Singapore banks are often touted as some of the safest and best banks in the world, coming in at 11th (DBS), 13th (OCBC) and 14th (UOB) in the World’s Top 50 Safest Banks by Global Finance. In Singapore, they comprise close to 42% of the benchmark Straits Times Index (STI).
Everyone in Singapore is also very familiar with these three banks, with accounts in at least one, if not all, of them. This makes local banks a safe place for new investors to start learning the ropes of stock investing.
Singapore Banks – DBS; OCBC; UOB
Backed by a healthy global economy and rising interest rates, banks generally had a good year in FY2017. In particular, the three local banks rose by an average of 37% in 2017. In 2018, they have already gained an average of close to 6%.
On 20 March 2018, Maybank Kim Eng also issued a report stating that it has upgraded the banking sector to POSITVE from NEUTRAL.
DBS Group Holdings Ltd
DBS is Southeast Asia’s largest listed company with a market capitalisation of $69.8 billion. It has the most extensive footprint with over 280 branches spanning over 18 countries, including Singapore, Hong Kong, China, Taiwan, India, Indonesia, Malaysia and other regions.
In 2017, DBS posted record income and profit levels which amounted to $11.9 billion, or 7% higher, and $4.4 billion, or 3% higher, respectively. In addition to this, the Group also celebrated their 50-year milestone by paying out a dividend of $1.43, inclusive of a special dividend of $0.50. This brings its yield to 4.3% as at 27 March 2018. Taking out its special dividend, this still added to a dividend yield of 3.4%.
As at 27 March 2018, DBS was trading at $27.59. In 2017, the group’s share price increased by 43%, while its year-to-date 2018 gains stand at 9%.
Oversea-Chinese Banking Corporation Limited (OCBC)
OCBC is Singapore’s second largest bank by market capitalisation at $53.6 billion. The group also counts Great Eastern and Bank of Singapore (BOS) as its subsidiaries, as well as operates in up to 18 territories including Hong Kong, Malaysia, Indonesia and other regions with over 610 branches.
In 2017, OCBC posted a healthy income and profit of $9.6 billion and $4.1 billion respectively. This was a 14% and 19% increase over the previous year. In its FY2017, OCBC paid out $0.37, which translates to a dividend yield of 2.9%.
As at 27 March 2018, OCBC was trading at $12.94. In 2017, OCBC’s shares rose by 38%, while in the year-to-date 2018, it has risen by 4%.
United Overseas Bank Limited (UOB)
The third largest bank by market capitalisation, UOB is valued at $45.6 billion. The bank has a global network of more than 500 branches and office in Singapore, Indonesia, Thailand, Malaysia, China as well as in other Asia Pacific, European and North American countries.
In 2017, UOB delivered a 10% increase in income to $8.9 billion and a 9% increase in profit to $3.4 billion. The bank also announced $1.00 worth of dividends, taking its dividend yield to 3.6%. Not taking a $0.25 special dividend distribution into consideration, UOB’s dividend yield would be 2.7%.
As at 27 March 2018, UOB was trading at $27.61. Its shares rose by 38% in 2017, and in the year-to-date 2018, it has risen by 4%.
Investing In Singapore Banks In 2018
As mentioned, Singapore banks are companies that many of us in Singapore have close relationships with and are easiest to keep track of and understand. Listed on the STI, they are also some of the largest companies not just in Singapore, but the whole of Southeast Asia, making them safe and stable companies to start investing in.
Also highlighted above, Maybank Kim Eng has issued a report upgrading the banking sector to POSITIVE. In addition, in November 2017, the Monetary Authority of Singapore (MAS) highlighted that the fintech wave, while a risk to the banking sector, could still have a big impact driving opportunities to improve revenue and profitability.
With the interest rates in the US poised to further rise in the coming months, banks in Singapore will likely start seeing a bigger spread in interest earnings. Most of these banks are already offering high-interest rate accounts, the increase in base interest rates from 1.5% to 1.75% may not make much of a difference in Singapore, with base rates still remaining at the 0.05% mark.
Some other factors that may spur better outlook for banks include requiring less provisions for the oil & gas sector, with its improving outlook itself and a rebound in the property market. Singapore’s GDP is also expected to remain stable in 2018, with analysts increasing estimates of GDP growth to 3.2%, up from 3.0%, during the year.