SHAREHOLDERS of Singapore banks have more to gain ahead, as the local banking trio are looking to return capital due to their strong fiscal positions.
Amid another set of record-breaking results for the third quarter of 2024, the three banks have expressed their desire to use their excess capital, be it through acquisitions, share buybacks or dividends.
Shares of the trio rallied to all-time highs after the announcements. As at 2 pm on Friday, DBS was up 1.3 per cent at S$42.24, UOB rose 9.5 per cent to S$36.46, while OCBC gained 2 per cent to S$16.19.
Having applied new international standards for capital requirements under Basel IV, the three banks currently have Common Equity Tier-1 (CET-1) ratios above regulatory and historical levels.
DBS was the first mover, announcing a S$3 billion share buyback programme to be rolled out in the next few years. It will buy back shares in the open market and cancel them, in a bid to lower their excess capital and raise earnings per share.
The lender said it will continue to look at more ways to return the capital, given that it still had an excess of around S$3 billion to S$5 billion.
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Meanwhile, UOB’s management said they will find ways to take “full advantage” of the excess by the end of this year – it noted it had around S$2 billion to S$2.5 billion in excess capital to use.
On its cards are investment opportunities to take advantage of growth in the Asean region, or capital returns to shareholders, including share buybacks or higher dividends.
As for OCBC, its management said it prefers to give dividends over share buybacks to return excess capital to shareholders.
It is also looking to keep its excess capital as dry powder to support franchise flows and potential inorganic growth opportunities that may pop up.
OCBC did not disclose the amount of excess capital it has, but said it will maintain its CET-1 ratio at 14 per cent. Its fully-loaded CET-1 ratio as at end-September 2024 is 15.6 per cent, leaving around 1.6 per cent of its S$227 billion in risk-weighted assets that it can use.
The three banks posted third quarter results that beat consensus estimates.
DBS’ Q3 net profit rose 17 per cent to S$3.03 billion, from S$2.59 billion the year before, amid broad-based growth. This exceeded the S$2.76 billion consensus forecast among four analysts polled by Bloomberg.
UOB’s net profit for the third quarter rose 16 per cent to S$1.61 billion, from S$1.38 billion a year earlier, beating the S$1.51 billion consensus forecast from a Bloomberg survey of four analysts.
The lender saw record highs in net fee income as well as trading and investment income in the period.
Meanwhile, OCBC’s net profit for Q3 rose 9 per cent to S$1.97 billion, from S$1.81 billion in the previous corresponding period. The earnings beat the S$1.9 billion consensus forecast in a Bloomberg poll of four analysts.
This was underpinned by higher non-interest income and lower allowances.
DBS declared an interim dividend of S$0.54 per share for the quarter, unchanged from the previous quarter. UOB and OCBC pay out dividends semi-annually.
