The Straits Times Index (STI), Singapore’s benchmark index, includes 30 companies, among which are the three major banks headquartered in Singapore: DBS (SGX: D05), UOB (SGX: U11), and OCBC (SGX: O39).
At the time of writing (10 May 2024), the 3 banks collectively hold a weightage of approximately 48.5% in the STI. This implies that fluctuations in the share prices of these banks significantly influence the overall movement of the STI.
The 3 banks have released their business updates for the first quarter of FY2024, ending on 31 March. In this post, you will find my review of their financial performances and key financial ratios, presented in the order of their release dates. First, we have DBS, which shared its update on 02 May, followed by UOB on 08 May, and finally, OCBC on 10 May.
Let’s begin:
DBS Group Holdings Limited (SGX: D05) – Results Released on 02 May 2024
Brief Introduction:
DBS is a leading financial services group in Asia with a presence in 19 markets. It provides a full range of services in consumer, SME (Small and Medium Enterprises), and corporate banking. On top of having one of the highest credit ratings in the world, the bank is also named as the “World’s Best Bank” by Global Finance and Euromoney, and “Global Bank of the Year” by The Banker.
Financial Performance (Q1 FY2023 vs. Q1 FY2024):
| Q1 FY2023 | Q1 FY2024 | % Variance | |
| – Net Interest Income (S$’mil) | $3,271m | $3,505m | +7.2% |
| – Net Fee & Commission Income (S$’mil) | $851m | $1,043m | +22.6% |
| – Other Non-Interest Income (S$’mil) | $814m | $1,009m | +24.0% |
| Total Income (S$’mil) | $4,936m | $5,557m | +12.6% |
| Net Profit (S$’mil) | $2,571m | $2,951m | +14.8% |
My Observations: Overall, it was another impressive set of results reported by Singapore’s largest bank – where its net profit hit a new record high of $2,951m (this was inclusive of S$5m of cost for the integration of Citibank Taiwan into DBS’ operations; excluding it, its net profit would be $2,956m), contributed by improvements across all of the banks’ 3 business segments (in net interest income, net fee and commission income, and other non-interest income).
The 7.2% increase in the bank’s net interest income can be attributed to a 2 basis point (bp) growth in net interest margin (from 2.12% in Q1 FY2023 to 2.14% in Q1 FY2024) from higher interest rates, along with a 1% growth in its loans from higher non-trade corporate loans, and the consolidation of Citibank Taiwan.
Net fee and commission income was up by 22.6% to S$1,043m – the first time it surpassed the S$1 billion mark. This was due to a 47% increase in wealth management fees from stronger market sentiment and an increase in assets under management, a 33% rise in credit card fees from higher spending, as well as a 30% growth in loan-related fees. The consolidation of Citibank Taiwan also benefited wealth management and card fees.
Other non-interest income was up by 24% led by an increase in treasury consumer sales.
Key Financial Ratios (Q4 FY2023 vs. Q1 FY2024):
| Q4 FY2023 | Q1 FY2024 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 2.13% | 2.14% | +0.01pp |
| Return on Equity (%) | 16.1% | 19.4% | +3.3pp |
| Non-Performing Loans Ratio (%) | 1.1% | 1.1% | – |
My Observations: The most remarkable thing to point out was the huge 3.3 percentage point (pp) jump in its return on equity, to a record high of 19.4%.
As there were no interest rate cuts by the US Federal Reserve in Q1 FY2024, the bank continued to benefit from the current high interest rate environment, where its net interest margin was up by another 0.01pp to 2.14%.
Finally, non-performing loans remain unchanged at 1.1%.
Dividend Payout to Shareholders:
DBS is the only bank among the 3 to pay out a dividend to shareholders on a quarterly basis.
As per the bank’s guidance when it released its 4th quarter and FY2023 results, it declared a dividend payout of 54.0 cents/share, a 28.6% increase from its payout of 42.0 cents/share last year.
If you are a shareholder of DBS, do take note of the following dates regarding its dividend payout:
Ex-Date: 09 May 2024
Record Date: 10 May 2024
Payout Date: 20 May 2024
CEO Mr Piyush Gupta’s Comments and Outlook:
“Our record earnings have given us a strong start to the year. We had broad-based business momentum as loans grew and both fee income and treasury customer sales reached new highs. While geopolitical tensions persist, macroeconomic conditions remain resilient and our franchise is well positioned to capture business opportunities. We are optimistic that total income and earnings will be better than previously guided and we will be able to deliver another year of strong shareholder returns.”
United Overseas Bank Limited (SGX: U11) – Results Released on 08 May 2024
Brief Introduction:
UOB is a leading bank in Asia, where it has a global network of around 500 offices in 19 countries and territories in Asia Pacific, Europe, and North America. The bank is highly rated by Moody’s Investors Service (with a credit rating of Aa1), as well as by S&P Global Ratings and Fitch Ratings (with a credit rating of AA-).
Financial Performance (Q1 FY2023 vs. Q1 FY2024):
| Q1 FY2023 | Q1 FY2024 | % Variance | |
| – Net Interest Income (S$’mil) | $2,409m | $2,362m | -2.0% |
| – Net Fee & Commission Income (S$’mil) | $552m | $580m | +5.1% |
| – Other Non-Interest Income (S$’mil) | $563m | $581m | +3.2% |
| Total Income (S$’mil) | $3,524m | $3,523m | -0.0% |
| Net Profit (S$’mil) | $1,511m | $1,487m | -1.6% |
My Observations: UOB’s result for the first quarter was a flattish one – where its total income was more or less the same as last year, due to a 2% decline in its net interest income, but mitigated by a low to mid-single percentage improvement in its net fee and commission income as well as in its other non-interest income.
The 2.0% decline in its net interest income was due to a 0.12pp decline in net interest margin (from 2.14% in Q1 FY2023 to 2.02% in Q1 FY2024).
On the other hand, the 5.1% increase in net fee and commission income due to higher loan-related, card and wealth activities, while the other non-interest income rose 3.2% from stronger trading and investment income.
Net profit, including integration cost of Citi’s operations, was down by 1.6% at S$1,489m. Excluding it, its net profit would have been down by about 0.7% to S$1,566m (compared to S$1,577m in Q1 FY2023).
Key Financial Ratios (Q4 FY2023 vs. Q1 FY2024):
| Q4 FY2023 | Q1 FY2024 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 2.02% | 2.02% | – |
| Return on Equity (%) | 13.8% | 14.0% | +0.2pp |
| Non-Performing Loans Ratio (%) | 1.5% | 1.5% | – |
My Observations: In terms of its key financial ratios, they are largely the same compared to the previous quarter, apart from its return on equity – which saw a slight 0.2pp improvement to 14.0%.
CEO Mr Wee Ee Cheong’s Comments and Outlook:
“Amid an uncertain global environment, UOB delivered a stable set of results for the first quarter backed by our strong balance sheet and liquidity position. Our core business franchise performed well, with higher fee income and record trading and investment income. Despite heightened geopolitical tensions, our home region of Southeast Asia is relatively resilient. We continued to see ongoing shifts in global supply chains and sustained tourism activities. Our extensive regional footprint, enlarged customer franchise and enhanced capabilities put us in a good position to ride on the region’s economic growth.
Our Citigroup integration is progressing well. We recently successfully migrated customers in Thailand to our UOB platform following the smooth transition in Malaysia and Indonesia last year. Next year, we will complete the integration in Vietnam. So far, our focus on cross-sell synergies is starting to gain good traction. With our stronger customer base and regional value proposition, we will continue to expand our offerings and deepen our capabilities to meet the needs and aspirations of our customers.”
Oversea-Chinese Banking Corporation (SGX: O39) – Results Released on 10 May 2024
Brief Introduction:
OCBC is Singapore’s longest established bank, where it was formed in 1932 from the merger of 3 local banks, with the oldest founded in 1912. It is also the second largest financial services group in Southeast Asia by assets. The bank’s key markets are in Singapore, Malaysia, Indonesia, as well as Greater China, and currently, it has close to 420 branches and representative offices in 19 countries and regions. It is also ranked among one of the world’s highly rated banks, with Aa1 by Moody’s and AA- by both Fitch and S&P.
Financial Performance (Q1 FY2023 vs. Q1 FY2024):
| Q1 FY2023 | Q1 FY2024 | % Variance | |
| – Net Interest Income (S$’mil) | $2,338m | $2,437m | +4.2% |
| – Net Fee & Commission Income (S$’mil) | $453m | $479m | +5.7% |
| – Other Non-Interest Income (S$’mil) | $559m | $710m | +27.0% |
| Total Income (S$’mil) | $3,350m | $3,626m | +8.2% |
| Net Profit (S$’mil) | $1,879m | $1,982m | +5.5% |
My Observations: A stable set of results in my opinion, where its net interest income, net fee and commission income, other non-interest income, as well as net profit all recorded year-on-year improvements. Particularly, its net profit for the quarter, at S$1,982m, is a record breaking one.
The 4.2% increase in net interest income was led by a 5% growth in average assets, which more than compensated for a 3 basis-point decline in its net interest margin (which edged down slightly from 2.30% in Q1 FY2023 to 2.27% in Q1 FY2024 – as rising funding costs offset the higher asset yields).
Its net fee and commission income, at S$479m, was the highest in the past 4 quarters (between Q1 FY2023 and Q1 FY2024) underpinned by growth in wealth management fees (up from S$190m in Q1 FY2023 to S$228m in Q1 FY2024).
OCBC’s other non-interest income jumped by 27.0%, which can be attributed to its trading income rising to a quarterly high – driven by record customer flow income and improved non-customer flow income.
Key Financial Ratios (Q4 FY2023 vs. Q1 FY2024):
| Q4 FY2023 | Q1 FY2024 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 2.29% | 2.27% | -0.02pp |
| Return on Equity (%) | 12.4% | 14.7% | +2.3pp |
| Non-Performing Loans Ratio (%) | 1.0% | 1.0% | – |
My Observations: The slight -0.02pp in net interest margin to 2.27%, as a rise in asset yields was outpaced by higher funding costs.
Apart from it, return on equity improved by 2.3pp to 14.7% (aided by the bank’s record net profit), with non-performing loans ratio remaining at 1.0% (which is the lowest among the 3 Singapore-listed banks).
Looking ahead, the bank have set its net interest margin target to be at the higher end of 2.20% – 2.25% range if rate cuts is less than originally expected – hence, at 2.27% as at Q1 FY2024, we will see further declines (albeit just slightly) in the quarters ahead.
CEO Ms Helen Wong’s Comments and Outlook:
“We are pleased to start the year on a strong footing with robust first quarter results. We achieved record net profit which lifted return on equity higher, underpinned by income growth and strict cost discipline. Asset quality remained sound and we prudently maintained our credit allowances. Our performance was driven by the deep synergies across banking, wealth management and insurance. This demonstrates the ability of our diversified franchise to deliver resilient earnings growth towards achieving our strategic priorities.
While some recent economic indicators are looking more favourable, near-term risks remain, such as heightening geopolitical volatility arising from ongoing wars and the outcome of a number of key elections this year. Our key markets in Asia are expected to be resilient, benefitting from increasing capital flows and supply chain diversification. Our healthy balance sheet position provides us the flexibility to manage uncertainties, and capacity for growth as we continue to support our customers across our network.”
Closing Thoughts
Here’s a quick summary of the individual bank’s business updates for the 1st quarter:
DBS:
Financial Performance (Q1 FY2023 vs. Q1 FY2024): Another record breaking quarter, with its net fee and commission income breaking past S$1 billion mark for the first time, and net profit at a new high of S$2,951m. Net interest income was up by 7.2% from net interest margin and loan growth, while other non-interest income was up by 24.0% from higher treasury consumer sales.
Key Financial Ratios (Q4 FY2023 vs. Q1 FY2024): RoE was also at a record high of 19.4%, with net interest margin up slightly to 2.14%, and non-performing loans ratio at a low of 1.1%.
UOB:
Financial Performance (Q1 FY2023 vs. Q1 FY2024): Muted performance, with its net interest income suffering a 2% dip due to a 0.12pp decline in its net interest margin, while its net fee and commission income, as well as other non-interest income up by 5.1% and 3.2% respectively.
Key Financial Ratios (Q4 FY2023 vs. Q1 FY2024): Net interest margin and non-performing ratio same as the previous quarter at 2.02% and 1.5% respectively, with return on equity up by 0.2pp to 14.0%.
OCBC:
Financial Performance (Q1 FY2023 vs. Q1 FY2024): A record breaking quarter, with the bank’s net interest income, net fee & commission income, and other non-interest income all recorded growth; particularly, its net profit, at S$1,982m, was a record breaking one for the bank, together with its net fee and commission income the highest in the last 4 quarters, and trading income hit a new quarterly high.
Key Financial Ratios (Q4 FY2023 vs. Q1 FY2024): Apart from a slight decline in net interest margin (by 0.02pp to 2.27%, as a rise in asset yields was outpaced by higher funding costs), return on equity continue to grow by 2.3pp to 14.7%, and its non-performing loans ratio, at 1.0%, was the lowest among the 3 Singapore-listed banks.
Overall, it was a record breaking set of financial results by both DBS and OCBC, and one which as a shareholder, I’m satisfied with.
As for UOB, even though its results was slightly weaker, but in my opinion, one quarter’s worth of results does not “define the bank”. I remain confident of it bouncing back in the quarters ahead.
With that, I have come to the end of my review of the 3 Singapore-listed banks’ results. Just like in the other posts I have published, I hope you have found the contents presented above useful. Do note that all opinions expressed are purely mine, which I am sharing for educational purposes only. You are strongly advised to do your own due diligence before making any investment decisions.
Related Documents:
DBS:
UOB:
OCBC:
Disclaimer: At the time of writing, I am a shareholder of all 3 Singapore-listed banks.
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