SGX Market Updates

Singapore Banks Amongst August Advancers


04 September 2020

  • DBS, OCBC & UOB averaged 4.2% total returns in August, outpacing 1.6% flat median returns of the top quartile of global banking stocks by market value. Similar performance parallels were observed in the 2020 year to 2 Sep, with the trio averaging 18.2% declines, compared to a 20.2% median decline for the top global quartile.

  • DBS and OCBC remain amongst the top ten constituents of the FTSE Developed Asia Pacific ex-Japan Sustainable Yield Index. Constituents meet financial and operating strength criteria, with emphasis on strong balance sheets and ability to generate cash flow.

  • With the three banks directed to cap FY20 dividend distributions to 60% of FY19 distributions (to bolster ability to swerve credit needs and absorb potential shocks), potential FY20 dividend yields for the three banks could be as high as 3.5% to 4.0%, based on current market prices.  

Sector-Driven Performances in 2020 YTD

DBS Group Holdings ("DBS"), Oversea-Chinese Banking Corp ("OCBC") and United Overseas Bank ("UOB") all distributed dividends in August, which saw their average 2.6% price return for the month extended to a 4.2% total return. By comparison, the top quartile of global banking stocks by market value generated a median total return of 1.6% over the month.  As illustrated below, the three banks have outpaced the top quartile of global banking stocks over the past five years.

DBS OCBC UOB Total Return Aug 2020

The three banks have gradually increasing quarterly Net Interest Income to above S$4 billion in 2QFY15 and above S$5 billion in 2QFY18, maintaining a combined Net Interest Income of S$5.4 billion in 2QFY20 as discussed here.

For the 2020 year to 2 September, accommodative monetary policy and economic lockdowns have meant that global banks have had to contend with a sudden reduction in interest rate margins and overall demand for financing, while needing to boost loan provisions, hence uniform drivers have seen parallel performances of banking sectors across the globe. Key Banking Sector themes continuing into the second half of 2020 include bank  abilities to generate income, tier 1 capital to risk-weighted assets and non-performing loan ratios. Note that on the ability to generate income, the top quartile of global banks with an ROE less than 4% generated a median decline of 30% in the 2020 year to date.

Dividend Yields Remain Competitive 

With the MAS recently directing the three Banks to cap dividends at 60% of FY19 levels “to bolster the ability to continue to support the credit needs of businesses and consumers as well as absorb economic shocks” the maximum dividends amounts for FY20 are as follows:

  • As DBS paid S$1.23 in FY19, 60% of this amount is S$0.738 max per share in FY20. Theoretically, if DBS would then save S$1.25 billion from the S$3.145 billion paid in FY19.

  • As OCBC paid S$0.53 in FY19, 60% of this amount is S$0.318 max per share in FY20 . Theoretically, OCBC would then save S$924 million from S$2.31 billion paid in FY19. 

  • As UOB paid S$1.30 in FY19,  60% of this amount is S$0.780 max per share in FY20. Theoretically, this would save S$868 million from S$2.17 billion paid in FY19.

Based on the above caps, the maximum potential FY20 dividend yields for the three banks could still be as high as 3.5% to 4.0%based on current market prices.  The current median indicative dividend yield for the top quartile of global banks by market value is 4.4%. 

FTSE Global Sustainable Yield Index Series 

The FTSE Global Sustainable Yield Index Series is reviewed semi-annually in March and September using data at the close of the last business day of February and August. This means, results of the FTSE Developed Asia Pacific ex Japan Sustainable Yield Index which includes as many as 17 Singapore stocks, are expected to be released within the week. 

DBS Group Holdings ("DBS"), Oversea-Chinese Banking Corp ("OCBC") have remained in the top 10 constituent weights of the FTSE Developed Asia Pacific ex-Japan Sustainable Yield Index at the end of August. United Overseas Bank ("UOB") and Hong Kong listed CK Hutchison Holdings places were displaced as the 10 heavyweights in August by Korea-listed Hyundai Motor and Hong Kong listed Sun Hung Kai Props. 

The FTSE Global Sustainable Yield Index Series examines the financial and operating strength of prospective constituents with specific emphasis on companies with strong balance sheets and the ability to generate cash flow. Financial and operational strength metrics include Return on Assets, cash-flow from operations, accruals and changes in leverage. Note that other screening criteria include the pay-out ratio and incidence of historic or forecast dividend cuts (for the Factsheet and more detailed methodology, click here), hence the upcoming rebalance results will be of particular relevance to the Singapore Banking Sector. 

To follow the FTSE Index announcements, click here.

This article is provided by SGX My Gateway.

SGX My Gateway

SGX's investor education portal with market, product and investment information and events. Sign up now at to receive our investment updates and economic calendar.

This document is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject Singapore Exchange Limited (“SGX”) to any registration or licensing requirement. This document is not an offer or solicitation to buy or sell, nor financial advice or recommendation for any investment product. This document is for general circulation only. It does not address the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment product before investing or adopting any investment strategies. Use of and/or reliance on this document is entirely at the reader’s own risk. Further information on this investment product may be obtained from Investment products are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not indicative of their future performance. Examples provided are for illustrative purposes only. While each of SGX and its affiliates (collectively, the SGX Group Companies) have taken reasonable care to ensure the accuracy and completeness of the information provided, each of the SGX Group Companies disclaims any and all guarantees, representations and warranties, expressed or implied, in relation to this document and shall not be responsible or liable (whether under contract, tort (including negligence) or otherwise) for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind, including without limitation loss of profit, loss of reputation and loss of opportunity) suffered or incurred by any person due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information, or arising from and/or in connection with this document. The information in this document may have been obtained via third party sources and which have not been independently verified by any SGX Group Company. No SGX Group Company endorses or shall be liable for the content of information provided by third parties. The SGX Group Companies may deal in investment products in the usual course of their business, and may be on the opposite side of any trades. SGX is an exempt financial adviser under the Financial Advisers Act (Cap. 110) of Singapore. The information in this document is subject to change without notice. This document shall not be reproduced, republished, uploaded, linked, posted, transmitted, adapted, copied, translated, modified, edited or otherwise displayed or distributed in any manner without SGX’s prior written consent.

SGX Stock / REIT Search


Trust Bank Referral Code