Last week DBS, OCBC & UOB led the STI’s 3.4% gain, with the 3 banks averaging a 6.1% gain. This has brought the average 2019 YTD total return of the 3 banks to 8.6%, and their 5 year average annualised total return to 10.3%.
For FY18, DBS, OCBC & UOB averaged 19% YoY net profit growth. Combined, the 3 banks reported total income (pre allowances, expenses & taxes) of S$32.0 billion for FY18, up 6.6% from S$30.0 billion in FY17.
Shareholders have been rewarded with the 3 banks maintaining an average dividend yield of 4.0% for the past 6 months, which represents the longest period of time in their recent history that their yields remained at or above the key 4.0% level.
Singapore’s 3 listed local banks, with a combined market capitalisation of S$163 billion consist of DBS Group Holding ("DBS"), Oversea-Chinese Banking Corporation ("OCBC") and United Overseas Bank ("UOB").
Last week, the Straits Times Index (“STI”) gained 110 points or 3.4%, to end the week at 3322, with the 3 banks rallying 6.1%, as DBS gained 6.9%, OCBC gained 6.0% and UOB gained 5.3%.
The 3 banks are expected to report their 1QFY19 results in early May, with UOB confirming it will release its earnings before trading on Friday 3 May. In FY18, DBS, OCBC and UOB averaged 19% net profit growth from FY17 (following on from 11% net profit growth in FY17 from FY16).
Combined, the 3 banks reported total income (pre allowances, expenses & taxes) of S$32.0 billion for FY18, up 6.6% from S$30.0 billion in FY17:
- DBS reported total income of S$13.2 billion, up 11% from S$11.9 billion in FY17;
- OCBC reported total income of S$9.7 billion, up from S$9.5 billion in FY17; and
- UOB reported total income of S$9.1 billion, up 6% from S$8.6 billion in FY17.
Average FY18 NIM Increased 7 bps from FY17
The average Net Interest Margin (“NIM”) for the 3 banks in FY18 was up 7 basis points (“bps”) from 1.72% in FY17 to 1.79% in FY18. The FY16 NIM averaged 1.73% for the 3 banks. NIM represents annualised net interest income as a percentage of total interest bearing assets.
Combined, the quarterly net interest income for the 3 banks has gradually grown in recent years and has been consistently above S$4.0 billion for each quarter since the end of 2014. Moreover, combined quarterly net interest income was above S$5.0 billion for each quarter in FY18. This has coincided with gradual increases of local interest rates as represented by the 1-month Swap Offer Rate (“SOR”) and 3-month Singapore Interbank Offered Rate (“SIBOR“).
Banks Maintain 4% Yield for Past 6 Months
As of the end of March, the average indicative dividend yield of the 3 banks stood at 4.2%, which has since retraced to 4.0% with the strong gains of the banks in the April month-to-date. At the end of March, the average yield of DBS, OCBC and UOB had ended each of the preceding six months above 4.0%. This was the lengthiest time in their recent trading history that the average dividend yield for the 3 banks had consistently held above 4.0% at month end.
The average indicative dividend yield of the 3 banks at month-end dating back to major market lows in mid-2009 are illustrated below.
| Stock | SGX Code |
Market Cap S$ Billion |
YTD Total Return % |
Annualised 5 Year Total Return % |
Indicative Dividend Yield % |
|---|---|---|---|---|---|
| DBS Group Hldgs | D05 | 69.0 | 13.9 | 14.6 | 4.5 |
| Oversea-Chinese Banking Corp | O39 | 49.7 | 4.0 | 8.2 | 3.7 |
| United Overseas Bank | U11 | 44.2 | 7.9 | 8.2 | 3.8 |
| Average | 8.6 | 10.3 | 4.0 |
Source: SGX StockFacts & Bloomberg (Data as of 5 April 2019)
