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DBS, OCBC and UOB: How Did They Perform in the 2021 Second-Quarter?

profileSudhan P

DBS, OCBC and UOB Financial Performance

Financial updates for the 2021 second-quarter (three months ended 30 June 2021) from Singapore’s listed banks have been filed with the Singapore Exchange. 

For the uninitiated, those banks are — DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11).

The banks, which make up around 44% of the Straits Times Index, are certainly recovering from the economic headwinds brought about by the Covid-19 pandemic.

Here’s a look at how the Singapore banking giants performed financially in the second quarter of 2021.

Continuing that are previously published pieces of the banks’ 2021 first-quarter and 2020 financial results.

For easier navigation, you can click on the links below: 


DBS, OCBC and UOB: How Did They Perform in 2Q 2021?

For the second quarter of 2021, apart from UOB, the banks saw their total incomes fall as compared to the previous year. 

DBSOCBCUOB
FigureChange year-on-year (YoY)FigureChange year-on-year (YoY)FigureChange year-on-year (YoY)
Total incomeS$3,589 million-4%S$2,572 million-2%S$2,417 million7%
Profit before allowances S$2,046 million-9%S$1,434 million-6%S$1,360 million11%
Net profitS$1,703 million37%S$1,160 million59%S$1,003 million43%
Net asset value per share S$21.107%S$11.237%S$22.595%
Net interest margin (NIM) 1.45%
1.47%
(for 1H 2021)
-0.17 percentage point1.58%
1.57%
(for 1H 2021)
-0.02 percentage point1.56%
(for 1H 2021)
-0.04 percentage point
Return on equity12.7%
14.0%
(for 1H 2021)
2.9 percentage points9.3%
10.8%
(for 1H 2021)
3.1 percentage points10.1%
(for 1H 2021)
2.1 percentage points
Non-performing loan (NPL) ratio1.5%No change1.5%-0.1 percentage point 1.5%-0.1 percentage point
Common Equity Tier 1 capital adequacy ratio14.5%+0.8 percentage point16.1%- 1.9 percentage points14.2%+0.2 percentage point

However, all three banks posted higher net profit year-on-year on the back of lower allowances. DBS saw its specific allowances fall to pre-pandemic levels.

Correspondingly, the bank’s non-performing loan (NPL) ratio improved or was stable across the board. 

The NPL ratio compares the amount of loan which borrowers are unable to pay off interest or the principal amount to the total loan book.

And all three banks continued maintaining strong Common Equity Tier 1 capital adequacy ratios, which were well above the Monetary Authority of Singapore (MAS) limit of 6.5%. This ratio is a critical measure of a bank’s financial strength. 

For the quarter, OCBC came out tops with the highest Common Equity Tier 1 capital adequacy ratios among the banks of 16.1%. 

As for net interest margin (NIM), OCBC emerged the best too, with a figure of 1.57%, beating DBS’ 1.47% and UOB’s 1.56%. 

We are comparing the first half of 2021 (1H 2021) numbers here as UOB didn’t specifically report its NIM number for the 2021 second-quarter. 

The NIM reveals the average interest margin that a bank earns from its borrowing and lending activities.

Now, let’s explore how much interim dividend each of the banks has declared for the latest quarter.

This should be of special interest to shareholders given the MAS recently lifted the dividend restrictions on local banks.

 DBSOCBCUOB
Interim dividend per share for 2019S$0.30S$0.25S$0.55
Interim dividend per share for 2020S$0.18S$0.159S$0.39
Interim dividend per share for 2021S$0.33S$0.25S$0.60

With the dividend cap lifted, all three banks upped their latest dividends.

In fact, the banks’ dividends have reversed to pre-pandemic levels, which is good news for shareholders.

For example, the DBS dividend is back to S$0.33 per share, up from S$0.18 per share a year ago.  

Source: DBS Earnings Presentation

With that, we round off the latest earnings highlights with a sound bite from Singapore’s largest bank, DBS. 

The chief executive of DBS, Piyush Gupta, said: 

“We achieved an exceptional first half with the first and second quarters the two highest on record. Business momentum and asset quality have both been better than expected as the economic recovery from the pandemic takes hold. While risks remain, our pipeline remains healthy and we expect business momentum to be sustained in the coming quarters.”

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Editor’s note: The information below was originally published on 7 May 2021.

DBS, OCBC and UOB: How Did They Perform in 1Q 2021?

Broadly speaking, the latest net profits from DBS, OCBC, and UOB improved on a quarterly and yearly basis. 

This is a vast improvement from the corresponding quarter a year ago when the banks reported that earnings fell from 19% to 43% year-on-year as they increased their allowances to prepare for risks arising from the deadly coronavirus disease. 

The following table shows a comparison of key metrics from all three banks’ 2021 first-quarter: 

DBSOCBCUOB
FigureChange year-on-year (YoY)FigureChange year-on-year (YoY)FigureChange year-on-year (YoY)
Total incomeS$3,854 million-4%S$2,914 million17%S$2,486 million3%
Profit before allowances S$2,267 million-8%S$1,765 million28%S$1,397 million6%
Net profitS$2,009 million72%S$1,501 million115%S$1,008 million18%
Net asset value per share S$20.463%S$11.10 5%S$23.423%
Net interest margin (NIM) 1.49%-0.37 percentage point1.56%-0.20 percentage point1.57%-0.14 percentage point
Return on equity15.4%+6.2 percentage points12.4%+6.4 percentage points10.2%+1.4 percentage points
Non-performing loan (NPL) ratio1.5%+0.1 percentage point1.5%No change1.5%+0.1 percentage point
Common Equity Tier 1 capital adequacy ratio14.3%+0.4 percentage point15.5%+1.2 percentage points14.3%+0.2 percentage point

Of the three banks, OCBC posted the highest yearly increase in total income of 17%.

Its net interest income fell 11% year-on-year largely due to a lower net interest margin (NIM) in the low interest rate environment. 

The NIM reveals the average interest margin that a bank earns from its borrowing and lending activities.

However, the drop in net interest income was more than offset by higher non-interest income and income from life and general insurance under its listed subsidiary, Great Eastern Holding Limited (SGX: G07). 

OCBC was also the best performer among the trio in terms of its net profit growth. 

Its earnings more than doubled to S$1.5 billion, up from S$0.7 billion a year earlier. The huge jump was on the back of the income growth (as seen earlier) and lower allowance (which fell 75% year-on-year). 

Non-performing loan (NPL) ratio generally improved across the banks. Coupled with lower allowances for the banking trio, it looks like the worst is over for the banks. 

The NPL ratio compares the amount of loan which borrowers are unable to pay off interest or the principal amount to the total loan book.

It is encouraging to see all three banks improving their return on equity (ROE) on a yearly basis. This ratio shows how effective a bank’s management is in maximising the profits earned from shareholders’ capital. 

DBS came out on tops with an ROE ratio of 15.4%, up from 9.2% in the previous year. 

The banking trio continued to maintain robust Common Equity Tier 1 capital adequacy ratios of at least 14%, which are more than double that of the regulatory limit of 6.5%. This ratio is a critical measure of a bank’s financial strength. 

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DBS is the only bank that pays a quarterly dividend, and it declared a first quarter interim dividend of 18 cents per share, similar to the previous quarter.

In July last year, the banks had to curb their dividend payout after the Monetary Authority of Singapore (MAS) called on the local banks to cap their total dividends per share for 2020 at 60% of 2019’s dividends. 

Since DBS pays a quarterly dividend, the guidance affects its 2021 first-quarter dividend payout as well, which will be the final one under the curb. 

MAS also asked banks to offer shareholders the option of receiving their dividends in scrip instead of cash. Therefore, DBS’ interim dividend for the latest quarter will be available in scrip.

The issue price for the new DBS shares will be at the average of the closing share prices on 10 and 11 May 2021.

During its FY2020 annual general meeting (AGM), DBS’ chief executive Piyush Gupta said that “with increased optimism, many regulators around the world have started to let banks increase dividends”.

The Singapore regulator could take a similar stance and allow DBS to transition back to its pre-pandemic levels of dividend payout. 

With the improved economy and strong earnings growth, all three banks have room to increase their dividends once the MAS dividend cap is removed. 

Looking ahead, the interest rate environment is likely to remain subdued and rates could stay near zero over the next few years, affecting the NIM. 

But overall, things are looking rosier than last year and that would bode well for the banks over the longer run. 

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Editor’s note: The information below was originally published on 3 March 2021.

DBS, OCBC and UOB: How Did They Perform in 2020?

Profitability Ratios

The following table shows a few key ratios that give us a better picture of the banks’ profitability (the “best” metrics are in bold):

BankNet Interest MarginCost-to-Income RatioReturn on AssetsReturn on Equity
DBS1.62%42.2%0.75%9.1%
OCBC1.61%43.8%0.85%7.6%
UOB1.57%45.6%0.69%7.4%

Net interest margin (NIM): This is similar to the operating margin for a non-banking outfit. The NIM shows the average interest margin that a bank is earning from its borrowing and lending activities.

Among the banking giants, DBS had the highest NIM for 2020 at 1.62%.

Cost-to-income ratio: This ratio measures the non-interest expense of a bank as a percentage of its revenue. It is used to gauge a bank’s efficiency and productivity. Generally, the lower the ratio, the more efficient a financial institution is.

DBS had the lowest cost-to-income ratio among the banks at 42.2% for the year.

Return on assets and return on equity: These tell us how effective a bank’s management is in maximising the profits earned from shareholders’ capital.

Among the three banks, OCBC had the best return on assets, and DBS had the highest return on equity for 2020.

Balance Sheet Ratios

Here is a table showing the key ratios that can give us clues on how strong the banks’ balance sheets are (the “best” metrics are in bold):

BankLoan-to-Deposit RatioNon-Performing Loans RatioLeverage RatioAverage All-Currency Liquidity Coverage Ratio
DBS80.0%1.6%6.8%136%
OCBC83.7%1.5%7.7%139%
UOB85.4%1.6%7.4%135%

Loan-to-deposit ratio: This ratio measures a bank’s liquidity. The sweet spot for this ratio is usually between 80% and 90%. Banks with a loan-to-deposit ratio below that range may not be maximising the capital they have.

On the other hand, if a bank’s loan-to-deposit ratio is above that range, it might run into liquidity problems when there is a high withdrawal rate on deposits, especially during an economic downturn.

Among the three banks, UOB was the best at maximising the loans and deposits it had for 2020, given that it had the highest loan-to-deposit ratio in that year.

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Non-performing loans (NPL) ratio: A non-performing loan is a loan on which the borrower is unable to pay off interest or the principal amount. The lower the ratio, the better it is for a bank.

For 2020, OCBC had the lowest NPL ratio of 1.5% among the banking trio.

Leverage ratio and liquidity coverage ratio: These ratios show the ability of a bank to meet its financial obligations. In general, the lower the leverage ratio, the better.

Meanwhile, for the liquidity coverage ratio, we’re looking for high numbers.

Among the three banks, DBS had the lowest leverage ratio while OCBC had the highest liquidity coverage ratio for 2020.

Valuation Ratios

The table below reveals the banks’ valuation numbers (the “best” metrics are in bold; share price as of time of writing on 3 March 2021):

BankPricePrice-to-Book
(PB) Ratio
Price-to-Earnings (PE) RatioDividend Yield
(Based on MAS Dividend Cap)
DBSS$27.361.3615.12.6%
OCBCS$11.181.0314.02.8%
UOBS$25.161.0914.93.1%

OCBC seems to offer the best value among the three banks with its lowest price-to-book and price-to-earnings ratios.

However, it loses out to the other banks in terms of dividend yield

Income investors would love UOB as it has the highest dividend yield among the banks at 3.1%. 

However, all three banks have depressed dividend yields as the Monetary Authority of Singapore (MAS) has called on local banks to cap their dividends for 2020.

With a dividend payout ratio ranging from 39% to 45% for the banks, there’s room for dividend growth once the MAS dividend cap is removed.

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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.

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About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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