In the midst of a high-interest rate environment prevailing throughout the first nine months of 2023, Singapore's banking sector has shown resilience with DBS Group (OTC:DBSDY) (SGX:D05) reporting a leading total income of S$15.2 billion. Following closely are UOB (SGX:U11) and OCBC Ltd (SGX:O39), with total incomes of S$10.5 billion and S$10.2 billion respectively.
Despite the challenges posed by rising rates, which have led to a dip in loan growth across all major banks, the higher net interest margins (NIMs) have compensated for the decline. OCBC not only recorded the highest NIM at 2.27% but also minimized the decrease in loan growth and achieved the lowest cost-to-income ratio (CIR) after a significant year-on-year reduction.
DBS's net interest income saw an impressive 23% growth, and its net profit would have shown an 18% increase when adjusted for one-time costs associated with acquiring Citigroup's consumer banking operations. UOB also displayed robust financial health, with a notable 28% year-on-year growth in total income.
OCBC's financial performance stands out with a net profit growth of 21.4% and profits before allowances up by 19.2%. The bank also boasted the lowest non-performing loan (NPL) ratio at just 1%.
Investors are now considering these financial metrics to gauge investment value among these institutions. UOB presents as the most economical option with a price-to-book (P/B) ratio of just 1.1 times, while DBS exhibits a higher ratio of 1.45 times despite achieving the highest return on equity (ROE) for Q3.
Looking ahead, all three banks anticipate modest loan growth but expect to continue reaping benefits from the high interest rates into 2024. This forward-looking perspective is crucial for investors assessing the earnings momentum and long-term value propositions of these leading Singaporean banks.
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