Singapore's Listed Banks Complete Second Quarter Reports
Foundations of the Three Banks
The Government of Singapore established DBS in July 1968 as the development bank of Singapore. Its initial role was to finance Singapore’s ongoing economic requirements and industrial development. DBS is a leading financial services group in Asia, with over 280 branches across 18 markets. While headquartered in Singapore, DBS has a growing presence in Greater China, Southeast Asia and South Asia. The stock currently represents 13.2% of the STI weighting. More about DBS can be found here.
In 1932, three banks that were consolidated to form OCBC were Chinese Commercial Bank, Ho Hong Bank Limited and Oversea-Chinese Bank Limited. Chinese Commercial Bank and Ho Hong Bank Limited were corporatized in 1912 and 1917 respectively. Oversea-Chinese Bank Limited was corporatized in 1919, and opened its Xiamen branch in 1925. OCBC was also the only foreign bank to have branches in China in the 1950s. OCBC was listed prior to Singapore’s independence in 1965. Today OCBC operates its banking business as OCBC Bank, Bank OCBC NISP and Bank of Singapore in over 18 countries and territories, and has strategic stakes in other financial services businesses operating under independent brands. The stock currently represents 11.7% of the STI’s weighting. More on OCBC’s heritage can be found here.
UOB was founded in 1935 as the United Chinese Bank, located in the Bonham Building which is now the site for UOB Plaza Two. Sarawak-born Datuk Wee Kheng Chiang founded the bank with six Chinese businessmen colleagues and a paid up capital of Straits $1 Million. Today UOB provides a wide range of financial services through its global network of branches, offices, subsidiaries and associates and the group has a network of more than 500 offices in 19 countries and territories in Asia Pacific, Western Europe and North America. The stock currently represents 9.4% of the STI’s weighting. More on UOB can be found here.
Recent Results
Last week, Singapore’s the three banks reported their second-quarter earnings for 2015.
OCBC and DBS posted the strongest quarter-on-quarter growth in net interest income for the second quarter of 2015 – both were up 3.0% to S$1.28 billion and S$1.74 billion respectively. This also reflected a 14.0% year-on-year gain for OCBC and a 12.0% year-on-year gain for DBS. UOB’s net interest income of S$1.21 billion was up 1.0% from the previous quarter and up 7.9% from a year ago.
DBS outperformed its peers in net interest margin (NIM) improvement. The bank’s NIM in 1Q rose 6 bps to 1.75% from the previous quarter, which was also the highest it’s been in the last 13 quarters. OCBC’s NIM rose 5 bps from Q1 to 1.67%, and UOB rose 1 bps from Q1 to 1.77%. NIM is a measure of the difference between the interest income generated by banks and the amount of interest paid out to their lenders, relative to the amount of their interest-earning assets. Asset quality for the three banks in the second quarter of the year remained stable, with non-performing loans (NPL) levels little changed compared with the first quarter and the year-ago period.
Source: Company Reports
Net Interest Margin (%)
Source: Company Reports
Non-Performing Loans (NPLs) (%)
Source: Company Reports
Return on Equity
OCBC, DBS and UOB averaged an Return on Equity (ROE) of 11.8% for Q2. This means for every dollar of a common share invested in the three banks, the financial return came to 11.8%. Or expressed in another way, a basket of appropriately weighted 3 banks would have generated almost 12 cents of net income for every one dollar invested. The ratio is thus more focused on the profitability of the stock, rather than a price multiple.
OCBC maintained the highest ROE ratio of 13.4% which was up 2 bps from last quarter. Conversely, UOB and DBS reported ROEs of 10.4% down 7 bps from last quarter and 11.6% down 6 bps from last quarter, respectively.
Return on Equity (ROE) (%)
Source: Company Reports
Price Points
DBS, OCBC, and UOB have a combined market capitalisation of S$127.5 billion. In the year thus far, these three banks have averaged negative dividend-adjusted returns of 2.5%, and maintain an average dividend yield of 3.4%. In terms of one-year and three-year returns, they have averaged 8.5% and 32.8% respectively. The three stocks are detailed in the table below. Please note that by clicking on a stock name will take you to its relevant page on StockFacts.
| Name | SGX Code | Mkt. Cap. in S$ mm | % Price Change YTD | % Change - Dividend Adj. | % Change - Dividend Adj. | % Change - Dividend Adj. | Div. Ind Yld. in % |
| DBS Group Holdings | D05 | 50,741 | -1.8 | 1.0 | 17.4 | 54.6 | 3.0 |
| Oversea-Chinese Banking Corporation | O39 | 41,596 | -1.7 | -0.1 | 10.7 | 24.0 | 3.5 |
| United Overseas Bank | U11 | 35,186 | -10.5 | -8.5 | -2.7 | 19.8 | 3.9 |
| Average | -4.7 | -2.5 | 8.5 | 32.8 | 3.4 |
Source: SGX StockFacts (data as of 3 August 2015)
Source: SGX StockFacts (data as of 3 August 2015)
Bloomberg Markets Survey
In the most recent survey that was released on 30 July, Bloomberg ranked OCBC, DBS and UOB as 3rd, 9th and 10th strongest banks in the world in a survey that covered 114 banks, of 101 are publicly listed. Results are based on tier 1 capital to risk-weighted assets, nonperforming assets to total assets, loan-loss reserves to nonperforming assets, deposits to funding and costs to revenue efficiency.
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