DBS, OCBC or UOB: Which Bank Did Best on Q2 Earnings?

August 19, 2022

Dividend investors in Singapore love their bank stocks. That’s because the big three banks here are reliable payers of dividends.

DBS Group Holdings Ltd (SGX: D05) – Singapore’s largest bank – pays a dividend every quarter.

The other two – Oversea-Chinese Banking Corporation (SGX: O39), also known as OCBC, and United Overseas Bank Ltd (SGX: U11), more commonly known as UOB – pay out dividends twice a year.

All three banks reported their Q2 and H1 2022 earnings in late July/early August. On the whole, the results came in ahead of expectations.

But which Singapore bank stock out of DBS, OCBC and UOB did the best? And which one should dividend investors be focused on after the latest earnings? Let’s dig deeper to find out.

OCBC leads the way on NII and NIM growth

For many watchers of Singapore banks, the good news on net interest margin (NIM) and net interest income (NII) was widely expected.

That was that both NII and NIM expanded for all banks given the rising interest rate environment in the US.

While DBS recorded the largest absolute NII figure of S$2.45 billion for Q2 2022, it was OCBC that edged it in terms of its NII increase.

That’s because OCBC saw a 13% quarter-on-quarter increase for its NII to S$1.7 billion for the second quarter.

This figure was ahead of DBS’s 12% increase and UOB’s 9% expansion over the same time period.

Meanwhile, a faster-growing NII also translated into a bigger quarter-on-quarter bump for OCBC’s net interest margin (NIM).

The bank notched up a 16 basis point (bp) increase in its NIM in Q2 to 1.71%, up from 1.55% in the first quarter.

DBS saw a 12bp increase quarter-on-quarter in NIM to 1.58% while UOB only saw an NIM expansion of 9bp quarter-on-quarter to 1.67%.

Dividends up for OCBC and DBS

Given the importance of dividends among the bank stocks, it’s important to monitor their payouts.

On this front, OCBC announced an H1 2022 dividend per share (DPS) of 25 Singapore cents. That was up 12% year-on-year from the same period in 2021.

For DBS, although it pays a quarterly dividend, on a year-on-year basis Singapore’s biggest bank saw its DPS climb 9.1% year-on-year to 36 Singapore cents. That was up from its DPS of 33 Singapore cents in Q2 2021.

What about UOB? Well, the bank – perhaps disappointingly for shareholders – did not raise it H1 2022 interim dividend. It kept its first-half DPS flat at 60 Singapore cents, the same as the first half of 2021.

For all three banks, their dividend payout ratios are in a very reasonable range of 45-50%. That suggests to investors that all of the banks are being responsible with how they pay out their dividends.

DBS top dog in terms of ROE

For any investor in banks, one key metric to watch is Return on Equity (ROE). That’s because it measures how efficient a bank is at utilising its capital to generate returns.

In that sense, DBS led the pack in terms of its ROE for the second quarter of 2022. Singapore’s largest bank had an ROE of 13.4% during Q2 2022.

That was up from 11% in Q1 2022 and 12.5% for the whole of FY2021.

As for OCBC, it had an ROE of 11% in its H1 2022 while UOB had an ROE of 9.9% in H1 2022. On the whole, DBS has historically had a higher ROE than its other two competitors.

Solid set of results as OCBC edges it

Overall, it was a solid set of results for all the banks. For investors looking at just the latest set of earnings, it could be said that OCBC outperformed the most.

Meanwhile, DBS is probably best-positioned to benefit from higher interest rates in the second half of 2022.

As for UOB, it had another solid first half of 2022 but guidance on fee growth that was revised downwards (to single-digit growth from high single-digit previously) could have weighed on sentiment.

Dividend investors who are looking for reliable SGX stocks for passive income, though, can be happy picking up shares of any of Singapore’s big banks.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of DBS Group Holdings Ltd.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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