Recap and Outlook of Singapore's Three Giant Banks in Q2

The second quarter and the first half of FY2024 have been strong for OCBC and DBS. Both banks recorded improvements in net interest income, net fee and commission income, and other non-interest income, achieving new highs in several financial metrics. While UOB's results are comparatively weaker than those of DBS and OCBC, the bank has maintained stability, particularly in its NPL ratio and slight improvements in NIM.

The three banks showed mixed results in total income. UOB saw a decline of 2% YoY to S$3.48 billion, primarily due to a 1.5% drop YoY in net interest income and a 21.3% YoY fall in other non-interest income. In contrast, OCBC achieved a 5.0% YoY growth in total income to S$3.63 billion, driven by increases in net interest income (1.7%), net fee and commission income (8.4%), and other non-interest income (15.3%). DBS also saw growth, with total income rising 9% YoY to S$5.48 billion as net interest income increased by 5% YoY to S$3.77 billion.Net profit figures also varied. UOB's net profit inched up by 1% YoY to S$1.43 billion. OCBC saw a significant rise in net profit, up by 14% YoY to S$1.94 billion. DBS experienced a 6% YoY increase in net profit, reaching about S$2.79 billion.

The three banks maintained stable non-performing loan ratios. DBS held steady at a 1.1% NPL ratio, unchanged from the previous year. OCBC improved, reducing its NPL ratio to 0.9% from 1.0%. UOB marginally bettered its position, slightly decreasing its NPL ratio to 1.5%, down by 0.1 percentage points from last year.

Dividend payouts generally improved. UOB's dividend payout for 1H FY2024 increased by 3.5% to 88.0 cents per share, representing a payout ratio of 51%. OCBC's dividend payout rose by 10.0% to 44.0 cents per share, representing a payout ratio of 50%. DBS declared a dividend of 54.0 cents per share for Q2 FY2024, consistent with last year. For the first half of FY2024, DBS's total dividend payout was S$1.08 per share, a 20% improvement from last year's S$0.90 per share.

According to Bloomberg, several of Singapore's largest banks have benefited from the increased interest of wealthy individuals in transferring assets and conducting transactions in this Asian wealth hub, boosting the profitability of these banks.

DBS Bank's wealth fees soared by 37% in the second quarter, exceeding expectations, as a result of the shift from deposits to investments and bancassurance, as well as the expansion of its asset management scale, which reached a record high of 396 billion Singapore dollars. OCBC Bank saw strong growth in wealth, trading, and insurance fees, driving a 13% increase in non-interest income. Meanwhile, UOB's strong income from wealth management and fees from loans has helped mitigate the decline in its primary loan income.

All three banks have outperformed the STI index year-to-date, with DBS leading the way with a gain of over 14%. OCBC and UOB follow closely behind, with gains of 13.12% and 8.7% respectively.

Looking ahead, DBS Bank's CEO Piyush Gupta expects profits to continue growing in 2024. He anticipates that net income for the year will increase by a mid to high single-digit percentage, driven by loans and fee income. While acknowledging increased uncertainty in financial markets and heightened geopolitical tensions, he stated, "We have built the capability to withstand economic slowdown and low-interest rate risks."

UOB's CEO Mr. Wee Ee Cheong is optimistic about company's future, highlighting strong quarterly results, resilient asset quality, and a robust balance sheet. He expects ASEAN to remain resilient despite global challenges and sees long-term potential driven by strong fundamentals and foreign investments. With successful integrations in Malaysia, Indonesia, and Thailand, and upcoming integration in Vietnam, UOB aims to enhance synergies and deepen customer relationships.

OCBC's CEO Ms. Helen Wong is also optimistic about OCBC's future, noting record earnings for the first half of 2024 driven by strong performance in banking, wealth management, and insurance. The bank's robust capital position allows for growth opportunities, managing uncertainties, and increasing shareholder returns, including a 10% raise in the interim dividend. OCBC has strengthened its franchise, expanded its customer base, and invested in talent, capturing trade, investment, and wealth flows in ASEAN and Greater China. Despite geopolitical uncertainties, Ms. Wong is confident OCBC's strong capital position, diversified earnings, and prudent risk management will enable it to navigate challenges and deliver enduring value.