Which Singapore-Listed Bank Had the Most Resilient Set of Q1 FY2021 Results?
This post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has close to 2,000 followers.
All 3 Singapore-listed banks (in DBS, UOB, and OCBC) have reported their business updates for the first quarter of the financial year 2021 ended 31 March 2021.
As a shareholder of all 3 banks, I have reviewed and posted a summary when their results were released. In case you’ve missed out, you can find them below:DBS: https://www.thesingaporeaninvestor.sg/2021/05/04/dbs-group-holdings-q1-fy2021-business-updates-key-highlights-and-my-thoughts/
In this post, I’ll be putting the 3 banks’ key financial results, as well as its key financial ratios side-by-side to find out which one had the strongest set of results for the current quarter under review. Also, you’ll learn about which bank is currently the ‘cheapest’ based on its current valuations.
Key Financial Results (Q1 FY2020 vs. Q1 FY2021)
In this section, you will find a comparison of the 3 banks’ key financial results for the first quarter of the financial year 2021 ended 31 March 2021, compared against that reported in the same time period last year – i.e. first quarter of the financial year 2020 ended 31 March 2020:
Net Interest Income:
DBS: Down 15.1% to S$2,107m (from S$2,482m in Q1 FY2020)
UOB: Down 4.0% to S$1,529m (from S$1,593m in Q1 FY2020)
OCBC: Down 11.4% to S$1,441m (from S$1,626m in Q1 FY2020)
Verdict: All 3 banks saw their net interest income recording declines compared to last year, which was pretty much expected due to the fall in interest rates. However, UOB saw the smallest percentage of decline (at just 4.0%), followed by OCBC (by 11.4%), and then DBS (where its net interest income fell the most – by 15.1%.)
Net Fee & Commmission Income:
DBS: Up 14.5% to S$953m (from S$832m in Q1 FY2020)
UOB: Up 23.9% to S$638m (from S$515m in Q1 FY2020)
OCBC: Up 7.1% to S$585m (from S$546m in Q1 FY2020)
Verdict: All 3 banks saw their net fee and commission income improved compared to last year, with UOB recording the highest percentage of improvements (at 23.9%), and OCBC recording the smallest percentage of improvements (at 7.1%.)
Other Non-Interest Income:
DBS: Up 11.5% to S$794m (from S$712m in Q1 FY2020)
UOB: Up 7.0% to S$319m (from S$298m in Q1 FY2020)
OCBC: Up by more than 100.0% to S$888m (from S$318m in Q1 FY2020)
Verdict: Just like its net fee and commission income, all 3 banks also saw improvements in its other non-interest income for the current quarter under review, and OCBC recorded the biggest percentage improvement – by more than 100.0%.
DBS: Up 72.4% to S$2,009m (from S$1,165m in Q1 FY2020)
UOB: Up 17.9% to S$1,008m (from S$855m in Q1 FY2020)
OCBC: Up by more than 100.0% to S$1,501m (from S$698m in Q1 FY2020)
Verdict: All 3 Singaporean banks recorded growth in its net profit, but OCBC saw the biggest percentage jump (by more than 100.0%), followed by DBS (by 72.4%), and then UOB (by 17.9%.)
Question: Which bank had the best set of financial results for Q1 FY2021?
Answer: Its a tie between UOB and OCBC – with the former coming out on top for recording the highest percentage of increase in its net fee and commission income, and at the same time, recording the lowest percentage of drop in its net interest income; for the latter, it came out on top for having the highest percentage of jump in its other non-interest income, as well as in its net profit.
Key Financial Ratios (Q4 FY2020 vs. Q1 FY2021)
In this section, let us take a look at some of the key financial ratios recorded by the bank for the current quarter under review (i.e. Q1 FY2021 ended 31 March 2021), compared against the previous quarter 3 months ago (i.e. Q4 FY2020 ended 31 December 2020) to find out which of the 3 Singapore bank had the most resilient set of financial ratios this time round:
Net Interest Margin:
DBS: Remained the same at 1.49%
UOB: Remained the same at 1.57%
OCBC: Remained the same at 1.56%
Verdict: All 3 banks saw their net interest margins remained unchanged from the previous quarter. Among them, UOB have the highest net interest margin, at 1.57%, followed closely by OCBC (at 1.56%) and then DBS (at 1.49%.)
Return on Assets:
DBS: Up by 0.62 percentage points (pp) to 1.25% (Q4 FY2020: 0.63%)
UOB: Up by 0.28pp to 0.93% (Q4 FY2020: 0.65%)
OCBC: Up by 0.37pp to 1.44% (Q4 FY2020: 1.07%)
Verdict: While all 3 banks saw an increase in their return on assets, DBS saw the biggest improvement (by 0.662pp), followed by OCBC (by 0.37pp) and then UOB (by 0.28pp.)
Return on Equity:
DBS: Up 7.7pp to 15.4% (Q4 FY2020: 7.7%)
UOB: Up 3.2pp to 10.2% (Q4 FY2020: 7.0%)
OCBC: Up 3.1pp to 12.4% (Q4 FY2020: 9.3%)
Verdict: Just like its return on assets, all 3 banks also saw growth in their return on equity compared to the previous quarter – however, DBS saw the biggest improvement (by 7.7pp). The bank also had the highest return on equity among the 3 banks (at 15.4%.)
Non-Performing Loans Ratio:
DBS: Down 0.1pp to 1.5% (Q4 FY2020: 1.6%)
UOB: Down 0.1pp to 1.5% (Q4 FY2020: 1.6%)
OCBC: Remained the same at 1.5%.
Verdict: All 3 banks saw their non-performing rates at 1.5% as at the end of the first quarter of FY2021.
Question: Which bank has the most resilient set of financial ratios?
Answer: DBS is the winner here, for recording the biggest improvement in its return on assets, as well as in its return on equity, compared to the other 2 banks.
Which Bank is Currently the Cheapest in Terms of their Valuation?
Now, let us take a look at which of the 3 Singapore-listed banks is currently the cheapest, based on their current valuations (from their current share prices as at 12.00pm on 07 April 2021), where I’ve gotten the data from ShareInvestor’s WebPro platform:
|** Dividend Yield||2.9%||2.9%||2.5%|
** Do take note that the yields are calculated based on the total dividend payout of $0.87/share for DBS, $0.78/share for UOB, and $0.318 for OCBC for FY2020
Looking at the table above, it seems that UOB is currently the ‘cheapest’ among the 3 banks as it has the lowest current P/B ratio, along with a joint-highest dividend yield.
On the other hand, DBS is current the most ‘expensive’ for having the highest P/E and P/B ratios among the 3 banks.
To wrap up, all 3 Singapore-listed banks delivered an improved set of results, and personally, there’s no clear winner here – as UOB and OCBC edged out for having the most improvements in terms of their financial results, while DBS emerged the winner for the most improvements in its key financial ratios.
In terms of which bank is the ‘cheapest’ currently, based on its current valuations (from its current share prices), UOB is the ‘cheapest’ among the 3 banks, and DBS being the most ‘expensive.’
As a shareholder of all 3 banks, I am optimistic of them recording an improved set in the coming quarters ahead – provided if the Covid-19 pandemic continues to remain under control, with normal business activities able to continue, and consumer sentiments improving.
With that, I have come to the end of my comparison of the 3 Singapore banks’ latest business updates. Here’s wishing you a great weekend ahead.
Disclaimer: At the time of writing, I am a shareholder of DBS Group Holdings Limited, United Overseas Bank Limited, and Overseas-Chinese Banking Corporation Limited.
Once again, this article is a guest post and was originally posted on Jun Yuan‘s profile on InvestingNote.
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