times Index (STI) – Singapore’s benchmark index.
| Banks | Market Cap |
| DBS (SGX: D05) | $86.7 billion |
| OCBC (SGX: O39) | $56.4 billion |
| UOB (SGX: U11) | $49.8 billion |
| Total | $192.9 billion |
(As of 3 March 2023)
This means that when we invest in the STI, nearly half of our portfolio would be exposed to just the three local banks. Another thing is that the three local banks are known for also paying relatively good and stable dividends to investors.
An increase in market interest rates appears to be positive 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 (as of 3 Mar 2023) | Dividends Per Share In FY2022 | Dividend Yield Based On Current Share Price |
| DBS (SGX: D05) | $33.50 | FY2022: $2.00
1Q2022: $0.36
|
4.5% |
| OCBC (SGX: O39) | $12.50 | FY2022: $0.68
1H2022: $0.28 |
5.4% |
| UOB (SGX: U11) | $29.54 | FY2022: $1.35
1H2022: $0.60 |
4.6% |
Information is accurate as of 3 March 2022. Do note that DBS pays quarterly dividends while OCBC & UOB pay dividends semi-annually. Dividend yield calculation for DBS excludes $0.50 Special Dividend.
Read Also: Complete Guide To Investing In The Straits Times Index (STI) ETFs In Singapore
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 $33.50, giving it a market capitalisation of about $86.7 billion.
In FY2022, DBS achieved a net profit of $8.2 billion and a return on equity of 15.0%, a record high. Total income grew 16% to $16.5 billion as net interest margin was boosted by higher interest rates, and a decline in offset non-interest income due to market volatility.
4Q2022 net profit increased to a record $2.3 billion, 69% higher than a year ago. Total income in 4Q2022 also rose 41% to $4.6 billion on the back of higher net interest income and recovering trading income and investment gains.
In line with its strong performance, DBS raised its quarter dividend in 4Q2022 to $0.42, from $0.36 paid in the preceding three quarters. It also announced a Special Dividend given its strong capital base.
At the start of last year, 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 $956 million.
Since the start of 2023, DBS’s share price has dipped 1.2% to $33.50 (as of 3 March 2023), from $33.92.
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 $12.50, OCBC has a market capitalisation of $56.4 billion. OCBC’s share price has increased by about 2.6% since the start of 2023.
For FY2022, OCBC reported a net profit grew 18% to a new high of $5.8 billion. This was largely driven by higher net interest income and lower allowances.
Non-Interest Income dipped 16% to $4.0 billion. Net fee income was impacted by softer wealth management fees due to heightened market volatility, but supported by an increase in fees from loans and trade-related activities. Net trading income rose partly due to gains from hedging activities. However, OCBC incurred a loss from its sale of investment securities, mainly due to rebalancing and positioning its bond portfolio amid changing market conditions. Nevertheless, its insurance business remained resilient, delivering a 7% growth in operating profit.
Read Also: Step-By-Step Guide To Investing Using Regular Shares Savings (RSS) Plan In 2022
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.
Currently trading at $29.54, UOB has a market capitalisation of about $49.8 billion. UOB’s shares have declined about 3.8% since the start of 2023.
For FY2022, UOB reported a record net profit of $4.6 billion, an 18% increase compared to the year before. Net interest income leaped 31% due to a 30 basis points improvement in net interest margin and 3% loan growth rate.
The big news for UOB investors in FY2022 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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