Comprehensive Analysis of Financial Giants: Insights from OCBC Investment Research
Report Date: 16 December 2024
Broker: OCBC Investment Research
DBS Group Holdings Ltd – A Deep Dive
DBS Group Holdings Ltd, a major player in Singapore’s financial sector, has been making significant strides recently. With a strategic share buyback program commencing on 28 November 2024, DBS plans to repurchase SGD3 billion worth of shares. As of now, they have acquired approximately 4 million shares at an average price of SGD43.56, ranging from SGD41.84 to SGD44.95. This initiative is expected to bolster share price support in the near to medium term.
Financial Performance and Outlook
DBS showcased a robust performance with a 9-month net interest margin (NIM) of 2.13%, contributing to a 5% increase in net interest income (NII) to SGD10.7 billion for the first nine months of 2024. The wealth management division was a standout, showing a 47% rise in fee income to SGD1.7 billion. Assets under management (AUM) rose significantly by 14% from SGD353 billion in 9M23 to SGD401 billion in 9M24. Consequently, total income surged by 11% to SGD16.8 billion. Cost discipline remains strong with a cost-to-income ratio of 38.7%, and the return on equity (ROE) is high at 18.8%. The non-performing loans (NPL) ratio is a healthy 1.0%, and a 3Q24 dividend of 54 Singapore cents was declared.
Investment Summary
The share buyback program, coupled with recent 3Q24 results, is pivotal in providing share price support. Since the initiation of the buyback, DBS shares have appreciated by 4.5% over 12 trading days. The program is capable of acquiring up to 51.58 million shares, with a maximum price potential of about SGD59 for the remaining shares. Additionally, the attractive dividend yield of 4.9% at the current share price provides another layer of support. The fair value estimate for DBS has been raised to SGD45.20.
ESG and Risks
DBS leads in corporate governance, particularly in board structure, though its average staff turnover rate of 12% exceeds the industry average. Potential growth catalysts include advancements in digital banking and wealth management. However, risks such as slower loans and earnings growth, margin pressure, and asset quality deterioration exist.
United Overseas Bank Ltd (UOB) – Financial Metrics Overview
United Overseas Bank Ltd is another significant name in Singapore’s banking sector. The bank forecasts a stable financial performance with a net interest margin expected to decline slightly, counterbalanced by loan growth. UOB’s estimated dividend yield stands at 4.6% for FY24E and 4.8% for FY25E, with a consistent return on equity (ROE) projected at around 13.2% and 12.9% for the respective years.
Valuation Metrics and Comparison
UOB’s price-to-earnings (P/E) ratio is forecasted at 10.3 for FY24E and 9.9 for FY25E, reflecting strong earnings potential. In comparison, its price-to-book (P/B) ratio remains at a modest 1.3x for both fiscal years, providing an attractive valuation against its peers.
Malayan Banking Bhd – Dividend and Growth Prospects
Malayan Banking Bhd stands out with a particularly high dividend yield of 5.9% for both FY24E and FY25E, the highest among its peers. The bank maintains a healthy ROE of 10.5% and 10.7% for the respective fiscal years, indicating solid profitability amidst competitive pressures.
Key Financial Ratios
The bank’s P/E ratios for FY24E and FY25E are noted at 12.1 and 11.6, respectively, with a P/B ratio of 1.4 in FY24E decreasing to 1.2 in FY25E. These figures highlight Malayan Banking’s strong market position and its ability to deliver shareholder value consistently.
Bank Central Asia Tbk PT – A Leader in Growth
Bank Central Asia Tbk PT is a leader in growth metrics among its peers, with a forecasted ROE of 21.5% for both FY24E and FY25E. Despite a lower dividend yield of 2.8% and 2.9% respectively, its high ROE underscores its strong profitability and efficient capital utilization.
Valuation Insights
With a P/E ratio of 22.6 in FY24E and 20.7 in FY25E, and a P/B ratio of 4.8 and 4.3, the bank is valued at a premium, reflecting its robust growth prospects and market leadership.
Bangkok Bank PCL – Stability with Growth Potential
Bangkok Bank PCL provides a solid combination of stability and growth potential. Its estimated dividend yield of 4.2% for FY24E and 4.7% for FY25E is supported by a stable ROE of 8.1% and 7.9% respectively.
Financial Position
The bank’s P/E ratios are 6.5 and 6.4 for FY24E and FY25E, respectively, with a P/B ratio at a low 0.5 for both years, making it an attractive option for value-focused investors.
Conclusion
OCBC Investment Research provides a comprehensive analysis of these financial giants, highlighting DBS Group Holdings Ltd as a standout performer with a “HOLD” recommendation. The report emphasizes the strategic initiatives, financial metrics, and growth prospects of each company, offering valuable insights for investors navigating the financial landscape.
