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 46% of the Straits Times Index (STI) – Singapore’s benchmark index.
|DBS (SGX: D05)||$88.8 billion|
|OCBC (SGX: O39)||$59.4 billion|
|UOB (SGX: U11)||$48.8 billion|
(As of 11 August 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 rise, 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 11 August 2023)||Dividends Per Share In FY2023||Dividend Yield Based On Current Share Price|
|DBS (SGX: D05)||$33.62||1Q2023: $0.42
|OCBC (SGX: O39)||$13.08||1H2023: $0.40||6.1%|
|UOB (SGX: U11)||$28.98||1H2023: $0.85||5.9%|
Information is accurate as of 11 August 2023. Do note that DBS pays quarterly dividends while OCBC & UOB pay dividends semi-annually. The dividend yield calculation assumes DBS pays quarterly dividends of $0.48 for the rest of 2023, OCBC pays 2H2023 dividend of $0.40, and UOB pays 2H2023 dividend of $0.85.
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 $33.62, giving it a market capitalisation of about $88.8 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 the net interest margin was boosted by higher interest rates and a decline in offset non-interest income due to market volatility.
1H2023 net profit increased to a record $5.3 billion, 45% higher than a year ago. Total income in 1H2023 also rose 34% to $10.0 billion on the back of a higher net interest margin and healthy business momentum. In line with its strong performance, DBS announced a quarterly dividend of $0.48 in 2Q2023 – higher than the $0.42 paid out in 1Q2023. It also highlighted that its ROE for 2Q2023 is at a record high of 19.2%.
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.
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 $13.08, OCBC has a market capitalisation of $59.4 billion.
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.
For 1H2023, OCBC also recorded a net profit of $3.6 billion, 38% higher compared to the same period last year. Total income was up 30% to $6.8 billion compared to the same period last year. This was driven by a 48% increase in net interest income. OCBC’s ROE is at 14.3%.
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 $28.98, UOB has a market capitalisation of about $48.8 billion.
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.
For 1H2023, UOB posted another record net profit of $3.7 billion, 44% more than the same period last year.
Net interest margin expanded 50 basis points driving net interest income up by 37%. Non-interest income surged to $1.1 billion on record high hedging demands, as well as higher robust trading and liquidity management activities. The total income for 1H2023 was $7.1 billion, an increase of 40% compared to the same period last year.
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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