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The Remarkable Dividends of Singapore’s Banks

The Great Financial Crisis of 2007-2009 was a traumatic event for the global economy. Credit markets were frozen, stock markets were hit, and plenty of companies saw sales and earnings plummet. The hardest hit of all were likely to be the banks.

In particular, Western banks such as Citigroup, Bank of America, and Royal Bank of Scotland saw a huge reversal of fortunes during the crisis.

From a profit of US$3.6b in 2007, Citigroup turned in a debilitating loss of US$27.7b in 2008. In the same period, Royal Bank of Scotland’s £7.3b in profits became £23.7b in losses. Bank of America suffered a similar fate as it made a loss of US$2.2b in 2009, a marked difference from the US$14.7b it earned in profits back in 2007.

Needless to say, with such dismal performance, the dividends for those banks were either removed completely or slashed beyond recognition during the crisis, and have yet to recover.

Remarkable local dividends

But for investors of Oversea-Chinese Banking Corporation (SGX: O39), one of the publicly-listed local banks here in Singapore, the financial crisis might even have been seen as an inconsequential blip. That’s because it was the only local bank that managed to maintain its dividends through the crisis.

Its two other local peers, DBS Group Holdings (SGX: D05) and United Overseas Bank (SGX: U11), had managed the crisis admirably as well. Given the scope of the crisis, especially within the financial industry, it seems reasonable to say that a slight dip in dividends of 4.4% and 2.3% respectively for the two banks from 2007 to 2008 can still be considered a great achievement.


Dividends for OCBC*

Dividends for DBS*

Dividends for UOB*


S$ 0.184

S$ 0.58

S$ 0.60


S$ 0.23

S$ 0.71

S$ 0.57


S$ 0.28

S$ 0.68

S$ 0.614


S$ 0.28

S$ 0.65

S$ 0.6


S$ 0.28

S$ 0.56

S$ 0.6


S$ 0.30

S$ 0.56

S$ 0.6


S$ 0.30

S$ 0.56

S$ 0.6


S$ 0.33

S$ 0.56

S$ 0.6

*Dividend figures exclude special dividends

Source: S&P Capital IQ

Market beating returns

It’s also interesting to note that all three banks have also outperformed Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI), since the start of 2005 till today, despite the Great Financial Crisis that happened in between.


3 Jan 2005*

17 Dec 2013

Total Return













Straits Times Index




*Except for the Straits Times Index, prices for 3 Jan 2005 are adjusted for dividends, rights offerings, stock splits, and spin-offs.

Source: S&P Capital IQ

What’s the secret sauce?

This naturally leads to the question though, of how did the local banks do it? How did they maintain their earnings and dividends, and post market beating returns to boot?

While it certainly isn’t the only factor, the three banks’ consistent prudence in managing their risks through the use of low leverage even while a huge number of their Western peers were playing with fire would likely have a huge role to play in their corporate performance.

The local banks’ level of prudence is also currently evident in their capital adequacy ratios (a measure of the amount of ‘cushion’ a bank has on its balance sheet to withstand losses), which are all much higher than the requirements set by the Monetary Authority of Singapore, our country’s financial regulator.

Foolish Bottom Line

When leverage works during good times, gains are magnified. But when times are bad, it can kill. Highly levered Western banks raked in the money during a boom, but when the bust came, they imploded.

American billionaire investor Warren Buffett once wrote that “…Any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.”

Given what we’ve seen so far, it seems that the local banks really understand what Buffett’s saying and do take those words to heart.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.