DBS    Last:63.78    -0.36

Dbs 4.7% bond

Best they don' t at all issue any more preference shares. These have to be redeemed in the end. All debt must be repaid. But ordinary shares do not need to be redeemed. They are traded in the secondary market for perpetuity until acquired.

n3wbie      ( Date: 18-Oct-2020 22:21) Posted: I think with MAS' ruling that the local banks are only to pay 60% of FY19 profits, that will translate to a yield of less than 4.7% for FY20. I do agree with St.Maximus' point that this indeed does reflect the strength of DBS balance sheet and by redeeming these preference shares, it saves the bank from paying out at 4.7% and indeed, they could issue a bond or other fixed income at a lower coupon.

 

I think with MAS' ruling that the local banks are only to pay 60% of FY19 profits, that will translate to a yield of less than 4.7% for FY20. I do agree with St.Maximus' point that this indeed does reflect the strength of DBS balance sheet and by redeeming these preference shares, it saves the bank from paying out at 4.7% and indeed, they could issue a bond or other fixed income at a lower coupon.

 

By redeeming the preference shares, DBS no longer needs to pay dividend on these shares and thus has more cash on hand to bolster its business.

ssw518      ( Date: 18-Oct-2020 11:21) Posted: Means this dividend on the other hand is affecting bottomline? I don' t know, not expert, but try to read a bit out of context, which mean if 4.5% is redeem more profit, also meaning earning is below 4.5%? just sharing....dunno my view make sense.   St.Maximus      ( Date: 17-Oct-2020 23:37) Posted: That was not the point I was making. By redeeming this preference share, DBS will be less burdened by a dividend payment that is relatively high, but instead will still be able to meet its capital requirements after redeeming this preference share, showing that it is sufficiently well capitalized.

 

Means this dividend on the other hand is affecting bottomline? I don' t know, not expert,
but try to read a bit out of context, which mean if 4.5% is redeem more profit, also meaning
earning is below 4.5%? just sharing....dunno my view make sense.
 

St.Maximus      ( Date: 17-Oct-2020 23:37) Posted: That was not the point I was making. By redeeming this preference share, DBS will be less burdened by a dividend payment that is relatively high, but instead will still be able to meet its capital requirements after redeeming this preference share, showing that it is sufficiently well capitalized.

 

That was not the point I was making.
By redeeming this preference share, DBS will be less burdened by a dividend payment that is relatively high, but instead will still be able to meet its capital requirements after redeeming this preference share, showing that it is sufficiently well capitalized.

 

dbs can always issue the same amount of similar things but at  much lower distribution given the current near zer0 interest rate environment.
bank is not stupid in making money.

 

This is actually an interesting redemption by DBS of a non-cumulative, non-convertible, non-voting preference share (NCPS) after 10 years of issue. The notice of redemption is given below:

https://links.sgx.com/FileOpen/DBS%20Preference%20Shares%20-%20Notice%20of%20Redemption_FINAL.ashx?App=Announcement& FileID=633312

It is strictly speaking, not a bond. It is a preference share with no voting rights and it cannot be converted to ordinary shares of DBS. The preference share dividend, if declared, is paid first before any ordinary dividends are declared. Similarly, should there be any failure of the bank, all creditors are to be paid first before the preference share holders and finally the ordinary shareholders are paid.

Some people misunderstand this to be a bond because it offers a fixed coupon payout (non-guaranteed though). However, it is not a bond. The capital raised from this share issue is to supplement the bank' s Tier 1 capital and other capital requirements for business development as stated in their 2010 offer document below:

https://www.sgmoneymatters.com/wp-content/uploads/2010/11/DBS-preference-shares-Offer-Information-Statement.pdf

The fact that DBS is redeeming this preference share seems to imply that they have sufficient capital and do not want to pay 4.7% dividend rate on these shares anymore. This should reduce the dividend payout burden of its preference shares as these will be fully redeemed in Nov 20.

Is this really an indication of the bank' s ability in fulfilling its capital requirements? It will be a good sign for DBS if it truly is so.

 

Dbs to redeem all 4.7 bond in nov.
.