Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

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Last week DBS, OCBC &amp; UOB led the STI’s 3.4% gain, with the three banks averaging a 6.1% gain. This has brought the average 2019 YTD total return of the three banks to 8.6%, and their 5 year average annualised total return to 10.3%. 
	 </li>
	<li>
For FY18, DBS, OCBC &amp; UOB averaged 19% YoY net profit growth. Combined, the three banks reported total income (pre allowances, expenses &amp; taxes) of S$32.0 billion for FY18, up 6.6% from S$30.0 billion in FY17. 
	 </li>
	<li>Shareholders have been rewarded with the three banks maintaining an average dividend yield of 4.0% for the past six months, which represents the longest period of time in their recent history that their yields remained at or above the key 4.0% level. </li>
</ul>
Singapore’s three listed local banks, with a combined market capitalisation of S$163 billion consist of DBS Group Holding ("DBS"), Oversea-Chinese Banking Corporation ("OCBC") and United Overseas Bank ("UOB").

Last week, the Straits Times Index (“STI”) gained 110 points or 3.4%, to end the week at 3322, with the three banks rallying 6.1%, as DBS gained 6.9%, OCBC gained 6.0% and UOB gained 5.3%.
<figure>
 <img src="https://api2.sgx.com/sites/default/files/2019-04/Capture_0.PNG" alt="DBS, OCBC &amp; UOB: Average Returns">
 </figure>
 <div class="content-caption">DBS, OCBC &amp; UOB: Average Returns</div>
The three banks are expected to report their 1QFY19 results in early May, with UOB confirming it will release its earnings before trading on Friday 3 May.  In FY18, DBS, OCBC and UOB averaged 19% net profit growth from FY17 (following on from 11% net profit growth in FY17 from FY16).

Combined, the three banks reported total income (pre allowances, expenses &amp; taxes) of S$32.0 billion for FY18, up 6.6% from S$30.0 billion in FY17:

<ul>
<li>DBS reported total income of S$13.2 billion, up 11% from S$11.9 billion in FY17;</li>
	<li>OCBC reported total income of S$9.7 billion, up from S$9.5 billion in FY17; and</li>
	<li>UOB reported total income of S$9.1 billion, up 6% from S$8.6 billion in FY17.</li>
</ul>
Average FY18 NIM Increased 7 bps from FY17  

The average Net Interest Margin (“NIM”) for the three banks in FY18 was up 7 basis points (“bps”) from 1.72% in FY17 to 1.79% in FY18. The FY16 NIM averaged 1.73% for the three banks. NIM represents annualised net interest income as a percentage of total interest bearing assets.
<figure>
 <img src="https://api2.sgx.com/sites/default/files/2019-04/charts.PNG" alt="Financial Charts">
 </figure>
 <div class="content-caption">Financial Charts</div>
Combined, the quarterly net interest income for the three banks has gradually grown in recent years and has been consistently above S$4.0 billion for each quarter since the end of 2014. Moreover, combined quarterly net interest income was above S$5.0 billion for each quarter in FY18. This has coincided with gradual increases of local interest rates as represented by the 1-month Swap Offer Rate (“SOR”) and 3-month Singapore Interbank Offered Rate (“SIBOR“).

Banks Maintain 4% Yield for Past Six Months 

As of the end of March, the average indicative dividend yield of the three banks stood at 4.2%, which has since retraced to 4.0% with the strong gains of the banks in the April month-to-date.  At the end of March, the average yield of DBS, OCBC and UOB had ended each of the preceding six months above 4.0%. This was the lengthiest time in their recent trading history that the average dividend yield for the three banks had consistently held above 4.0% at month end. 

The average indicative dividend yield of the three banks at month-end dating back to major market lows in mid-2009 are illustrated below.
<figure>
 <img src="https://api2.sgx.com/sites/default/files/2019-04/chart2.PNG" alt="Average Indicative Dividend Yield">
 </figure>
 <div class="content-caption">Average Indicative Dividend Yield</div>
<table class="table table-striped"><tbody>
<tr>
<td>
			Stock
			</td>
			<td>
			SGX Code
			</td>
			<td>
			Market Cap S$ Billion
			</td>
			<td>
			Total Return YTD %
			</td>
			<td>
			Annualised 5 Year Total Return %
			</td>
			<td>
			Indicative Dividend Yield

			%
			</td>
		</tr>
<tr>
<td>
			<a href="http://www.sgx.com/wps/portal/sgxweb/home/company_disclosure/stockfacts?page=1&amp;code=D05&amp;lang=en-us">DBS Group Hldgs</a>
			</td>
			<td>
			D05
			</td>
			<td>
			69.0
			</td>
			<td>
			13.9
			</td>
			<td>
			14.6
			</td>
			<td>
			4.5
			</td>
		</tr>
<tr>
<td>
			<a href="http://www.sgx.com/wps/portal/sgxweb/home/company_disclosure/stockfacts?page=1&amp;code=O39&amp;lang=en-us">Oversea-Chinese Banking Corp</a>
			</td>
			<td>
			O39
			</td>
			<td>
			49.7
			</td>
			<td>
			4.0
			</td>
			<td>
			8.2
			</td>
			<td>
			3.7
			</td>
		</tr>
<tr>
<td>
			<a href="http://www.sgx.com/wps/portal/sgxweb/home/company_disclosure/stockfacts?page=1&amp;code=U11&amp;lang=en-us">United Overseas Bank</a>
			</td>
			<td>
			U11
			</td>
			<td>
			44.2
			</td>
			<td>
			7.9
			</td>
			<td>
			8.2
			</td>
			<td>
			3.8
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			8.6
			</td>
			<td>
			10.3
			</td>
			<td>
			4.0
			</td>
		</tr>
</tbody></table>
Source: SGX StockFacts &amp; Bloomberg (Data as of 5 April 2019)
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Last week DBS, OCBC &amp; UOB led the STI’s 3.4% gain, with the three banks averaging a 6.1% gain. This has brought the average 2019 YTD total return of the three banks to 8.6%, and their 5 year average annualised total return to 10.3%. 
	 
	
For FY18, DBS, OCBC &amp; UOB averaged 19% YoY net profit growth. Combined, the three banks reported total income (pre allowances, expenses &amp; taxes) of S$32.0 billion for FY18, up 6.6% from S$30.0 billion in FY17.  
	 
	Shareholders have been rewarded with the three banks maintaining an average dividend yield of 4.0% for the past six months, which represents the longest period of time in their recent history that their yields remained at or above the key 4.0% level. 

Singapore’s three listed local banks, with a combined market capitalisation of S$163 billion consist of DBS Group Holding ("DBS"), Oversea-Chinese Banking Corporation ("OCBC") and United Overseas Bank ("UOB").

Last week, the Straits Times Index (“STI”) gained 110 points or 3.4%, to end the week at 3322, with the three banks rallying 6.1%, as DBS gained 6.9%, OCBC gained 6.0% and UOB gained 5.3%.

      
    
    DBS, OCBC &amp; UOB: Average Returns
The three banks are expected to report their 1QFY19 results in early May, with UOB confirming it will release its earnings before trading on Friday 3 May.  In FY18, DBS, OCBC and UOB averaged 19% net profit growth from FY17 (following on from 11% net profit growth in FY17 from FY16).

Combined, the three banks reported total income (pre allowances, expenses &amp; taxes) of S$32.0 billion for FY18, up 6.6% from S$30.0 billion in FY17:


DBS reported total income of S$13.2 billion, up 11% from S$11.9 billion in FY17;
	OCBC reported total income of S$9.7 billion, up from S$9.5 billion in FY17; and
	UOB reported total income of S$9.1 billion, up 6% from S$8.6 billion in FY17.

Average FY18 NIM Increased 7 bps from FY17  

The average Net Interest Margin (“NIM”) for the three banks in FY18 was up 7 basis points (“bps”) from 1.72% in FY17 to 1.79% in FY18. The FY16 NIM averaged 1.73% for the three banks. NIM represents annualised net interest income as a percentage of total interest bearing assets.

      
    
    Financial Charts
Combined, the quarterly net interest income for the three banks has gradually grown in recent years and has been consistently above S$4.0 billion for each quarter since the end of 2014. Moreover, combined quarterly net interest income was above S$5.0 billion for each quarter in FY18. This has coincided with gradual increases of local interest rates as represented by the 1-month Swap Offer Rate (“SOR”) and 3-month Singapore Interbank Offered Rate (“SIBOR“).

Banks Maintain 4% Yield for Past Six Months 

As of the end of March, the average indicative dividend yield of the three banks stood at 4.2%, which has since retraced to 4.0% with the strong gains of the banks in the April month-to-date.  At the end of March, the average yield of DBS, OCBC and UOB had ended each of the preceding six months above 4.0%. This was the lengthiest time in their recent trading history that the average dividend yield for the three banks had consistently held above 4.0% at month end. 

The average indicative dividend yield of the three banks at month-end dating back to major market lows in mid-2009 are illustrated below.

      
    
    Average Indicative Dividend Yield



			Stock
			
			
			SGX Code
			
			
			Market Cap S$ Billion
			
			
			Total Return YTD %
			
			
			Annualised 5 Year Total Return %
			
			
			Indicative Dividend Yield

			%
			
		


			DBS Group Hldgs
			
			
			D05
			
			
			69.0
			
			
			13.9
			
			
			14.6
			
			
			4.5
			
		


			Oversea-Chinese Banking Corp
			
			
			O39
			
			
			49.7
			
			
			4.0
			
			
			8.2
			
			
			3.7
			
		


			United Overseas Bank
			
			
			U11
			
			
			44.2
			
			
			7.9
			
			
			8.2
			
			
			3.8
			
		


			Average
			
			
			 
			
			
			 
			
			
			8.6
			
			
			10.3
			
			
			4.0
			
		

Source: SGX StockFacts &amp; Bloomberg (Data as of 5 April 2019)



DBS, OCBC & UOB Rallied 6%, Leading Last Week’s STI Gains