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

This article is republished with permission from Dollars And Sense .

26-Nov    Share!

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 48% of the Straits Times Index (STI) - Singapore's benchmark index.

Banks Market Cap*
DBS (SGX: D05) $89.9 billion
OCBC (SGX: O39) $55.3 billion
UOB (SGX: U11) $51.0 billion
Total $196.2 billion

* As of 26 November 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 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 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.

Read Also: Complete Guide To Investing In The Straits Times Index (STI) ETFs In Singapore

Banks Share Price (as of 26 November) Dividends Per Share In 1H 2022 Implied Dividend Yield Based On Current Share Price
DBS (SGX: D05) $34.75 $0.72 ($0.36 per quarter) + 0.36 (3Q2022) 4.1%
OCBC (SGX: O39) $12.25 $0.28 4.6%
UOB (SGX: U11) $30.25 $0.60 4.0%

Information is accurate as of 26 November 2022. Do note that DBS pays quarterly dividends while OCBC & UOB pay dividends semi-annually.

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 $34.75, giving it a market capitalisation of about $89.9 billion.

For 3Q2022, DBS achieved a net profit of SGD 2.24 billion and a return on equity of 16.3%, both record highs. Total income grew 28% to a record $4.54 billion as net interest margin recovered to pre-pandemic highs and business momentum was sustained during the quarter.

Nine-month net profit is up 8% at $5.85 billion which is also a new high for the company. Total income rose 10% to $12.1 billion as a higher net interest margin and loan growth more than offset lower fee income.

Net interest income increased 23% from the previous quarter to SGD 3.02 billion. Net interest margin climbed 32 basis points (0.32%) to 1.90%, accelerating from increases of three basis points and 12 basis points in the first and second quarters, from further increases in interest rates.

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.

Since the start of the year, DBS’s share price has gone up from $32.79 to $34.75 (as of 26 November 2022).

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 $12.25, OCBC has a market capitalisation of $55.3 billion. OCBC’s share price has increased by about 7.3% since the start of 2022.

For 3Q2022, OCBC reported a net profit after tax of $1.60 billion for the quarter, up about 8% compared to the same period last year. This is largely driven by higher net interest income which grew 23% to $2.10 billion, underpinned by a 35 basis points (0.35%) uplift in net interest margin.

Non-interest income declined 11% to $1.05 billion, mainly attributable to lower fee and trading income, and life insurance profit.

For the 9M2022 year-on-year performance, group net profit was $4.44 billion for the first nine months of 2022 ("9M22"), 14% higher as compared to the previous year ("9M21"), largely driven by net interest income growth and a decline in allowances.

Earlier this week, OCBC opened a 20,000 sq ft lifestyle and banking space at Wisma Atria. Unlike a typical bank branch that only caters to bank customers needing banking services or to perform financial transactions, the location has retail space that includes a bookstore and even a 10-seater omakase restaurant.

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.

For 3Q2022 results, UOB reported a net profit of $1.4 billion, up 34% compared to the same period last year. Currently trading at $30.50, UOB has a market capitalisation of about $51.0 billion. UOB's shares have increased about 12% since the start of 2022.

Net interest margin expanded 40 basis points (0.40%), driving net interest income up by 39%, which more than offset the 10% decline in net fee and commission income. Other non-interest income grew 58% as customer demand for hedging activities accelerated.

Net profit surged 12% to $3.42 billion in 9M22 on strong net interest income and lower credit allowance.

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).

Read Also: 4 Dividend-Paying ETFs On SGX To Invest For Dividend Income: iShares Barclays USD Asia High Yield Bond Index ETF (O9P); Lion-Phillip S-REIT ETF (CLR); NikkoAM-StraitsTrading Asia ex Japan REIT ETF (CFA/COI); Phillip SING Income ETF (OVQ)

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Contributed By: Dollars And Sense