Singapore Banks - RHB Invest 2023-08-17: Will Earnings Momentum Pick Up In 2H23?

• Singapore banks’ (SG Banks) 2Q23 results were a slight beat, mainly on a stronger-than-expected performance by DBS (SGX:D05).
• UOB (SGX:U11) is our sole BUY as:
  • - Read this at SGinvestors.io -
  • valuation appears undemanding at 0.96x FY24F P/B vs 12.6% ROE, and
  • relatively smaller exposure to Greater China.

2Q23: Higher loan provisions a dampener.

• 2Q23 sector net profit was down 3% q-o-q mainly on a 56% q-o-q rise in loan allowances – pre-emptive provisions were booked in by OCBC (SGX:O39) and UOB, and the latter making full provision for a Thai corporate account.
• - Read this at SGinvestors.io -
• Y-o-y, 1H23 earnings surged 42% on NII growth and NIM expansions of 43% y-o-y and 61bps.

Dividends.

• All 3 banks declared interim dividends. See
  • DBS's dividend,
  • OCBC's dividend,
  • UOB's dividend.
• With the strong 1H y-o-y earnings growth and commitment to improve capital efficiencies, SG Banks boosted 1H23 absolute dividend by 25-43% y-o-y. Dividend payouts ranged from 45% for DBS to ~50% for OCBC and UOB. DBS also shared that it can return a further S$1.20 per share to shareholders in the coming years as part of its capital management plan.
• We believe investors will view DBS’s clear pathway in a positive light, and wait for its peers to provide further clarity on their respective plans.
• SG Banks currently offer more than 6% dividend yield, which will help support total shareholders’ returns.

Guidance largely unchanged.

• Read more at SGinvestors.io.

Singapore Research RHB Securities Research | https://www.rhbgroup.com/ 2023-08-17 SGinvestors.io

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