What you need to know about the SG market 

#whatstrending feat. Beansprout

Ever wondered what is currently driving the local and regional markets? #whatstrending addresses some of the most trending questions/topics on the markets for investors. Designed to be educational, expect to get factual information on what is driving sectors and stocks listed on SGX, featuring insights from professionals in the community.

Today, we hear more from Beansprout, a MAS-licensed investment advisory platform offering expert insights on Singapore stocks, REITs, ETFs and bonds. Gerald Wong, founder and CEO, shares his thoughts on market developments. 

Q: The results of Singapore banks are always closely watched. What are some of the key takeaways from the results?

From Gerald, founder and CEO of Beansprout:

Net interest margins were stable. DBS’ margins of 2.14% was due to stronger margins from commercial book over 4Q23, backed by higher interest rates. UOB sustained margins at 2.02% through active balance sheet management to offset the decline in loan margin. OCBC posted a small decline of 0.02% point to 2.27% due to rise in funding costs. 

Asset quality remains healthy. Non-performing loans (NPL) as % of total loans were kept low. 

Provisions for impaired loans were just 10 basis points for DBS, and 20 basis points for UOB. Both improved year-on-year and quarter-on-quarter.

OCBC had a higher credit cost of 18 basis points, compared with 5 basis points in 1Q23 and zero in 4Q23. But risk is well-contained, with flat NPL at 1.0%.

Generating stronger return on equity. All three banks maintained or improved on returns on equity (ROE). ROE ranges from 14% for UOB to 19.4% for DBS.

The earnings guidance for FY24 by Singapore banks was generally upbeat. DBS forecasts a higher net profit for FY24. UOB is guiding for positive growth in total income, while OCBC expects loans to grow at low single-digit in FY24. 

The share prices of Singapore banks have been strong year-to-date, buoyed by the improvement in returns in the first quarter. DBS’ share price, OCBC’s share price and UOB’s share price have gained 17.7%, 11.4% and 7.2% respectively as of 30 May 2024, outpacing the Straits Times Index (STI). 

Q: Are banks worth considering for dividend investors?

The higher profit and returns may provide room for Singapore banks to pay a higher dividend per share in FY24. 

UOB and OCBC’s absolute dividend per share may rise as they adhere to the 50% payout ratio. DBS has also indicated that it will pay a dividend of at least S$2.16 per share for FY24.

As of 10 June 2024, Singapore banks are expected to offer a dividend yield of 5.5% and above. DBS is expected to offer the highest dividend yield of 6.1%, above OCBC’s dividend yield of 5.9% and UOB’s dividend yield of 5.5%. 

For more insights on Singapore stocks, REITs, ETFs and bonds, visit growbeansprout.com.

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