DBS OCBC UOB 4Q22 Round-Up - UOB Kay Hian 2023-02-27: Scaling Greater Heights In Dividend Payout

• Singapore Banks continue to deliver upside surprises for dividends.
  • DBS increased its quarterly dividend by 17% to S$0.42 and rewarded shareholders with a special dividend of S$0.50.
  • OCBC lifted final dividend by 43% y-o-y to 40 cents and intends to maintain dividend payout ratio at 50% going forward.
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DBS, OCBC & UOB's 4Q22 Earnings

• DBS (SGX:D05)’s 4Q22 results were above expectations, while OCBC (SGX:O39)'s results were below expectations. UOB (SGX:U11) delivered revenue synergies but also incurred hefty one-off expenses of S$246m in relation to the acquisition of Citi’s Consumer Businesses. See
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  • OCBC's announcement dated 23 Feb 2023,
  • UOB's announcement dated 24 Feb 2023.
• Maintained accelerated pace of double-digit NIM expansion. DBS, OCBC and UOB registered NIM expansion of 15bp, 25bp and 27bp q-o-q respectively in 4Q22, although the Fed has toned down the pace of rate hikes to 50bp on 2 Nov 22 and 25bp on 14 Dec 22. Nevertheless, DBS, OCBC and UOB were able to achieve strong growth in net interest income of 53%, 60% and 53% y-o-y respectively in 4Q22.
• Comparison on strength of funding franchise. Customers inevitably switch to fixed deposits as interest rates rise. CASA ratios have dropped by 15.7ppt, 11.5ppt and 8.7ppt respectively to 60.3% for DBS, 51.8% for OCBC and 47.5% for UOB. Fixed deposits grew 79% y-o-y at DBS, 46% y-o-y at OCBC and 28% at UOB.
• US$-denominated loans contracted. Large Chinese corporations switched from borrowing US$ offshore to borrowing RMB onshore, which has become cheaper. Thus, we observed that US$-denominated loans contracted 11% h-o-h at DBS, 7% h-o-h at OCBC and 14% h-o-h at UOB in 2H22. Similarly, loans for Greater China have declined 5% h-o-h at DBS, 4% h-o-h at OCBC and 7% h-o-h at UOB.
• Asset quality was stable. NPL ratios were relatively unchanged across the board for DBS (-0.1ppt q-o-q to 1.1%), OCBC (unchanged at 1.2%) and UOB (+0.1ppt q-o-q to 1.6%). New NPL formation remains benign (DBS: S$350m, OCBC: S432$m and UOB: S$395m). The banks also benefitted from strong upgrades and recoveries (DBS: S$357m, OCBC: S$271m and UOB: S$322m).
• Rewarding shareholders with more dividends. DBS increased its quarterly dividend by 17% to S$0.42 (previous: S$0.36) and rewarded shareholders with a special dividend of S$0.50 for 4Q22. OCBC proposed a generous final dividend of S$0.40 (+43% y-o-y), bringing dividend payout ratio to 53% for 2022. OCBC's management intends to maintain dividend payout ratio at 50% going forward. See
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Above is the excerpt from report by UOB Kay Hian Research.
Clients of UOB Kay Hian may be the first to access the full report in PDF @ https://www.utrade.com.sg/.