Singapore banks' shares surge after MAS lifts dividend cap; higher payouts expected

DBS, UOB and OCBC were the top three most heavily traded stocks in terms of value.
DBS, UOB and OCBC were the top three most heavily traded stocks in terms of value.PHOTO: ST FILE

SINGAPORE - Shares of Singapore's three listed banks rose strongly on Thursday (July 29) after the Monetary Authority of Singapore (MAS) lifted dividend payout restrictions.

DBS Bank was up 43 cents, or 1.4 per cent, to $30.50; UOB gained 36 cents, or 1.4 per cent, to $26.28; while OCBC Bank jumped 25 cents, or 2.1 per cent, to $12.32.

The trio were the top three most heavily traded stocks in terms of value.

In its announcement after the stock market closed on Wednesday, MAS had said dividend restrictions on locally incorporated banks and finance companies headquartered in Singapore would not be extended starting from this financial year, with "Singapore's economy expected to continue on its recovery path".

MAS said the banks' strong capital adequacy ratios "are projected to remain resilient" even if there is a "stalled global recovery associated with delays in vaccine deployment and a global resurgence in the pandemic due to mutated virus strains".

In July and August last year, MAS had called on local banks and finance companies to cap their total dividends per share (DPS) for the 2020 financial year at 60 per cent of DPS in 2019. Instead, shareholders were given the option of receiving the remaining dividends for 2020 in shares.

Maybank Kim Eng noted that the move was more positive than expected, as it had been anticipating “at least some token restrictions” to remain. The brokerage is expecting higher dividends to be declared for the first half of the year.

OCBC should see the “strongest uplift” in DPS, while DBS may not be able to match its 2019 absolute dividend payout of 33 cents per quarter until 2022, Maybank Kim Eng said.

IHS Markit said in a report released earlier this month that dividend payouts for DBS, OCBC and UOB are expected to make a "strong comeback" this year due to the banks' strong capital positions and improving economic outlook.

The data analytics company predicted that the three banks could increase DPS by as much as 40 per cent on average this year.

Rating agency Moody's expects DBS, OCBC and UOB, to increase dividend payments to pre-pandemic levels of around 50 per cent of their net income. 

In 2019, OCBC registered a dividend payout ratio of 47 per cent, while UOB maintained a dividend payout ratio policy of about 50 per cent of earnings. DBS had paid an absolute DPS of 33 cents per quarter.

The dividend payout ratio is the percentage of earnings paid to shareholders in dividends.

OCBC and UOB will release their second-quarter results on Aug 4, and DBS on Aug 5.

In a statement on Wednesday evening, DBS chief financial officer Chng Sok Hui said the bank will "take into account" MAS' latest move in considering its dividends in the upcoming results.

OCBC chief financial officer Darren Tan said the bank will "heed MAS' guidance and will determine and declare our interim dividend accordingly".

Mr Lee Wai Fai, UOB's group chief financial officer, "welcomed the move" by MAS to lift dividend restrictions.

The three Singapore banks lead among South-east Asian markets in terms of aggregate dividend payouts recovery this year, the IHS Markit report noted.

The move follows a similar relaxation by the European Central Bank this month, and by the United States Federal Reserve in March this year.