Singapore Banks - RHB Invest 2024-05-16: Near-Term Optimism; Long-Term Visibility Limited

• Singapore banks (SG banks)’s 1Q24 results beat expectations on non-interest income and credit cost. The shift in rates expectations and good earnings start to the year have prompted SG banks to be a tad more optimistic on operating income and PATMI in the coming quarters, although visibility beyond that is lacking.
• - Read this at SGinvestors.io -
• In the near term, we think the dividend yield theme will continue to drive SG banks’ share price performance.

SG Banks have done well on a total returns performance relative to regional peers.

• We believe this was due to several factors:
  1. Lighter investor positioning on SG banks at the start of the year as market was expecting 6-7 US FFR cuts;
  2. - Read this at SGinvestors.io -
  3. a subsequent shift in rate expectations to higher-for-longer, which will help keep NIMs and earnings elevated – positive for dividend yields.
• See DBS share price, OCBC share price, UOB share price. Among the SG Banks, DBS share price outperformed, thanks to its dividend and capital returns commitment.
• Recall that DBS had committed to an absolute dividend increase, which provides investors with a good line of sight as to expected dividend yields and decouples dividends from earnings performance. Based on the commitment, which management thinks can be sustained over the next 2-3 years, investors can expect DBS's dividend growth to significantly outpace that of earnings (FY23-26F DPS CAGR of 16% vs EPS CAGR of 2%). DBS continues to explore opportunities to return excess capital and this would provide further upside to the above commitment, if it materialises.
• As for OCBC and UOB, we think the headroom for higher dividends would largely boil down to earnings performance.

DBS & OCBC's 1Q24 results beat expectations; UOB in line

• Read more at SGinvestors.io.

Singapore Research RHB Securities Research | https://www.rhbgroup.com/ 2024-05-16 SGinvestors.io

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