Singapore Banks At All Time Highs. What's Next?

Estimated read time: 1:20

Summary

In a comprehensive webinar hosted by Beansprout, founder Gerald provided a detailed outlook on Singapore Banks such as DBS, UOB, and OCBC, discussing the economic factors influencing their current stock success and what the future might hold. Key discussions included factors impacting their stock performance, such as net interest margins, fee income, and dividend predictions, alongside potential risks like U.S. recession impacts and interest rate changes. The event emphasized the banks' strong capital positions and the appealing dividend yields compared to other market options.

Highlights

Gerald provided insights on the driving forces behind the impressive performance of Singapore banks in 2024 and their future outlook. 🔍
Singapore's GDP growth and U.S. Federal Reserve interest rate decisions have significantly influenced these banks' stock performances. 📊
The session highlighted that while interest rates are dropping, Singapore banks remain robust with strong non-interest income growth. 🌱
Special dividends and share buybacks are among capital management strategies enhancing shareholder value. 🔄
Despite impressive growth, investors should remain cautious of potential economic slowdowns and their impact on bank stocks. 🚨

Key Takeaways

Singapore banks have witnessed unprecedented highs, driven by strong earnings and robust economic growth in Singapore. 🏦
DBS has outperformed its peers, benefiting from exceptional fee income and a steady net interest margin. 📈
Despite global economic uncertainties, the Singapore banks maintain strong capital positions, supporting generous dividends. 💰
The outlook for 2025 suggests stable profits despite potential pressures on net interest margins due to U.S. rate cuts. 🌍
Investors should weigh macroeconomic risks, including potential U.S. recession impacts and trade tariffs. ⚠️

Overview

The recent webinar by Beansprout's founder, Gerald, discussed the impressive high-performance streak of Singapore banks and explored the factors propelling their success. Starting with an exploration of the global macroeconomic factors, particularly Singapore's strong GDP growth and the U.S. Federal Reserve's evolving interest rate policies, the session provided a foundational understanding of the economic landscape impacting these financial giants.

A closer look at each bank revealed DBS's superior performance, attributed to their robust fee income and well-maintained net interest margins. Gerald pointed out that while UOB and OCBC are performing well, DBS leads in delivering exceptional value to investors through strategic capital management, involving special dividends and aggressive share buybacks.

Looking forward, the outlook remains cautiously optimistic, given the potential macroeconomic risks, such as a U.S. recession. Gerald stressed the importance of understanding these risks and their potential impacts on interest margins and loan growth, urging investors to stay informed and consider these factors when engaging with Singapore bank stocks.

Chapters

00:00 - 00:30: Introduction and Agenda The chapter titled 'Introduction and Agenda' begins with a welcoming note to the audience, encouraging them to feel comfortable, including eating dinner if they haven't yet. The session is intended to be informal, focused on updating the key drivers impacting Singapore Banks. This includes a detailed look at the latest valuation charts for major banks such as DBS, UOB, and OCBC. The presenter sets the tone for a comprehensive and engaging discussion on the subject.
00:30 - 02:00: Presentation Overview and Speaker Introduction The chapter titled 'Presentation Overview and Speaker Introduction' is an introduction to a webinar on Singapore Banks, hosted by someone named Gerald. The presenter thanks the audience for joining and mentions that they will discuss the outlook for DBS, UOB, and OCBC banks. The introduction sets the context for the presentation, noting the current time and indicating that a Q&A session will follow.
02:00 - 04:00: Economic Overview The chapter introduces the audience to the speaker's insights on Singapore Banks, with a plan to discuss these findings before a Q&A session. The speaker, the founder of Beansprout, mentions that Beansprout is a licensed Financial Insights provider.
04:00 - 09:00: Singapore Banks Performance The chapter titled 'Singapore Banks Performance' discusses insights and thoughts on Singapore stocks, particularly focusing on the performance of banks. The transcript mentions the usefulness of these insights for users in making informed financial decisions. The objective of events like webinars is highlighted to emphasize the importance of staying updated with the latest financial developments and insights, which can aid in making well-informed decisions.
09:00 - 21:00: Banks' Key Financial Metrics The chapter begins with a disclaimer emphasizing that the discussion is for informational purposes and not personalized financial advice. It is suggested that individuals consult with their financial advisors for specific advice tailored to their individual circumstances. The chapter proceeds to outline the approach of starting with a top-down analysis to comprehend the global financial landscape and how it pertains to key financial metrics of banks.
21:00 - 25:00: Outlook for 2025 The chapter 'Outlook for 2025' provides a quick overview of the macroeconomic landscape and is followed by an analysis of Singapore banks' earnings expected in 2024. The analysis aims to uncover factors driving the strong share price performance of these banks and assess the sustainability of this trend. Finally, the chapter highlights key factors to monitor as we approach 2025.
25:00 - 34:00: Valuation of Singapore Banks The chapter begins by discussing the current volatility in the global financial markets, emphasizing the importance of analyzing economic indicators. Economic growth is highlighted as a key factor influencing this volatility.
34:00 - 43:00: Dividend Comparison The chapter discusses the economic growth of Singapore, noting a key economic data point focused on GDP growth. In 2024, despite the general feeling, Singapore's economy showed a strong performance with a 4.4% growth. This marks an improvement from 2023, where the growth rate was lower.
43:00 - 61:00: Q&A Session The chapter discusses a Q&A session focusing on Singapore's economic growth. It highlights that in the second half of the year, the growth was more robust compared to the first half. This upward trend in economic momentum is expected to influence the country's economic expectations for 2025, with anticipated growth projected between 1% to 3% by Singapore's Ministry of Trade and Industry.

Singapore Banks At All Time Highs. What's Next? Transcription

00:00 - 00:30 I hope everyone had your dinner uh but if you haven't had your dinner feel free to be enjoying your food uh while you listen to my sharing on Singapore Banks uh we'll keep it a relatively informal session uh where I will provide my update on some of the key drivers of the Singapore Banks uh thereafter we will look at some of the latest valuation charts for the Singapore Banks including DBS UOB and ocbc and then last but not
00:30 - 01:00 these uh we open up for Q&A uh where we welcome your burning questions around the Singapore Banks okay so uh the time now is 7:31 uh I will start my presentation so uh once again good evening everybody uh thanks so much for joining beans sprs webinar on Singapore Banks uh my name is Gerald and over today's sharing I would be discussing what the outlook for DBS you and ocbc are okay uh let me start by
01:00 - 01:30 sharing my slides uh where I hope to be able to go through with you uh some of my learnings about the Singapore Banks before we go into the Q&A session okay so uh I am the founder of beans Sprout uh in case you have not heard of beans Sprout uh we are a licensed Financial Insights provider uh by the mees uh on on our website groin
01:30 - 02:00 sprout.com we share our thoughts on Singapore stocks reads bonds uh and I think that is something that many users have actually shared that they find useful in helping them to make financial decisions so likewise today's webinar would be with the same objective uh because we believe that to be able to make this financial decisions uh you need to be informed around some of the latest developments and to get the latest insights
02:00 - 02:30 okay uh just a disclaimer before we start uh while we will be discussing uh the names in this sector uh the sharing is for information purposes only and if you want uh specific advice to your individual circumstances uh do reach out to your financial advisor okay so what we will go through today will be a few key things uh first I always believe in starting from the top down to understand how the global
02:30 - 03:00 economy is like uh so we'll take a very quick overview around what we see for the macroeconomy uh next we will look at the Singapore Banks earnings in 2024 um to understand what is actually driving the very strong share price performance and understand whether that is something that can be sustained okay and then last but not least I will look at a few key factors that I'll be looking out for going into 2025
03:00 - 03:30 okay uh starting from the global economy I think uh over the past few weeks we have seen a lot of volatility in the global financial markets so to help us understand what is driving this volatility it is always important to start by looking at some of the economic indicators okay so I start with economic growth uh I think if there's one key
03:30 - 04:00 economic uh one key economic data point that I'll be looking out for it is always economic growth and this is what we see for Singapore's GDP growth for 2024 while we may not actually feel it uh the Singapore economy actually did very well in the last year with a 4.4% growth okay so uh with this 4.4% growth uh it has actually picked up from what we saw in 2023 where the growth was at
04:00 - 04:30 1.8% I think what is also uh useful from this chart is that uh the growth was stronger in the second half of the year compared to the first half of the year so I think over the course of 2024 uh Singapore's economic momentum has picked up and I think that is driving the Expectations by Singapore's uh Ministry of trade and Industry for 2025 growth to be between 1 to 3% okay so in 2025 we are going to see
04:30 - 05:00 potentially a slight slowdown in Singapore's economic growth um but it will still be at a fairly decent level of between 1 to 3% okay uh next the other key um Global indicator is really the interest rate set by the US Federal Reserve um if you have been following what we have been writing this is something that we have been following since 202 4 uh because
05:00 - 05:30 what the US Federal Reserve or the US Central Bank does has an impact towards the Singapore economy as well as the Singapore Banks okay so what we see here is that uh since the second half of last year uh the US Federal Reserve has been bringing down its Target interest rate okay uh from above 5% uh progressively it's been brought down to now 4.25 to 4.
05:30 - 06:00 5% okay uh what is also important to note from this chart is that while we initially saw the FED being very aggressive in terms of the interest rate Cuts in more recent meetings um the pace of the rate Cuts has actually been slowed down okay so this is the horizontal line that we see here uh effectively uh given what we are seeing in terms of inflation in terms of economic growth um the FED believes that it is is probably wise to not cut
06:00 - 06:30 interest rates further for now which is what we saw in the uh latest meeting where it actually kept interest rates unchanged okay so what is the expectations for interest rates going forward um while the FED has kept interest rates unchanged um in the latest meeting um investors are expecting that we may see further rate Cuts in 2025 and when I just checked what the expect expectations are um this is using
06:30 - 07:00 the CME fat Watch 2 uh what we do see from this chart is that uh we may see three further interest rate Cuts in 2025 uh potentially one in June one in September and one in December okay so that effectively is the backdrop that we are looking at in that wall the FED has paused on its interest rate cut so far we might see further rate Cuts again later this
07:00 - 07:30 year okay so what does this mean for interest rates and bond yields uh if you are uh uh investor of the Singapore T Bill if you're investor in the Singapore savings bonds you probably have realized that interest rates have come down okay so I have picked up this chart which is the Singapore 10-year government bond yield um the latest that checked it was at 2.72% uh which is significantly lower than where it was um at the start of the
07:30 - 08:00 Year where at one point in time it was close to 3.1% okay so with the expectations of further interest rate Cuts uh we have seen Bond use actually coming down in recent months um and I think that actually led to questions around will this actually affect the prospects of Singapore Banks okay so at this point in time we have seen the banks doing very well in 2024 but one of the commonly asked questions that I have received is
08:00 - 08:30 actually with interest rat starting to come down uh should we still be looking at Singapore Banks and what are the risks involved so that is actually my next section around how uh Singapore Banks doing okay uh but before we move on to the next section uh if you find that my speed of covering so far is okay uh maybe you can just put in a yes uh in the chat so that I know that the pace is something that suitable uh if you find that I am too fast too slow feel free to
08:30 - 09:00 put in your comments in the chat as well okay uh thank you for your responses uh so with that I will go on to the next part which is what everyone is very concerned um given the macroeconomic backdrop that we discussed um how are the Singapore Banks doing and what does it mean for their Outlook okay so uh um I think it's
09:00 - 09:30 always useful to understand how they've done in the past so this is their oneyear share price performance um what we see is that the Singapore Market has done very well in the past year up by more than 20% so it's actually quite rare that we see that Singapore Market is up by double digit in a single year and that's actually pushed the SDI to an all-time high okay but what we also see here is that the banks have done better
09:30 - 10:00 uh DBS was up by close to 40% uh UB was up by close to 30% and ocbc also up by more than 20% okay so effectively all the three Singapore banks have done better than the Singapore Market uh while there may be some Divergence DBS has done better compared to UV compared to ocbc all of them have done generally well and this is what we see particularly for uh DBS um if you have
10:00 - 10:30 been following DBS very closely you have known that the share price reach an all-time high after they reported their full year results uh reaching close to $46 per share um at one point last year um it was actually just above $30 per share uh so that represents a very sharp increase in DBS share price over the past 12 months okay so currently uh at about 4546 uh which is still close to an all-time
10:30 - 11:00 high and I think the questions at everyone's mind is probably what to do uh with the Singapore Bank shares okay so I think there are many things that we can keep a lookout for uh but to me I will actually distill it down to three key things so while you may read a lot of reports talking about um maybe um their non-performing loans uh maybe talking about their Capital ratios but to me it comes down to three key things uh that I want to be really
11:00 - 11:30 focusing on in tonight's webinar okay the first is their net interest margin which is effectively how much profit they make on their loan book okay so that is the first thing that I'll keep a lookout for the second thing is their fee income uh this fee income can come from various things including um their Wealth Management Services it can come from their credit card business uh there is another key driver of their growth in the past year and it's something that
11:30 - 12:00 will continue to keep a lookout for uh last but not least I know many of you invest in the Singapore banks for dividends um there has been one of the key support for their share prices and we will look at what is the outlook for their dividends as well okay so remember three things net interest margin fee income as well as dividends okay so we'll go through each of them in a bit more detail uh in case you have not actually followed the
12:00 - 12:30 earnings for the Singapore Banks I have actually summarized it and put them side by side so that we can analyze which bank has actually done better and what does it mean for them going forward okay so first and foremost is the total profit in 2024 uh versus 2023 the key thing to know here is that the banks reported record profit last year uh for DBS it was close to 11% growth in its net profit as we see in the column on the left Okay then if
12:30 - 13:00 you look at ocbc is 7% growth in the total uh 7% growth in its total income and 8% growth in its net profit and then if I'm looking at U uh that is 6% growth in his net profit okay so all of them having fairly healthy growth in terms of his net profit and has come true from both net interest income as well as the non-interest income uh what is also interesting for me from this chart is
13:00 - 13:30 that the non-interest income has grown at a faster Pace compared to the net interest income and there something that I'll will go through in more detail later okay so the non-interest income will include some of the fee income that I discussed earlier and that is helping to support the Singapore bank's earnings okay if I look at the fourth quarter of 2024 versus the fourth quarter of 2023 uh likewise we see the continued
13:30 - 14:00 momentum in terms of his net profit growth uh once again with DBS leading the growth compared to U and ocbc okay so first and foremost uh we always start with the top line which is the loan growth because as a bank we want them to be able to grow their loan book uh which is actually one of the key profit drivers okay so this is what we see for the loan growth for 2024 uh all three Singapore Banks recorded
14:00 - 14:30 single digit loan growth uh DBS at about 3.5% and then for uh ocbc it went up to about 7.6% okay so earlier I shared that Singapore's economy grew by uh 4% in 2024 and typically what we see is that the loan growth would be in line with the GDP growth okay so that is my first observation from this chart uh the other key thing to note is that uh if I was to
14:30 - 15:00 look at the fourth quarter uh effectively uh there is still some form of loan growth compared to the third quarter uh but effectively the pace of growth has slowed down okay so uh that is something that we need to be mindful about in understanding that the pace of the loan growth has actually slowed down for the Singapore Banks okay the next thing that I mentioned is something that I will keep a very close lookout for is the net interest margin okay so this is
15:00 - 15:30 effectively the margin that the banks can make for giving out the loans okay so uh given the fall in interest rates uh the concern is that the banks would actually face lower net interest margin uh because they are no longer able to give out uh some of these loans as at as high uh interest rate compared to in the past okay so uh what we see here is that
15:30 - 16:00 uh for DBS actually it has been able to maintain its net interest margin in the fourth quarter it was at 2.15% in fact improving from where it was in the third quarter which was 2.11% okay if I compare dbs's net interest margin to the previous year 2.13% that represents an improvement as well so despite all the cut in US Federal Reserve interest rate the concerns around whether that will lead
16:00 - 16:30 to a decline in the Singapore bank's net interest margin uh for DBS it has actually been able to maintain its net interest margin at the 2.1 to 2.15% level okay so uh a good job by the company in terms of being able to sustain the net interest margin there but if I look at U and ocbc then it tells us a different story uh U be uh fourth quarter net interest margin 2% then uh that is a fall from where it was
16:30 - 17:00 in the third quarter as well as the fourth quarter of 2023 uh for ocbc that is where we have seen the most decline in the net interest margin uh 2.15% in the fourth quarter compared to 2.18% in the third quarter and 2.29% just one year ago okay so that probably explains the Divergence that we have seen in the share price of the Singapore Banks because uh the
17:00 - 17:30 ability to maintain the net interest margin is very important and we have seen DBS being able to do that more than UOB and ocbc okay uh so that was the net interest margin which is the first key factor that I mentioned I'll be keeping a lookout for uh but apart from their loan book uh what the Singapore banks have also done a lot in the past few years is to grow their nonin income okay so uh we see that in terms
17:30 - 18:00 of some of the fee related income um and this is what we have for DBS uh effectively the net fee income has grown um such that in fy2 24 the net fee income was at 4.2 billion compared to 3.4 billion in the previous year okay so that is something that is helping to support his profit while the net interest margin has been stable the
18:00 - 18:30 strong growth in the net fee income has actually helped to push up its profit okay likewise we see that for U uh if I to look at the uh fee income 3.2 billion in 20124 compared to 2.8 billion in 2023 uh that represents a 11% increase uh big part of that is driven by the wealth related fee income uh reaching 700 million in 202 24 from about 600
18:30 - 19:00 million in 2023 okay and likewise a similar story for ocbc uh if you look at the wealth management uh fee income in 2024 931 million uh once again a sharp increase from where it was in 2023 okay so this is helping to offset the decline in its net interest income and helping to boost the company's net
19:00 - 19:30 profit okay so the question is what is helping to boost um the wealth related fee income for the Singapore Banks uh if you go around Singapore you probably find a lot of their advertisements around uh their private banking offering around being able to do a lot of new transactions that you may not be able to do with them in the past and as um the uh consumers put in more of their wealth
19:30 - 20:00 uh with the banks it is helping to grow their assets under management okay so that is what we see for DBS 426 billion of assets under management as of December 2024 um compared to in June that was at about 396 billion so in the period of about half a year they managed to grow their asset under management by about 30 billion okay uh we have seen similar growth for ocbc and doob even though it
20:00 - 20:30 may not be at the same PA of growth like what we saw for DBS okay so as their assets under management grows uh they able to earn more wealth related fee income uh with the uh assets that have been placed with the Singapore Banks okay so um again if you're asking why DBS has done better than UOB and ocbc uh this is one of the factors as well in that because they've been able to
20:30 - 21:00 grow their assets under management by a more significant amount they have also been able to grow their wealth related fee income by a greater amount okay uh the next part would be a question that I sometimes get which is whether um we see that banks have a deteriorating loan book so you may have read in the newspapers that oh maybe there are restaurants that are shutting
21:00 - 21:30 down in Singapore uh maybe some of the small and medium Enterprises may not be doing as well so is that causing an increase in bed Deb for the Singapore Banks okay uh that is not what we see based on the reported nonperforming loans so uh the non-performing loans has been pretty much flat for all three Singapore Banks um and I think that reflects the uh decent economic growth environment that we are in that because the GDP growth was at about 4% last year we
21:30 - 22:00 have not seen a very sharp increase in terms of the nonperforming loans for DBS UOB and ocbc as yet okay so the next point that many investors would be looking at would be the dividends I think this is one good news for investors of the Singapore Banks uh we have seen an increase in the dividends paid out by DBS UOB and CBC and at the same time a share buyback
22:00 - 22:30 program uh that can continue to help to support the share price okay so this is a summary of the dividend announcement uh for DBS quarterly ordinary dividend per share of 60 cents uh they also announced a capital return dividend of 15 cents per share per quarter in 2025 okay and then earlier last year they announced a three billion share byb program uh for U we saw for the total ordinary dividend per share increased to
22:30 - 23:00 180 in 2024 uh theyve also announced a special dividend per share of 50 cents in 2025 as well as a two billion share by program uh for ocbc total ordinary dividend per share of 85 cents special dividend per share of 16 cents and a 2.5 billion Capital return over the next two years okay so across the board an increase in the dividends potential special dividends as well as share by
23:00 - 23:30 Bank programs okay so if you're wondering why can the banks give out such generous dividends is that something that is sustainable uh I will effectively look at this chart okay which gives me a good idea around why the banks have been able to pay out such attractive dividends uh one of the key metrics for the banks that are always look at would be the return on equity which is the right bar in this chart uh for DBS it is at
23:30 - 24:00 15.8% uh uov 13.3% ocbc 11.8% okay so this return on Equity tells us uh how effective it has been in making its capital make money for the bank and a higher return on Equity represents that the bank has been able to make more profit out of its existing capital okay so for DBS very strong in 2024 uh 16% and with the very high
24:00 - 24:30 profit that is generated it is hence able to pay out a higher dividend okay uh while U and ocbc Roe is lower at a double digit Roe of above 10% uh that is still a very healthy Lev which is helping to support the dividend payoff okay uh the next thing to keep a lookout for is this thing that is representing how much Capital it has on balance sheet uh this is measured by ct1 ratio uh we
24:30 - 25:00 don't need to know exactly what this ct1 ratio is how it's being calculated we'll leave that to the professional analyst uh but what this effectively tells us is that whether they have got sufficient Capital to be able to perform their different banking activities okay so for DBS and ocbc at about 17% ocbc uh you at 15.5% uh when I just check the uh Global Benchmark before uh this webinar it is
25:00 - 25:30 at about 133% so what this represents is that the banks in Singapore are very well capitalized they have decent amount of capital on their balance sheet uh if this is not something that the bank intends to actually use then they can return some of this Capital to investors in the form of the potential special dividend or looking at different ways to be able to manage their capital better okay so if you once again thinking about
25:30 - 26:00 why DBS has performed better than UOB and ocbc I hope this chart uh gives a good idea as well uh first and foremost we see that dbs's Roe is higher than U and ocbc and then at the same time it has got a very strong Capital position that also allows it to take on different Capital Management activities okay so this is what we see for the bbs's uh dividend per share uh
26:00 - 26:30 in 2024 a total of $222 uh fourth quarter it was increased to 60 cents per share uh compared to 54 cents per share in each of the previous three quarters okay so if I just uh look at 60 cents in the fourth quarter uh if I to think about it being able to maintain 60 cents and that continues through to 2025 uh debt is going to be $240 potentially worth of dividends uh
26:30 - 27:00 on top of it he has announced the 15 cents per share uh per quarter of his Capital return dividend so that can potentially bring up his total dividend in 2025 to $3 per share okay next we look at U also likewise an increase in dividend I mentioned earlier 180 for the full year of 2024 uh interim of 88 cents final of 92 cents uh so once again increasing
27:00 - 27:30 compared to the previous year okay on top of that is announced a 50 cents special dividend for 2025 so if I to add this 180 with 50 cents uh that gets me to potentially $230 worth of dividend okay uh last but not least OC CBC um inim dividend of 44 cents uh final dividend of 41 Cent uh so that would represent a total
27:30 - 28:00 ordinary dividend of 85 cents okay so the company has calculated debt based on the payout ratio of 50% uh then on top of it there is a special dividend uh which probably good news for shareholders of another 16 cents and in total $11 uh which would bring the total p ratio to 60% which is an increase from the previous year okay so across the board we see an increase in dividends as
28:00 - 28:30 well as more commitment towards uh potentially pay out more dividends in 2025 okay so here's a quick recap around uh why the Singapore banks have done well uh first and foremost we see that the net interest margin has been more resilient than expected uh even though the FED has started cutting interest rates uh we see that the net interest margin has been largely stable particularly for
28:30 - 29:00 DBS next uh while the net interest margin uh has been flat they have been able to grow their fee income to be able to offset that okay so a large part of that coming true from the uh increase in wealth management fee income as they help more consumers to be able to manage their wealth and with the higher profit we have also seen the Singapore Banks hiking their dividends and taking on different capital management initiatives
29:00 - 29:30 okay so if you're asking oh uh what is driving the Improvement in the share price of Singapore Banks I would actually attribute it to these three key reasons okay so having done a recap of the Singapore Banks I think the next question that we'll probably be asking ourself is what next that we can look forward to and what are some of the key things that I would be
29:30 - 30:00 tracking okay so if you recall what I mentioned earlier uh if there going to be one key takeaway for all of us from today's session um it is really these three key drivers that I will keep a lookout for uh the first is the net interest margin the next is the fee income and the next is the dividends and Capital Management okay so we'll take a look at what the banks have shared in terms of the Outlook across some of these key key drivers that are be looking
30:00 - 30:30 at okay so what is the outlook for 2025 uh this is the guidance that is provided by the Singapore Banks okay we start with DBS um they expect steady net interest income okay so while there might be a slight decrease in the net interest margin um the loan growth can potentially offset that okay so even though we have seen the FED cutting the interest rates um they still being conf that the net interest income Can Be
30:30 - 31:00 steady okay so that might help to provide some comfort for investors who are concerned around whether the interest rate Cuts would actually impact the net interest income of DBS okay next we move on to U um guidance for 2025 total income to be higher than 2024 uh once again they expect High single digit loan growth and double digit fee income growth okay so like what we saw for 202 4 um the loan
31:00 - 31:30 growth will be single digit and with the growth in the Fe income they confident that they can grow their total income uh last but not least for ocbc um this is where the Outlook may not be as positive compared to DBS and UOB uh the net interest margin is expected to come down to about 2% uh once again that would be partially cushioned by the loan growth uh but at the same time you also expect uh the cost to income ratio to
31:30 - 32:00 rise to the low 40% range okay so I think overall most of the banks are expecting that 2025 uh would present for them something that is fairly stable compared to 2024 uh while the net interest margin might be under pressure uh they can potentially offset that with the loan growth as well as continued growth in the fee income Okay so so naturally as investors we want to know whether the stocks are
32:00 - 32:30 overpriced underpriced fair value uh so one of the charts that I'll keep a lookout for uh would be the price to book valuation of the Singapore Banks okay so for the banks I look at the price support ratio uh because that is a reflection around the valuation of the bank and it's a commonly used measure for uh the banks globally okay so what we see here uh DBS at two times Price to Book uh that is above the historical
32:30 - 33:00 average of 1.2 times Price to Book uh you'll be at uh 1.35 times and once again that is above the historical average price to book ratio of U okay one commonly asked question that I get is how do I get the latest valuation chart of the Singapore Banks so that's what I'm going to show you next and then we can go through some of this charts in more detail Okay so you can scan this QR code and I will bring you to beIN
33:00 - 33:30 Sprout's website where we have the latest valuation charts for the Singapore Banks okay so uh atmin has actually um shared the link with everyone here um effectively you can get the DBS UB and ocbc dividend chart uh I'll run through some of the key metrics as well uh so we have summarized
33:30 - 34:00 it for you here uh the share price range of the Singapore Banks whether is it closer to the high to the low how have they actually performed compared to the market uh you can get a snapshot around their dividend and some of their key financials okay I'll jump to the valuation section okay so I mentioned the price to book chart earlier uh so uh if you see volatility in the Singapore Bank share price you want to get the latest valuation uh this charts are updated based on the latest price of the
34:00 - 34:30 Singapore Banks okay so what we see here DBS at 1.97 times Price to Book given that the share price has done very well over the past few months okay so that is higher than the historical average of 1.2 times uh the other thing you might want to do is to cross check that with the price to earnings valuation uh so likewise we have that as well um so while the price to the book valuation for DPS is at a high uh for PE ratio
34:30 - 35:00 actually is looking more reasonable at 9.5 times which is in line with the historical average okay so why is that the case that is because uh DBS earnings has actually grown a lot in the last few years such that even though the share price is at an all-time high uh the p ratio is actually not at such an elevated level okay next uh I'll go on to look at
35:00 - 35:30 UOB okay so U share price is so close to alltime High um and then if I was to jump to the valuation chart okay I start with the price to book 1.35 times Price to Book which is above the historical average of about one times Price to Book okay if you're wondering why does DBS trade at a higher valuation compared to U uh earlier if you recall I showed the return on Equity chart for DBS UB and ocbc and Banks which are able to
35:30 - 36:00 generate a higher return on Equity typically command a higher price to book valuation okay so uh this is what we see for UOB Price to Book again we can cross Che with the price to earnings ratio so for U the price to earnings is at 9.3 times currently uh which is once again in line with the historical average okay last I'll move to
36:00 - 36:30 ocbc okay so once you again jumping to the valuation chart a price book 1.3 four times so quite close to uh U and once again that is above the historical average okay and then if I look at the price of earnings ratio um for ocbc just slightly above the historical average uh that's because if you recall what we saw for the earnings earlier uh ocbc earnings did not actually grow as much
36:30 - 37:00 as what we saw for DBS which is why the PE Ratio is more elevated compared to its historical average okay so you can bookmark these pages and come back to check uh frequently if you want the latest Price to Book and price to earnings ratio for the Singapore Banks okay next I'll move on to the dividend yield uh I'm sure many of you here are Income investors uh who look at the Singapore banks for the dividend ELD
37:00 - 37:30 that they are able to provide okay so what we see here is that for DBS 5.2% EOB 4.9% and both of them are above the historical average divid yield okay um so once again I'll move over to the pinp website uh you can scan this QR code as well to be able to go to the website or go to the links that's been shared by the Admin Okay so I'll show you where you can get the latest dividend chart
37:30 - 38:00 and how to look at some of these charts okay so once again I'll start with uh DBS okay so go to Dividend okay so some of the key metrics here have been summarized for you including the forward dividend yield current dividend yield historical average dividend y bu uh we have data including uh the most recent
38:00 - 38:30 dividend payout so I mentioned earlier 60 cents per share uh X date uh coming up on 7th of April uh so you can keep track of some of these dividends uh with this pitch as well okay um I often get question on what is the difference between the current dividend yield forward dividend yield uh so on our site we use the forward dividend yield that is based on the average forecast but analyst who are covering DBS stock okay
38:30 - 39:00 so this is a number that is compiled by Yahoo finance uh they'll take the dividend forecast of all the Brokers and average debt to come up with the consensus average dividend per share expectation for the coming year okay so from that and based on the current share price we are able to then find out what the forward dividend yield of individual banks are so what we see here uh based on what the analyst are expecting in general uh
39:00 - 39:30 5.2% dividend yield uh which is above the historical average dividend yield of DBS okay uh we can look at the other Banks as well to see whether uh it is above the historical average so I'll move to UOB okay so uh U slightly lower dividend yield of uh below 5% based on the average analyst forecast uh and this is also above the historical average
39:30 - 40:00 dividend yield of UOB okay so last but not least uh ocbc okay so what we see for ocbc dividend yield uh 4.8% close to what we have for U and that is once again above the historical average dividend yield of ocbc okay so even though the share prices of the Singapore banks have done well uh the price of boook ratio is higher than the historical average but
40:00 - 40:30 if you were to look at the price of earnings ratio of the Singapore Banks if you were to look at the dividend yield of the Singapore Banks then that might actually provide some offsetting Factor towards the valuation of this stocks okay so I'll go back to my slides and have a further discussion around the dividend yield okay so earlier if you look at um the numbers that analyst are FOC for casting uh we see that the expected dividend yield for DBS is 5.2%
40:30 - 41:00 the expected dividend yield for UOB is 4.9% so once again that explains why DBS has done better than UOB and ocbc uh because they also pay out a higher dividend yield okay but if you recall what I shared earlier uh the Singapore banks have announced potential special dividends in 2025 so for DBS that is the capital return
41:00 - 41:30 dividend of 15 cents per quarter so that can potentially amount to 60 cents per year so if I were to time four of the 60 cents quarterly dividend in the fourth quarter add in the capital return dividend of 60 cents I would be potentially looking at a total dividend per share of $3 and using uh DBS share price uh that might actually bring us to a dividend yield of close to 5.9% oh sorry close to 6.6% for DBS okay
41:30 - 42:00 so that is significantly higher than what we see for U as well as ocbc okay U they have announced the additional 50 cent special dividend as well so if I to add that to the ordinary dividend I might be potentially looking at the dividend yield of 6.2% and for ocbc if they were to keep to their um payout ratio of 60% then that might potentially suggest a dividend yield of
42:00 - 42:30 5.9% okay so still fairly attractive dividend year for the Singapore Banks uh especially if I were to compare that to some of the other Alternatives in the market okay so I know many of us look at say the Singapore reads uh we may look at the SDI for dividend yield or maybe the Singapore savings bond so we can compare the dividend yield for the Singapore Banks uh versus some of this instrument so we start with the reads uh given that the share price of the reats have come
42:30 - 43:00 down sharly um the average of the 41 reads on the sjx is at about 7% um so it is higher than the Singapore Banks um but that is something that may then come with potential risk around the property assets okay next we come to the STI index uh which is a benchmark of the 30 largest names in the Singapore Market a big part of that is the Singapore banks in the STI index but on average the dividend yield is
43:00 - 43:30 4.6% okay so we see a higher dividend yield for the Singapore Banks versus The Benchmark STI index okay last but not least we compare to the 10year Singapore Government Bond uh currently at about 2.7% so once again the potential dividend yield of the Singapore Banks is above the 10year Singapore government bond yield Okay so uh it is now 8:15 I've come to the end of my prepared
43:30 - 44:00 presentation I know many of you have joined tonight's webinar to be able to ask your questions so if you have got any questions uh do put them into the uh Q&A box or into the chat and I'll be happy to take your questions okay so once again if you have got a question uh you can put it into the Q&A box or you can actually just leave us a
44:00 - 44:30 question in the chat okay I see some questions coming in so thanks so much for the questions okay so I believe quite a number of the questions relate to actually asking about which of the banks is preferred uh is it too late to buy the Singapore Banks uh how do we think about the dividend yield for the sing Banks okay so maybe I will answer the
44:30 - 45:00 question around the dividend U first and then with that we can then discuss how I'll compare between the different banks okay so I think if you look at some of the key drivers so going back to the three key things that I mentioned earlier the first is the net interest income the second is the fee income and the third one is the ability to pay out dividends so the ability to pay pay dividends would be supported by whether it is
45:00 - 45:30 making a good profit and whether it's got sufficient capital okay so if I to look at 2025 uh given the Outlook that we see uh if the Singapore GDP growth were to be between one to 3% that means that the banks are still able to grow their loan book um the net interest margin might come down slightly but that can be potentially offset by the growth in the fee income for the Singapore Banks okay so that is why the banks are expecting that the profit can remain fairly stable
45:30 - 46:00 going to 2025 okay at the same time if I to look at the capital ratio uh we have seen that the banks are very well capitalized based on the measure that I shared earlier which is the ct1 ratio uh for DBS and ocbc at close to 177% even though the global Benchmark is just at about 133% okay so if that is the environment that we are looking at stable economic growth the ability for them to be able to maintain their net
46:00 - 46:30 interest income um while at the same time growing their fee income then what this translates to is that uh maybe the dividend can be sustained which is why they have actually uh raised the dividend in the most recent results while at the same time committing towards a special dividend okay so I think that would hopefully answer the question towards the dividend for the sing four Banks okay then I guess going to the question around then how do I
46:30 - 47:00 think about the different banks uh hopefully from the comparison that I've done earlier uh that will give you some idea around how each of the different banks are doing uh so going back to again the key drivers uh DBS is the one that's been best able to maintain their net interest margin compared to UB as well as ocbc in terms of the fee income uh DBS has also been the one that has been able to grow its wealth related fee income
47:00 - 47:30 more than UOB as well as ocbc uh if I look at it from a dividend yield perspective likewise uh DBS is expected to give a higher dividend compared to Y and ocbc okay so you can do this comparison uh you can look at some of the latest metrics that on our site and hopefully that will give you an idea around which of the three Banks would actually be performing
47:30 - 48:00 better okay uh I see some questions in the webinar chat as well so I'll jump to the questions in the webinar chat okay uh how are the p ratio of major Singapore Banks compared to their Global counterparts in UK US China how to justify the differences okay so uh the price of ratio is one of the metrics that we can use uh but this uh question from Brian is a very good one because price to earnings is another key metric that we
48:00 - 48:30 often use to compare the valuation of Banks and the good thing about price to earnings ratio is that you can compare them with the historical average as well as across the different banks within the same sector so if I to look at the price of earnings ratio of the Singapore Banks uh earlier I shed that uh they are actually at a high single digit level uh and they are actually close to the historical average while the share prices are at all-time highs because
48:30 - 49:00 they have grown their profit to be at record levels as well which is why the p ratio is actually not at an elevated level okay uh the p ratio I would say would be broadly in line with some of the other developed Market Banks uh typically when we look at the p ratio uh investors would divide them between developed markets as well as Emerging Markets because for developed markets the perceived risk is actually lower uh
49:00 - 49:30 the risk of potential uh corporate governance uh the risk of policy would be significantly lower compared to Emerging Markets okay so if I to compare that with some of the developed markets like us and UK then the Singapore Banks would broadly be trading in line okay uh we might see the Singapore Banks trading at a slight premium compared to other markets uh if that's the case it's often Justified on the basis that uh because
49:30 - 50:00 Singapore is a well-regulated market uh there are very established Frameworks around how the banks are actually regulated so that can provide an additional layer of comfort to investors uh who are investing in the Singapore Banks okay um I see this question around us recession and I think that's something that I want to talk about as well
50:00 - 50:30 because I see questions around then should we be buying Singapore Banks and I think that is one aspect that I would like to cover in that the Singapore Banks Shares are actually very Cal in nature uh while they have actually done well over the past few months uh that is also because we have seen the global economy being very strong over the last few years so as I Shar earlier Singapore GDP grew by 4% last year so that has helped to support the Singapore Banks
50:30 - 51:00 earnings performance but if you to see a potential us recession coming if there's going to be a very sharp slowdown in global GDP growth um then that is something that can affect the outlook for the Singapore Banks so how will it affect the Singapore Banks um if there's going to be a sharp economic slowdown their loan growth would actually weaken as well okay because if there's going to be a us recession uh that may mean that
51:00 - 51:30 investors uh or consumers may not actually be borrowing as much uh whether is it to buy a home or for their other big ticket items businesses are not going to be borrowing as much for their spending purposes as well so the loan growth will slow down okay their net interest margin would potentially come down as well because if there's a US recession the FED will probably cut interest rates very sharply and that will once again put pressure on their net interest margin okay we have
51:30 - 52:00 seen very strong growth in their fee income over the last few years uh that's because also the global Capital markets have been very strong uh before the recent correction in US Stocks uh we have seen the US market going to all-time highs uh so that's also helping to grow its wealth management business uh because we see more activity amongst consumers in the capital markets okay so if there's going to be a Slowdown uh the consumers will likely cut back on their
52:00 - 52:30 uh wealth management and investment activity and that may pressure the fee income as well last but not least I mentioned the credit cost uh so far they don't have much non-performing loans if there's going to be a sharp us recession then what this means is that some businesses May then face pressure in terms of repaying their loans and with that we might see an increase in the non-performing loans so all of that is going to pressure the earnings of the
52:30 - 53:00 Singapore Banks um and if that's going to happen then the share price of the Singapore Banks can potentially weaken so going back to the question around uh is it a good time to be buying Singapore Banks uh should we be buying Singapore Banks now I think that is definitely one of the key race we need to be mindful of uh so while for those who are looking at Singapore banks for dividends the dividend yeld is fairly attractive but I I think underlying the Singapore Banks is always that they are very subject to
53:00 - 53:30 the global economy and if we are uh investors who are concerned about some potential slowdown in the global economy and how that will impact the Singapore Banks then maybe uh such a cyclical sector might not be the sector that you want to be looking at okay um I see some additional question questions uh okay I see this question around the rate Cuts so I think
53:30 - 54:00 a number of macro questions I see one question on R Cuts one on trade tariffs um so those are good questions um because of the fact that I think it's always important to look at the global and how that will affect the performance of the Singapore Banks okay so in terms of the impact from impending rate Cuts uh will the share price of all this Bank share to decline uh does it makes sense to sell them first okay so first and foremost if there are R cards uh what
54:00 - 54:30 this is likely to do is that the net interest margin will likely be under pressure um which is what we have already seen for ocbc in 2024 okay but at the same time if you are looking at the moderate pace of rate Cuts so current expectation is potentially for tribit cuts in 2025 um then what the banks hope to be able to do is to be able to offset some of this pressure on net interest margin
54:30 - 55:00 with potentially still some degree of loan growth or at the same time being able to grow their fee income further okay so it doesn't necessarily mean that with free cards uh the share price of the banks will necessarily come down uh but I think it will potentially impact their net interest margin the question is just whether they can grow their other earnings strong enough to to be able to offset the pressure on their net interest
55:00 - 55:30 margin okay uh question on how us trade tariff will affect the local banks so once again if there are going to be more trade tariffs uh what this may potentially mean is that the global economy will slow down because if they're going to be trade tariffs um what this means is that consumers may actually decide to spend less uh because you're not sure whether that is going to drive out inflation you're not sure whether that's going to drive a economic slowdown so consumers may actually cut
55:30 - 56:00 back on their spending which is what we have really seen in the US over the past few months okay and again if we are going to see a global slowdown that is going to impact the earnings of the Singapore Banks uh based on the few drivers that I Shar earlier uh the loan growth will slow down uh the fee income May potentially be impacted uh and at the same time if there's going to be a sharp economic recession uh they might see increase in their non-performing loans as well okay so this speal RIS are
56:00 - 56:30 definitely things that we need to be aware of if we want to be investing in the Singapore Banks uh if you feel that there is a lot of uncertainty uh the economic Outlook is uncertain uh then maybe uh we might actually be more comfortable looking at other safer assets okay uh a few questions on ocbc dividends so I thought I'll probably explain this in more detail okay so I'll go back to the slides to share more about
56:30 - 57:00 ocbc okay so uh I think the question is uh people probably noticed that for ocbc the 500 dividend was at 41 cents uh compared to where it was in 2023 where the final dividend was 42 Cent okay so while the total dividend paid out in
57:00 - 57:30 2024 was actually higher at 85 cents compared to 82 cents if I to just look at the final dividend it is actually lower okay the total dividend including the special dividend is higher uh because that would include the additional 16 cent special dividend but the question is whether we should be worried about this uh for in the final dividend of ocbc Okay so I think first and foremost we need to understand how this 41 cents of final dividend came about uh because
57:30 - 58:00 ocbc has decided that it wants to maintain its payout ratio at 50% okay so what the payout ratio tells us is how much of his earnings is it paying out in terms of the dividend okay in the past it was between 42% and 49% in 2023 it raised it to 50% and in 2024 they have decided to keep that at 50% as well okay so given that the company has
58:00 - 58:30 decided that the p ratio is at 50% uh So based on the total earnings per share of ocbc uh we saw that it was able to grow the profit slightly in 2024 which is why they' have been able to increase the total dividend per share slightly for the full year of 2024 but because theyve already hied the interim dividend quite a bit from 40 to
58:30 - 59:00 44 cents so that is why when we to look at the final dividend announced in the second half it has come down slightly to just 41 cents uh should we be worried about this fall in dividend I think that then depends on the earnings outlook for 2025 um if the earnings were to be maintained then we can potentially look at ocbc being able to pay out the same dividend per share if it is keeping
59:00 - 59:30 the payout ratio at 50% okay but if the earnings were to come down and if they were to keep the ordinary payout ratio at 50% then what this means is that the ordinary dividend for ocbc might come down as well okay so then that goes back to the earnings Outlook that I shared earlier uh and I think for ocbc so far they have not presented as strong an Outlook compared to DBS and UOB uh
59:30 - 60:00 because they're expecting that the net interest margin might come down further to about 2% and that effectively you are looking at an increase in their overall cost to about 40% okay so uh it is definitely trying to offset some of this hit wins by growing its other earnings such as it fee income but if it is not able to do so and if it maintains the payout ratio at 50 % then the ordinary dividend for ocbc might be under
60:00 - 60:30 pressure okay I hope that answers the question on ocbc okay uh I see one question on the share buy back okay um my share by be carried up by the next financial year okay so the banks have committed to some degree of uh share buyb but they have actually a mandate that allows them to
60:30 - 61:00 carry out the buyback over a number of years I think what the banks generally do is they will be more aggressive in the buyback when the share price is lower and maybe if the share price is at the current level they may not be as aggressive in terms of the share buy back okay so they have Dem mandate from the shareholders to be buying back the shares um and I think in terms of when they will carry out this buyback they can
61:00 - 61:30 effectively decide when is the best time to be doing so okay uh let me see if there any final questions okay uh if there are no final questions I'll just do a quick recap uh BAS based on what I have discussed so far okay so I'll just go back to the
61:30 - 62:00 slides um I have a quick round up here in that I think while there are a lot of questions around whether it is time to be buying the Singapore Banks which of the banks is better I think there can always be a positive argument as well as risk that I'll be keeping a lookout for so in terms of the positives uh so far we have seen that the income for the banks have been strong and that is something that has helped to support the
62:00 - 62:30 earnings for the Singapore Banks especially as they grow their wealth related business next we have seen that the Singapore banks have a very strong Capital position so that allows them to be more active in terms of their Capital Management whether is it to pay out potentially higher dividends or to embark on the share byb program that has been announced okay and then last but not least when I look at the dividend year bu for the Singapore Banks compared that to the Singapore Market or the 10e
62:30 - 63:00 Singapore Government Bond then that is higher at this point in time okay but from the Q&A session I think many of you asked about the risk including whether what will happen to the banks if there's going to be a us recession if that's going to be tariff War if there's going to be other macro weakness so here it is important to note that if the interest rate cut by the US Federal Reserve is sharper than expected then this may
63:00 - 63:30 impact the net interest margin for the Singapore Banks okay if there's going to be an economic slowdown or recession it may lead to a Slowdown in the loan growth as well as an increase in the non-performing loans of the Singapore Banks okay and then last but not least if I don't look at the dividend yield but just look at the price to book valuation um then the price to book valuation of the Singapore Banks is currently higher compared to the historical average last but not least if you uh want to get updates around the
63:30 - 64:00 Singapore Banks I've shared with you where you can get the latest valuation charts um and if you want the latest insights on not just the Singapore Banks uh but Singapore stocks bonds weats ETF uh do follow us on our different social media channels and we will be updating you on some of this opportunities in the Singapore Market okay so with that uh I would like thank you for joining our webinar tonight uh you know where to find me in our different social media
64:00 - 64:30 channels so feel free to reach out if you have got any further question and I would look forward to you joining us in our future events thank you so much and have a good evening see you by