This morning (29 April 2022), all 3 Singapore-listed banks in DBS (SGX:D05), UOB (SGX:U11), and OCBC (SGX:O39) posted their business updates for the first quarter ended 31 March 2022 (i.e. Q1 FY2022.)

As such, instead of having separate posts to review the individual bank’s results, I’ve decided to combine them into one single post – you will still read about my review on each bank’s financial performance, as well as its key financial ratios (the select few that I always focus my attention on.) On top of that, you’ll also find out which bank had the most resilient performance this time round, and also which bank is currently the ‘cheapest’ based on its current valuations.

Let’s begin:

Financial Performance (Q1 FY2021 vs. Q1 FY2022)

DBS:

Q1 FY2021Q1 FY2022% Variance
– Net Interest
Income (S$’mil)
$2,107m$2,187m+3.8%
– Net Fee &
Commission Income
(S$’mil)
$953m$891m-6.5%
– Other Non-Interest
Income (S$’mil)
$794m$669m-15.7%
Total Income
(S$’mil)
$3,854m$3,747m-2.7%
Net Profit
(S$’mil)
$2,009m$1,801m-10.4%

Compared to last year, DBS’ latest set of results is largely a weaker one where, apart from its net interest income (due to a 3 basis point increase in its net interest margin, along with loans growing on constant currency terms; it is also bank’s first increase in this financial statistic in 3 years), all the other financial stats I look at all declined (but despite of that, its net profit of S$1,801m is the bank’s second highest on record.)

The reasons for a weaker net fee and commission income was due to a high base last year (where the amount of S$953m recorded in Q1 FY2021 was a record breaking one), along with a decline in wealth management (where it fell 21% due to a fall in investment product sales) and investment banking (where it fell 12% as fixed income activities fell) due to a weaker market sentiment. As for its other non-interest income, the 15.7% fall was due to lower trading incomer and lower investment gains.

UOB:

Q1 FY2021Q1 FY2022% Variance
– Net Interest
Income (S$’mil)
$1,529m$1,686m+10.3%
– Net Fee &
Commission Income
(S$’mil)
$638m$572m-10.3%
– Other Non-Interest
Income (S$’mil)
$319m$101m-68.3%
Total Income
(S$’mil)
$2,486m$2,359m-5.1%
Net Profit
(S$’mil)
$1,008m$906m-10.1%

Just like DBS’ results we have seen moments earlier, UOB’s first quarter results is also largely a weaker one compared to the same time period last year, with net interest income being the only one recording improvements (led by a loan growth of 9%, along with rising interest rates.)

The 10.3% decline in its net fee and commission income was largely attributed to lower wealth management and fund management due to a subdued market outlook, while the 68.3% plunge in its other non-interest income was due to impact on hedges, resulting in a lower non-customer-related trading and investment income.

OCBC:

Q1 FY2021Q1 FY2022% Variance
– Net Interest
Income (S$’mil)
$1,441m$1,503m+4.3%
– Net Fee &
Commission Income
(S$’mil)
$585m$522m-10.8%
– Other Non-Interest
Income (S$’mil)
$888m$502m-43.5%
Total Income
(S$’mil)
$2,914m$2,643m-9.3%
Net Profit
(S$’mil)
$1,501m$1,356m-13.0%

Apart from net interest income (which improved by 4.3%, driven by asset growth of 5%), all the other financial stats recorded declines (just like the 2 other Singapore-listed banks we’ve looked at above) – particularly, its net fee and commission fell by 10.8% due to lower wealth management fees, while the 43.5% decline in its other non-interest income was due to lower trading income, and lower life insurance profit.

Which Singapore-Listed Bank Had the Most Desirable Set of Q1 Results?

All the 3 Singapore banks’ results saw their net interest income recording improvements (with UOB recording the highest q-o-q growth at 10.3%, and DBS’ q-o-q growth was the lowest at 3.8%), and all the other financial results declined – as far as net fee and commission income is concerned, OCBC recorded the highest percentage of y-o-y decline (at -10.8%), while DBS suffered from the least percentage of decline (at -6.5%); as for its other non-interest income, DBS also saw the smallest percentage decline (at just -15.7%) while UOB saw the biggest decline among the 3 banks (at -68.3%).

Finally, in terms of its net profit on a q-o-q basis, even though all 3 banks also recorded declines, UOB saw the smallest percentage of decline (at -10.1%), with OCBC’s net profit (in terms of percentage) fell the most (at -13.0%.)

Looking at the 3 banks’ first quarter results, it is a tie between DBS (where it has the lowest percentage of decline in its net fee and commission income, and also in its other non-interest income) and UOB (where it has the highest percentage of increase in its net interest income, and at the same time, having the lowest percentage decline in its net profit.)

Key Financial Ratios (Q4 FY2021 vs. Q1 FY2022)

Next, let us take a look at some of the key financial ratios (those that I always focus on whenever I review a bank’s latest set of results) recorded by each Singapore bank for the current quarter under view (i.e. Q1 FY2022 ended 31 March 2022), compared against the previous quarter 3 months ago (i.e. Q4 FY2021 ended 31 December 2022):

DBS:

Q4 FY2021Q1 FY2022Difference (in
Percentage Points – pp)
Net Interest
Margin (%)
1.43%1.46%+0.03pp
Return on
Assets (%)
0.81%1.04%+0.23pp
Return on
Equity (%)
9.9%13.1%+3.2pp
Non-Performing
Loans Ratio (%)
1.3%1.3%

My Observations: Compared to the previous quarter, I’m encouraged to note that the key financial ratios I focus on (whenever I review a bank’s performance) has improved – particularly in its net interest margin (where it finally started to see improvements once again), along with its 3.2pp rise in its return on equity.

UOB:

Q4 FY2021Q1 FY2022Difference (in
Percentage Points – pp)
Net Interest
Margin (%)
1.56%1.58%+0.02pp
Return on
Assets (%)
0.91%0.77%-0.14pp
Return on
Equity (%)
10.2%8.8%-1.4pp
Non-Performing
Loans Ratio (%)
1.6%1.6%

My Observations: The bank’s financial ratios reported for the current quarter under review, compared against the previous quarter was mixed one – while its net interest margin have improved (after many quarters of decline due to Fed slashing interest rates as a result of the Covid-19 pandemic), but its return on assets and return on equity have both weakened.

OCBC:

Q4 FY2021Q1 FY2022Difference (in
Percentage Points – pp)
Net Interest
Margin (%)
1.52%1.55%+0.03pp
Return on
Assets (%)
0.88%1.23%+0.35pp
Return on
Equity (%)
7.5%10.6%+3.1pp
Non-Performing
Loans Ratio (%)
1.5%1.4%+0.1pp

My Observations: OCBC’s key financial ratios reported for the current quarter under review (compared against the previous quarter 3 months ago) is a very positive one (in my opinion) – apart from improvements in its net interest margin, its return on equity also went up by 3.1pp, and more impressively (at least for me), its non-performance loans ratio have further improved (from 1.5% in Q4 FY2021 to 1.4% in Q1 FY2022.)

Which Singapore-Listed Bank Recorded the Most Improvements in its Financial Ratios in Q1 FY2022?

Putting the 3 banks’ financial ratios side-by-side, OCBC edged out the other 2 banks for having joint-highest improvement in its net interest margin (at +0.03pp.) Its return on assets also saw the biggest improvement at +0.35pp. Finally, OCBC is the only bank that saw an improvement in its non-performing loans ratio (where it improved by +0.1pp.)

Dividend Payout to Shareholders

Only DBS pays out a dividend to its shareholders on a quarterly basis (while the other 2 banks – in UOB and OCBC – have a half-yearly dividend payout policy.)

For the current quarter under review, a dividend payout of 36.0 cents/share was declared, a 100% jump from 18.0 cents/share paid out in Q1 FY2021 (due to the bank being advised by the Monetary Authority of Singapore to pay out a dividend of no more than 60.0% of what was paid out in FY2019, for prudence in light of the Covid-19 pandemic then; however, the restriction have since been lifted.)

If you are a shareholder of DBS, do take note of the following dates about its dividend payout (scrip dividend scheme will not be applied this time round – meaning you’ll receive your dividend payout in cash only):

Ex-Date: 11 May 2022
Record Date: 12 May 2022
Payout Date: 25 May 2022

Which Bank is Currently the ‘Cheapest’ in Terms of its Current Valuations

At the time of writing, the 3 banks’ share prices, along with their current valuations, are as follows:

DBSUOBOCBC
Share Price$33.01$29.34$12.34
P/E Ratio12.913.111.2
P/B Ratio1.51.21.0
** Dividend Yield3.6%4.1%4.3%
** Dividend Yield for the 3 banks are computed based on their full-year dividend payouts in FY2021, which is 120.0 cents/share for DBS, 120 cents/share for UOB, and 53.0 cents/share for OCBC.

Based on its current valuations, DBS is currently the ‘most expensive’ at the moment (as it has the highest P/B ratio, and lowest dividend yield among the 3 banks.)

At the other end, OCBC is currently the ‘cheapest’ among the 3 Singapore-listed banks, with its P/E and P/B ratios the lowest, and at the same time, its dividend yield the highest.

Closing Thoughts

Personally, I felt that all 3 banks’ results were pretty much similar – with all 3 of them recording growth in their net interest income (contributed by an improvement in its net interest margin), and their net fee and commission income, along with its other non-interest income weakened due to poorer market sentiments.

In terms of the comparisons of the 3 banks’ results, both DBS and UOB edged out in terms of its financial performance, while OCBC saw the most improvements in its financial ratios.

Also, based on the 3 banks’ current valuations, just like in the previous quarters, remains DBS is the ‘most expensive’ among the 3, with OCBC being the ‘cheapest.’

That said, this post is by no means a buy or sell recommendation for the shares of any of the 3 Singapore banks. Please do your own due diligence before you make any investment decisions.

With that, I have come to the end of my review on the 3 banks’ latest business update. As always, I do hope you’ve found the contents presented above useful.

Related Documents

DBS:

UOB:

OCBC:

Disclaimer: At the time of writing, I am a shareholder of all 3 Singapore-listed banks in DBS, UOB, as well as OCBC.

 

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