In Singapore’s stock market, the three major bank shares are DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39), and United Overseas Bank Ltd (SGX: U11). After peaking in April this year, the three banks have seen their share prices decline by around 20% each from their respective highs.
The recent fall in DBS Group, OCBC, and UOB’s share prices may have led to some investors wondering which bank they should consider investing in now. There’s no easy answer, but I want to directly compare the important business and valuation aspects of the three banks in a mini article-series.
This article is the first in the series and it compares the most recent quarterly earnings updates of the banking trio. The objective is to find out which bank reported the best results.
Let’s begin with DBS Group. For 2018’s second quarter, DBS Group reported that total income grew by 10% from a year ago to S$3.20 billion. Net interest income (income from loans) jumped by 18% year-on-year to S$2.22 billion, driven by an improvement in net interest margin and loan volume growth. Similarly, net fee income increased 11% to S$706 million, led by growth in the wealth management and cards businesses. As a result, DBS Group’s net profit climbed by 20% to S$1.37 billion. DBS Group also declared an interim dividend of S$0.60 per share, up 82% from the S$0.33 seen a year ago. It was a good performance overall from DBS Group.
Next, I have OCBC. The bank experienced a 5% year-on-year increase in total income to S$2.47 billion in 2018’s second quarter. The total income growth was driven by net interest income, which grew 8% to S$1.45 billion on the back of higher net interest margin as well as loan volume. Non-interest income increased by only 2% to S$1.02 billion, but there was broad-based growth in that area of OCBC’s business. All told, OCBC’s net profit for 2018’s second quarter was S$1.21 billion, a record, and up 16% from a year ago. There was a higher dividend on the cards too, as OCBC declared an interim dividend of S$0.20 per share, up 11% from the interim dividend of S$0.18 per share for 2017’s second quarter. We can see that OCBC had produced a decent performance, but it was far from what DBS Group had achieved.
Lastly, let’s look at UOB. For the second quarter of 2018, UOB’s total income climbed by 11% year-on-year to S$2.34 billion. There was good growth in both net interest income (up 14% to S$1.54 billion) and net fees and commission income (up 11% to S$0.5 billion). These resulted in a solid 28% surge in net profit to S$1.08 billion. The interim dividend was also hiked by 43% from S$0.35 per share a year ago to S$0.50 per share. It’s clear that UOB had delivered a strong quarterly earnings update. What’s more, its growth rates for total income and net profit were the best among the three banks.
The Foolish conclusion
Looking at all the above, DBS, OCBC, UOB had all undoubtedly produced strong results in their latest quarterly earnings update. But, UOB was the cream of the crop with its higher growth rates. With that, stay tuned for the next installment of my series as I try to discover which bank share investors should consider investing in now – the latest piece will be coming soon! [Editor’s note: The second and final article in this series has been published. They can be found here and here.]
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommendations for DBS Group, Oversea-Chinese Banking Corporation, and United Overseas Bank.