DBS, OCBC, UOB shares: what’s next after higher profits, dividends

DBS Group, OCBC and UOB shares continue to climb this week, following better-than-expected second-quarter earnings.

Shares of DBS Group, OCBC and UOB are up over 3%, 2% and 3.5% respectively since the release of their second quarter results last week.

Singapore’s three main banks saw their 2Q earnings come in above analyst estimates on the back of lower loan loss provisions.

IG market strategist Yeap Jun Rong says the lower allowances are ‘a validation of the longer-term economic outlook ahead’, as Singapore transitions toward Covid-19 becoming endemic.

The banks also raised their dividends in lieu of Singapore’s central bank lifting dividend caps, which Yeap said would ‘translate to more shareholder return’.

Below are the key takeaways from each bank’s results.

DBS Group

DBS Group, Singapore’s most valuable bank by market cap, recorded a 37% year-on-year growth in net profit in the June-ending quarter as a result of lower allowances for credit and other losses.

Net profit for the quarter was S$1.7 billion (US$1.26 billion), surpassing an average estimate of S$1.42 billion from five analysts polled by Refinitiv.

Total income dipped 4% to S$3.59 billion, mainly due to lower net interest income.

During the quarter, the lender set aside a much lower amount of S$79 million toward expected credit losses, as against S$849 billion a year ago, as ‘business momentum accelerated’.

DBS said it would pay out a dividend per share (DPS) of S$0.33 for the quarter, up from S$0.18 a year ago when dividends caps were in place.

This brings the total DPS declared for the first half of 2021 to S$0.51.

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Oversea-Chinese Banking Corporation (OCBC)

OCBC posted a 59% year-on-year increase in 2Q net profit to S$1.16 billion, exceeding analysts’ S$1.14 billion targets.

However, group net profit was 23% lower quarter-on-quarter, following ‘the exceptionally strong performance’ in the first quarter.

Total allowances in 2Q 2021 of S$232 million were lower than the S$735 million recorded in the same period a year ago, but above the S$161 million from a quarter ago.

The group’s share of results of associates in 2Q 2021 also rose by 32% to S$213 million from S$163 million in the previous year, mainly from higher contribution by Bank of Ningbo.

An interim dividend of S$0.25 ‘comparable’ to the amount paid in 2019 was declared, representing a payout ratio of 42% against the group’s 1H 2021 net profit.

United Overseas Bank (UOB)

UOB’s net earnings for the second quarter of 2021 stood at S$1.0 billion, a year-on-year jump of 43% over 2Q 2020’s S$703 million.

This was higher than analysts’ consensus estimates of S$968 million, based on Bloomberg data.

Net interest income increased 8% year-on-year, led by robust loan growth of 6% and an eight-basis point increase in net interest margin to 1.56%.

Net fee and commission income grew 34%, driven by strong growth in wealth management, loan-related and fund management fees.

Other non-interest income declined 32% to S$243 million, mainly from a drop in non-customer-related gains.

UOB declared an interim DPS of S$0.60 for the quarter, up from S$0.39 a year ago. This equates to a payout ratio of 50%.

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