Insights

Stocks

DBS rises more than UOB and OCBC after dividend hike. Still a better buy?

By Beansprout • 07 Mar 2024 • 0 min read

DBS' share price has performed better than UOB and OCBC after it hiked its dividends. We find out what is driving greater investor optimism on DBS’ prospects.

singapore banks dbs uob ocbc share price march 2024

In this article

0 min read

What happened? 

Singapore banks saw mixed performance after their full year results.

Despite reporting record high profits in 2023, it seems that not all investors were pleased with the results of DBS, UOB and OCBC.

Among the three local banks, DBS’ share price performed the best after its full year results, climbing to above S$34 per share at one point. 

This would bring its share price gain to about 1% year-to-date, unlike what we saw in the previous quarter where its share price fell after reporting a record quarterly profit. 

dbs share price gain

OCBC’s share price reached a 52-week high prior to its results, but fell after the company announced earnings that disappointed investors. 

ocbc share price

Like OCBC, UOB’s share price fell after it reported its results, giving up the gains that were seen earlier. 

It is the worst performing of the local banks with a share price decline of 1% year-to-date. 

image.png

Let us dive deeper into the recent results of the Singapore banks to find out what is driving the divergence in the share price of DBS, UOB and OCBC.

What you need to know about DBS, UOB and OCBC full year results

Positives from Singapore banks full year results:

  • Dividends increased
  • Asset quality healthy 
  • Strong fee income

Negatives from Singapore banks full year results:

  • Loan growth slowing
  • Net interest income under pressure 

Positives from DBS, UOB and OCBC full year results

#1 - Dividends increased

The good news for investors is that DBS, UOB and OCBC announced an increase in their dividends in 2023 compared to 2022.

DBS announced a dividend per share of 54 cents in the fourth quarter, an increase from the ordinary dividend per share of 42 cents in the same period last year. This would bring its full year dividend per share to S$1.92.

In addition, DBS has proposed a bonus issue of one bonus share for every existing 10 ordinary shares held. 

Find out how much dividends you would have received as a shareholder of DBS in the past 12 months with the calculator below.  

Likewise, UOB announced an increase in its dividend per share to 85 cents in the second half of 2023 from 75 cents in the same period last year.

OCBC announced an increase in its dividend per share to 42 cents in the second half half of 2023 from 40 cents in the same period last year. 

The increase in dividends was supported by the record profits reported by all three local banks in 2023. 

#2 - Asset quality healthy

The asset quality of DBS, UOB and OCBC remains healthy with non-performing loans (NPL) remaining low. 

DBS’ non-performing loan ratio fell to 1.1% from 1.2% in the previous quarter, when the inclusion of Citi Taiwan led to new non-performing assets. 

UOB’s non-performing loan ratio fell to 1.5% from 1.6% in the previous quarter.

OCBC’s non-performing loan ratio was maintained at a low level of 1.0% in the fourth quarter. 

sg banks asset quality healthy

#3 – Fee income remains strong

UOB and DBS reported strong growth in fee income. 

UOB’s fees grew 17% in the fourth quarter compared to the previous year, driven largely by higher credit card fees which hit a new record of S$125 million. 

This was supported by higher card spending and an enlarged user based following the integration of Citi’s regional business. 

UOB’s wealth management fees also rose by 21% in the fourth quarter compared to the previous year. 

DBS’ fee income grew by 31% in the fourth quarter compared to the previous year, led by cards, wealth management and loans-related fees. 

OCBC reported stronger fee income led by improved wealth management, credit card, loan and trade-related fees. 

However, OCBC’s overall non-interest income disappointed due to weaker than expected insurance income. This was mainly attributed to higher insurance claims.

Negatives from Singapore banks full year results

#1 - Loan growth slowing

All three local banks reported weak loan growth in the fourth quarter of 2023.

DBS and OCBC’s gross loans fell by 1% compared to the previous quarter, while UOB’s gross loans rose by 1% compared to the previous quarter. 

OCBC and UOB expect low single-digit loan growth in 2024, reflecting low appetite for new loans in a higher interest rate environment.

#2 - Net interest income under pressure 

DBS and UOB reported a decline in net interest margin (NIM) compared to the previous quarter.

DBS’s net interest margin fell to 2.13% in the fourth quarter, after having risen for consecutive quarters to reach a high of 2.19% in the third quarter. 

UOB’s net interest margin disappointed as it fell further to 2.02% in the fourth quarter of 2023 from 2.09% in the third quarter and 2.22% in the fourth quarter of 2022. 

On the other hand, OCBC’s net interest margin surprised positively as it rebounded to 2.29% in the fourth quarter from 2.27% in the third quarter. 

All three banks are expecting slightly weaker net interest margins in 2024.

DBS expects its net interest margin in 2024 to be slightly below the fourth quarter margin of 2.13%.

OCBC expects its net interest margin in 2024 to be in the range of 2.20% to 2.25%, below the net interest margin of 2.29% in the fourth quarter.

UOB’s net interest margin guidance for 2024 has also been lowered to about 2.0%, based on the margin it was able to achieve in the fourth quarter. 

dbs and uob's net interest margin fell

What would Beansprout do?

Overall, the weak loan growth and pressure on net interest margin have impacted the returns generated by Singapore banks in the fourth quarter. 

Among the local banks, DBS continued to have the highest return on equity of 16.1% in the fourth quarter, even though it has fallen from 18.2% in the previous quarter. 

UOB’s ROE fell marginally to 13.8% in the fourth quarter from 13.9% in the third quarter OCBC’s ROE fell to 12.4% in the fourth quarter from 14.0% in the third quarter.

sg banks' returns declined

Heading into 2024, Singapore banks have provided a more muted outlook as the Fed is expected to cut interest rates. 

DBS is expecting a return on equity of 15-17% in 2024, compared to 18% in 2023. OCBC is expecting a return on equity of 13-14%, compared to 13.7% in 2023. 

We would be looking out for a few headwinds that may impact the profitability of Singapore banks in 2024, including a further decline in net interest margin and lower loan demand.

The bright spot for the banks is that fee income may continue to grow strongly with the increase in wealth management activities.

As such, we would continue to look at the Singapore banks more for their dividend yields rather than expectations for better earnings prospects in 2024. 

Singapore banks offer an attractive dividend yield of 6.0% and above with DBS’ dividend yield at 7.1% and OCBC’s dividend yield at 6.4%. 

dbs uob ocbc dividend yield

Amongst the three, DBS has strongest commitment to an increase in dividend payout with its guidance to keep its dividend per share of S$2.16 applied over the enlarged share base post the bonus share issue. 

As such, we will be adding DBS to our watch list if we are looking for stocks to add to our income portfolio. 

The record date to be eligible for the DBS bonus share issue is on 23 April 2024, and you can refer to our DBS stock page to get updates on the latest DBS dividend and bonus issue dates. 

Related links: 

Join the Beansprout Telegram group and Facebook group for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

This article was first published on 07 March 2024 .

Read also

Gain financial insights in minutes

Subscribe to our free weekly newsletter for more insights to grow your wealth

chatbubble Comments

1 comments


  • DBS • 07 Mar 2024 12:30 PM