All 3 Singapore banks (i.e. DBS, UOB, and OCBC) had already released their financial results for the fourth quarter and full-year ended 31 December 2019.
So, among the 3 banks, which one had the best performance? In this post, I’d be looking at some of their key financial results (both on a quarter-on-quarter, as well as on a year-on-year basis) to find out the answer to this question.
Additionally, I’ll also be looking at the current valuations of the 3 banks (based on their share prices at the time of writing) to find out which is the cheapest among them:
Key Financial Performances (4Q FY2018 vs. 4Q FY2019)
In this section, I will be looking at the 3 banks’ net interest income, net fee and commission income, and non-interest income on a quarter-on-quarter (q-o-q) basis (i.e. 4Q FY2018 vs. 4Q FY2019) to find out which bank recorded the most improvements:
Net Interest Income (S$’mil):
| 4Q FY2018 | 4Q FY2019 | % Change | |
| DBS | $2,330m | $2,426m | +4% |
| UOB | $1,608m | $1,635m | +2% |
| OCBC | $1,520m | $1,610m | +6% |
For the fourth quarter, OCBC’s net interest income, on a q-o-q basis, grew the most (at +6%), followed by DBS (at +4%), and then UOB (at +2%.)
Net Fee & Commission Income (S$’mil):
| 4Q FY2018 | 4Q FY2019 | % Change | |
| DBS | $635m | $741m | +17% |
| UOB | $467m | $476m | +2% |
| OCBC | $474m | $556m | +17% |
Both OCBC and DBS saw a +17% q-o-q growth in their net fee and commission income, while UOB saw a +2% q-o-q growth.
Other Non-Interest Income (S$’mil):
| 4Q FY2018 | 4Q FY2019 | % Change | |
| DBS | $280m | $294m | +5% |
| UOB | $140m | $321m | > 100% |
| OCBC | $356m | $756m | > 100% |
In terms of the 3 banks’ growth in their other non-interest income, both OCBC and UOB saw an above 100% improvement on a q-o-q basis, while DBS recorded a +5% q-o-q growth.
Conclusion: In terms of the 3 banks’ quarter-on-quarter results in their net interest income, net fee and commission income, and other non-interest income, OCBC emerged the winner as it recorded highest gains (in percentage terms) in its net interest income (largely due to loan growth, as well as improvements in its net interest margin), net fee and commission income (contributed by growth in its wealth management income), and non-interest income (on the back of growth in its income from trading, sale of investment securities and properties, as well as life and general insurance.)
Key Financial Performance (FY2018 vs. FY2019)
While OCBC recorded the highest percentage of increase in its net interest income, net fee and commission income, and other non-interest income on a quarter-on-quarter basis, is it the same as well for the bank when we compare the same sets of figures on a year-on-year (y-o-y) basis (i.e. FY2018 vs. FY2019)?
Let us find out in this section:
Net Interest Income (S$’mil):
| FY2018 | FY2019 | % Change | |
| DBS | $8,955m | $9,625m | +7% |
| UOB | $6,220m | $6,562m | +6% |
| OCBC | $5,890m | $6,331m | +7% |
Both DBS and OCBC recorded a +7% y-o-y improvement in its net interest income, followed by UOB at +6%.
Net Fee & Commission Income (S$’mil):
| FY2018 | FY2019 | % Change | |
| DBS | $2,780m | $3,052m | +10% |
| UOB | $1,967m | $2,032m | +3% |
| OCBC | $2,031m | $2,123m | +5% |
In terms of the net fee and commission income for the 3 banks, DBS recorded the highest y-o-y improvement (at +10%), followed by OCBC (at +5%), and then UOB (at +3%.)
Other Non-Interest Income (S$’mil):
| FY2018 | FY2019 | % Change | |
| DBS | $1,448m | $1,867m | +29% |
| UOB | $930m | $1,435m | +54% |
| OCBC | $1,780m | $2,417m | +36% |
From the table above, we can see that UOB recorded the highest growth in its other non-interest income among the 3 banks (at +54%), followed by OCBC (at +36%) and then DBS (at +29%).
Conclusion: On a year-on-year basis, DBS came out on top for recording the highest growth in its net interest income (due to increase in its net interest margin in the first half of FY2019, coupled with loan growth), and in its net fee & commission income (due to increase in its wealth management fees, investment banking fees, and card fees.)
Key Financial Ratios (FY2018 vs. FY2019)
In this section, I’ll be looking at the 3 banks in terms of their key financial ratios growth on a y-o-y basis. Particularly, I’ll be looking at their net interest margin, return on assets, return on equity, and non-performing loans ratio:
Net Interest Margin (%):
| FY2018 | FY2019 | Change (in pp) | |
| DBS | 1.85% | 1.89% | +0.04pp |
| UOB | 1.82% | 1.78% | -0.04pp |
| OCBC | 1.70% | 1.77% | +0.07pp |
OCBC recorded the highest y-o-y growth in its net interest margin (by +0.07pp), followed by DBS (at +0.04pp). However, UOB saw a -0.04pp dip in its net interest margin on a y-o-y basis.
Return on Assets (%):
| FY2018 | FY2019 | Change (in pp) | |
| DBS | 1.05% | 1.13% | +0.08pp |
| UOB | 1.07% | 1.08% | +0.01pp |
| OCBC | 1.17% | 1.26% | +0.09pp |
OCBC edged out DBS in terms of its y-o-y growth in their return on assets, while UOB saw a marginal improvement.
Return on Equity (%):
| FY2018 | FY2019 | Change (in pp) | |
| DBS | 11.4% | 12.5% | +1.1pp |
| UOB | 10.7% | 11.0% | +0.3pp |
| OCBC | 10.7% | 10.5% | -0.2pp |
In terms of the 3 banks’ return on equity, DBS recorded the most growth at +1.1pp, followed by UOB at +0.3pp. On the other hand, OCBC’s return on equity suffered a -0.2pp drop on a y-o-y basis.
Non-Performing Loans Ratio (%):
| FY2018 | FY2019 | Change (in pp) | |
| DBS | 1.5% | 1.5% | – |
| UOB | 1.5% | 1.5% | – |
| OCBC | 1.5% | 1.5% | – |
All 3 banks maintained their non-performing loans rate at 1.5%.
Conclusion: In terms of the 3 banks’ key financial ratios, OCBC edged out DBS with a higher percentage points of improvement in its net interest margin, as well as in its return on assets.
Dividend Payouts to Shareholders (FY2018 vs. FY2019)
In this section, we will be looking at the 3 banks dividend payouts to shareholders, along with their rate of growth compared to the previous financial year (i.e. FY2018):
DBS: The bank is the only one (among the three) that pays out a dividend to shareholders on a quarterly basis. For the first 3 quarters, it has paid out a dividend of 30 cents/share, while in the final quarter, they will be paying out 33 cents/share, hence a total of $1.23/share – a 2.5% improvement from a total dividend of $1.20/share paid out in FY2018.
UOB: The bank pays out a dividend to shareholders on a half-yearly basis. For the final quarter, they have declared a 75 cents/share of dividend to its shareholders. Together with an interim dividend of 55 cents/share, the bank’s total dividend payout to shareholders for FY2019 is $1.30/share – a 8.3% improvement compared to $1.20/share paid out in FY2018.
OCBC: Just like UOB, the bank pays out a dividend on a half-yearly basis as well. In the quarter under review, it has declared a 28 cents/share of dividend to shareholders. Together with its interim dividend payout of 25 cents/share, its total dividend payout for FY2019 is 53 cents/share – a 23% increase from 43 cents/share in FY2018.
Conclusion: OCBC saw the highest percentage of increase in terms of its dividend payout to shareholders in FY2019 (at +23%), followed by UOB (by +8.3%), and then DBS (at +2.5%.)
Which Bank is the Cheapest in terms of Their Current Valuations?
The following information is accurate as at the time of writing:
| DBS | UOB | OCBC | |
| Current Share Price | $24.73 | $25.24 | $10.91 |
| P/E Ratio | 10.06 | 9.70 | 9.86 |
| P/B Ratio | 1.29 | 1.13 | 1.05 |
| Dividend Yield | 4.97% | 5.15% | 4.86% |
Conclusion: Looking at the 3 banks’ current valuations based on their share prices at the time of writing, it seems that UOB is the cheapest among the 3 banks, because its current P/E Ratio is the lowest among the 3 banks, and at the same time, its current dividend yield is also the highest.
In Conclusion
From the above, it seems to me that, among the 3 Singapore banks, OCBC had the best performance – as it had recorded the strongest improvements on a q-o-q basis (4Q FY2018 vs. 4Q FY2019). The bank’s growth in terms of its dividend payout to shareholders for FY2019 is also the highest when compared with the other 2 banks (i.e. DBS and UOB.)
Having said that, this is by no means a buy recommendation for OCBC. Please do your own due diligence before you make any investment decisions.
Disclaimer: At the time of writing, I am a shareholder of OCBC Corporation Limited.
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