For their 1HFY18 DBS, OCBC & UOB have averaged YoY net profit growth of 22%. Combined, the three banks reported total income (pre allowances, expenses & taxes) of S$15.9 billion for the 1HFY18, up from $14.5 billion in 1HFY17.
The three banks have averaged a total return of 3.3% in the 2018 YTD, with net institutional inflows of S$457 million over the first seven months of 2018. This brings their average annualised five year total returns to 9.2%.
The three banks averaged a 1.78% Net Interest Margin for their 1HFY18, up from 1.71% for 1HFY17. The IMF also recently reported that within Singapore, the Banking Sector capital and liquidity buffers remained strong and asset quality has improved.
The IMF Country Report for Singapore released on 27 July (click here) highlighted that recent financial sectorand macro prudential policies have bolstered the resilience of the banking sector.
Highlights within the Country Report included:
- That within the banking sector, capital and liquidity buffers remained strong.
- Banks’ profitability has improved in the past year on the back of higher net interest margins and loan growth, in particular to non-residents. Growth in loans to non-residents was driven by trade credits to the Greater China region.
- Banking sector’s asset quality has improved and banks maintain adequate loss provisioning of above 100% of unsecured Nonperforming Loans, as well as capital adequacy and leverage ratios well above the regulatory requirements.
Recent Financials
Singapore’s listed Bank Sector consists of DBS Group Holding ("DBS"), Oversea-Chinese Banking Corporation ("OCBC") and United Overseas Bank ("UOB").
The three banks have recently reported 2QFY18 and 1HFY18 earnings. For their 1HFY18 (ended 30 June), DBS, OCBC & UOB have reported an average 22% YoY increase in net profit. As detailed in the table below, combined, the three banks reported total income (pre allowances, expenses, and taxes) of S$15.9 billion for the 1HFY18. This was up from $14.5 billion in 1HFY17.
| Stock | SGX Code | 1HFY18 | |||
|---|---|---|---|---|---|
| NET Interest Income S$M | NIM (Annualised) | Non-Interest Income S$M | Total Income S$M | ||
| DBS Group Hldgs | D05 | 4,352 | 1.84 | 2,211* | 6,563 |
| Oversea-Chinese Banking Corp | O39 | 2,865 | 1.67 | 1,942 | 4,807 |
| United Overseas Bank | U11 | 3,012 | 1.83 | 1,561* | 4,573 |
| Total: | 10,229 | 5,714 | 15,943 | ||
* Note consists of both Net Fee and Commission Income and other Non-interest Income.
Increase in NIM
The average Net Interest Margin (“NIM”) for the three banks in 1HFY18 was up from 1.71% in 1HFY17 to 1.78% in 1HFY18. The FY17 NIM averaged 1.72% for the three banks, with the FY16 average NIM at 1.73%. NIM represents annualised net interest income as a percentage of total interest bearing assets.
Net Interest Margin
Source: Recent Financial Reports
The average Return on Equity (“ROE”) for the three banks stood at 12.1% for 1HFY18, up from 10.4% in 1HFY17. ROE measures a corporation's profitability by revealing how much earnings a business generates with the money shareholders have invested.
| Stock | 1HFY18 | YoY Change in Net Profit Attributable to Shareholders | Return on Equity |
|---|---|---|
| DBS Group Hldgs | 20% | 12.5% |
| Oversea-Chinese Banking Corp | 22% | 12.2% |
| United Overseas Bank | 24% | 11.6% |
| Average: | 22% | 12.1% |
Source: Recent Financial Reports.
Recent Performances
The three banks have averaged a gain of 3.4% in the 2018 YTD, with net institutional inflow of S$457 million over the first seven months of 2018. This followed an average total return of 41.7% in 2017 for the three banks and net institutional inflows of S$3.4 billion in 2017.
Three Banks Net Institutional Flows (S$M)
Source: SGX Research
Over the past five years the average annualised total return of the three banks was 9.2% with performances ranging from 5.9% for OCBC to 13.2% for DBS Group Holdings.
During the five year period, DBS Group Holdings has become the largest capitalised primary-listed stock listed on SGX. To see more details on the performances of the three banks in SGX StockFacts click on the stock name below.
| Name | SGX Code |
Market Cap S$M |
06 Aug Closing Price |
Price Change YTD % |
Total Return YTD % |
Annualised 5-Year Total Return % |
Indicative Div Yld % |
|---|---|---|---|---|---|---|---|
| DBS Group Hldgs | D05 | 67,664 | 26.4 | 6.2 | 10.2 | 13.2 | 4.6 |
| Oversea-Chinese Banking Corp | O39 | 48,532 | 11.58 | -6.5 | -5.2 | 5.9 | 3.2 |
| United Overseas Bank | U11 | 45,266 | 27.13 | 2.6 | 4.8 | 8.5 | 1.7 |
| Average | 0.8 | 3.3 | 9.2 | 3.1 |
Source: Bloomberg & StockFacts (Data as of 6 August 2018)
The three banks pay dividends on a semi-annual basis and average a 3.1% indicative dividend yield based on recent distributions.
P/B Valuations
The average price-to-book (P/B) of the three banks is currently 1.35x, which ranges from 1.25x for OCBC to 1.45x for DBS. By comparison the five year average P/B for the three banks is 1.28x. The P/B ratio compares the company’s value on the market relative to its book value.
