Singapore Banks 4Q19 Preview - CGS-CIMB Research 2020-01-17: A Dividend Play

Singapore Banks - CGS-CIMB Research  | SGinvestors.io DBS GROUP HOLDINGS LTD (SGX:D05) OVERSEA-CHINESE BANKING CORP (SGX:O39) UNITED OVERSEAS BANK LTD (SGX:U11)

Singapore Banks 4Q19 Preview - A Dividend Play

  • We see scope for higher dividends for OCBC (SGX:O39) (above S$0.25/share in 2H19) and UOB (SGX:U11) (S$0.75/share) but DBS (SGX:D05)’s earnings could be the best performer.
  • NIM in 4Q19F: -4bp q-o-q for DBS, -1bp q-o-q for OCBC and -1bp q-o-q for UOB.
  • 4Q19F net profit:
    • DBS, S$1.65bn (+1.4% q-o-q/+25% y-o-y);
    • OCBC, S$1.13bn (-4% q-o-q/+22% y-o-y); 
    • UOB, S$1.09bn (-3% q-o-q/+19% y-o-y).
  • Credit cost pressures (particularly HK) should have largely played out over 2Q-3Q19. Expect weaker wealth and trading income from seasonal risk-off.



DBS: expect 4bp NIM compression but better q-o-q net profit

  • The heftier 12bp dip in average 3MSIBOR in 4Q19 (vs. 6bp in 3Q19) is likely to have compressed DBS’s NIMs by 4bp q-o-q, given the bank’s greater rate sensitivity. This resulted in a 4bp y-o-y rise in full-year FY19 NIMs to 1.89%.
  • We expect a 0.5% q-o-q growth from continued non-trade corporate loans (HK inclusive) and drawdowns from previous mortgage bookings. Housing loans should see a y-o-y contraction. We think wealth income should broadly sustain at the new normal (over S$300m/q), moderating other fee income weakness. Further provisions for the HK uncertainties are not expected.
  • See DBS Share Price; DBS Target Price; DBS Analyst Reports; DBS Dividend History; DBS Announcements; DBS Latest News.


OCBC: removal of Permata overhang gives scope for higher payout



UOB: NIMs likely -1bp as loan base contracts; dividend upside to S$1.25

  • Loan growth could trend negative to -0.5% q-o-q as corporates pare down debt. The bank had also let some of its HK exposures roll off.
  • The large repayment volumes and ample liquidity could start to pressure NII (stable over previous quarters of NIM compression), though we estimate a smaller 1bp NIM compression in 4Q19F. The potential 4bp y-o-y NIM compression to 1.78% in FY19 is the weakest among peers. Better credit card fees should offset some of the risk-off wealth and loan-related fees but non-II is likely negative.
  • See UOB Share Price; UOB Target Price; UOB Analyst Reports; UOB Dividend History; UOB Announcements; UOB Latest News.


Maintain Overweight; asset quality pressures largely played out

  • OCBC's share price could perform better than peers due to its strongest y-o-y NIM rise and intensifying pressures of higher dividends above our current S$0.50/share given the removal of an M&A overhang and stronger capital from Wing Hang’s eventual IRB adoption, although credit cost surprises underpin our HOLD call.
  • Higher dividends from DBS are less likely given the rise in its payout ratio to at least 50% since FY17, from just 36% in FY16.
  • Stable asset quality and a moderate growth outlook provides upside to UOB's dividend to S$0.75/share in 4Q19F (FY19: S$1.25/share), but share price could be anchored by its -4bp y-o-y NIM performance.
  • See DBS Target PriceOCBC Target PriceUOB Target Price.





Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2020-01-17
SGX Stock Analyst Report ADD MAINTAIN ADD 28.290 SAME 28.290
HOLD MAINTAIN HOLD 11.940 SAME 11.940
ADD MAINTAIN ADD 29.100 SAME 29.100



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