All the three Singapore banks – DBS, UOB, and OCBC, have already provided their business updates for the first quarter of financial year 2020 ended 31 March 2020, and many investors have the following question:

“Among DBS, UOB, and OCBC, which bank had the best first quarter results?”

In this post, I will be doing a quick comparison of the 3 banks’ financial results (on their improvements/deterioration in terms of percentage on a year-on-year (y-o-y) basis), as well as their key financial ratios (in terms of their improvements/deterioration between the current quarter under review (i.e. Q1 FY2020 ended 31 March 2020) and the previous quarter (i.e. Q4 FY2019 ended 31 December) in percentage points.)

Additionally, I will also be comparing the 3 banks based on their current valuations (from their current share prices at the time of writing) to find out which one of them is the “cheapest” at present.

Let’s begin…

Key Financial Highlights (Q1 FY2019 vs. Q1 FY2020)

Net Interest Income:

DBS’ net interest income grew by 7% to S$2,482m (from S$2,310m.)

UOB’s net interest income inched up by 0.4% to S$1,593m (from S$1,587m.)

OCBC’s net interest income increased by 6% to S$1,626m (from S$1,534m.)

Conclusion: All 3 banks saw y-o-y improvements to their net interest income, with DBS registering the strongest growth (at 7%), and this is closely followed by OCBC (at 6%), and then UOB (at just 0.4%.)

Non-Interest Income:

DBS’ non-interest income (comprising of net fee and commission income, as well as other non-interest income) totalled S$3,314m in Q1 FY2020, a 9% growth compared to S$3,040m last year.

UOB’s non-interest income (comprising of net fee income and other income) totalled S$2,108m in Q1 FY2020, a 2% increase compared to S$2,066m last year.

OCBC’s non-interest income plummeted 24% to S$864m (from S$1,142m last year.)

Conclusion: DBS emerged the winner here once again, where its non-interest income went up by 9% on a y-o-y basis, followed by UOB (which saw its non-interest income inch up by 2%), and then OCBC (which dropped by 24%.)

Total Income:

DBS’ total income saw a 13% y-o-y growth to S$4,026 (from S$3,551m.)

UOB’s total income edged up 0.04% y-o-y to S$2,407m (from S$2,406m.)

OCBC’s total income, however, fell by 7% y-o-y to S$2,490m (from S$2,676m.)

Conclusion: DBS is the runaway winner here in terms of its y-o-y total income growth (at 13%), followed by UOB (whose y-o-y growth was muted), and then OCBC (which saw a 7% y-o-y drop.)

Net Profit:

DBS saw a 29% y-o-y drop in its net profit to S$1,165m (from S$1,651m.)

UOB saw a 19% y-o-y reduction in its net profit to S$855m (from S$1,052m.)

OCBC saw a 43% y-o-y fall in its net profit to S$698m (from S$1,231m.)

Conclusion: While all 3 banks saw their net profit shrunk on a y-o-y basis, UOB’s net profit saw the smallest y-o-y drop (at -19%), followed by DBS (at -29%), and then OCBC (at -43%.)

Which Bank had the Strongest Set of Financial Results?

From the above, it is clear that DBS recorded the best results in terms of having the highest percentage of y-o-y growth in its net interest income, non-interest income, and total income.

Key Financial Ratios (Q4 FY2019 vs. Q1 FY2019)

In this section, let us take a look at some of the key financial ratios of the three banks, where I will be comparing their ratios recorded in the first quarter of FY2020 (ended 31 March 2020) against ratios recorded in the previous quarter (which is the fourth quarter of FY2019 ended 31 December 2019):

Net Interest Margin:

DBS’ net interest margin remained the same compared to the last quarter, at 1.86%.

UOB’s net interest margin fell by 0.05 percentage points (pp) to 1.71% (from 1.76% in the last quarter.)

OCBC’s net interest margin edged down by 0.01pp to 1.76% (from 1.77% in the last quarter.)

Conclusion: DBS edged out here, with its net interest margin remaining unchanged, while the other two banks (i.e. UOB and OCBC) registering minimal reductions.

Return on Assets:

DBS’ return on assets fell by 0.26pp to 0.70% (compared to 1.04% in the last quarter.)

UOB’s return on assets went down by 0.17pp to 0.83% (compared to 1.00% in the previous quarter.)

OCBC’s return on assets decreased by 0.56pp to 0.67% (from 1.23% recorded in the previous quarter.)

Conclusion: While all three Singapore banks saw their return on assets registering declines compared to the previous quarter, UOB saw the smallest magnitude of fall (at 0.17pp), followed by DBS (at 0.26pp), and then OCBC (at 0.56pp.)

Return on Equity:

DBS’ return on equity fell by 2.9pp to 9.2% (from 12.1% recorded in the previous quarter.)

UOB’s return on equity went down by by 1.8pp to 8.8% (from 10.6% last quarter.)

OCBC’s return on equity decreased by 4.9pp to 6.0% (from 10.9% last quarter.)

Conclusion: Just like the return on assets, all three banks’ return on equity for the current quarter also registered declines (when compared against the previous quarter) – with UOB’s return on equity falling the least (by 1.8pp), followed by DBS (by 2.9pp), and then OCBC (by 4.9pp.)

Non-Performing Loans Ratio:

Both DBS and UOB saw their non-performing loans ratio increasing by 0.1pp to 1.6% (from 1.5% recorded in the previous quarter), while OCBC’s non-performing loans ratio remained the same compared to the previous quarter at 1.5%.

Which Bank Emerged the Winner in Terms of their Financial Ratios?

UOB edged out here, with its return on assets and return on equity suffering from the least percentage of drop (when compared against the previous quarter.)

Which Bank is the “Cheapest” among the 3?

DBS: At its current price at S$19.72, its current P/E ratio is 8.0, P/B ratio is 1.0, and its dividend yield is 6.7% (based on a total payout of S$1.32/share in FY2020.)

UOB: At its current price of S$19.79, its current P/E ratio is 7.6, P/B ratio is 0.9, and its dividend yield is 6.7% (calculated based on a total dividend payout of S$1.30/share in FY2019.)

OCBC: At its current price of S$8.85, its current P/E ratio is 8.0, its P/B ratio is 0.9, and its dividend yield is 6.0% (calculated based on a total dividend payout of S$0.53/share in FY2019.)

Conclusion: UOB is the “cheapest” among the three Singapore banks, with its current P/E and P/B ratios the lowest among the three banks, and its current dividend yield being the highest among the three of them.

However, DBS is following very closely behind.

In Conclusion

Among the three Singapore banks, it seems that based on their current prices, both UOB and DBS are equally cheap.

In terms of its latest first quarter results, DBS had the best financial results, while UOB saw the smallest amount of drop in terms of their key financial ratios.

Having said that, this is by no means a buy/sell recommendation for any of the three Singapore banks. Please do your own due diligence before you make any investment decisions.

Disclaimer: At the time of writing, I am a shareholder of DBS Group Holdings, United Overseas Bank Limited, and Overseas-Chinese Banking Corporation Limited.


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