NIM could see potential bright spots as the credit environment improves
Chart 1: SORA generally tracks US Federal fund rates
Easing loan loss provisions will lend support to 2021 and 2022 forecasted earnings
Chart 2: Loan loss provisions of the three banks
Table 1: Update on the banks’ loans under moratorium in 3Q20
| Company | Loans under moratorium |
| DBS | SGD 13.5 billion worth of loans under moratorium (~4% of loan book) |
| OCBC | Loans under moratorium declined to ~5% of loan book, with 93% of the loans secured with real estate |
| UOB | SGD 28 billion worth of loans under moratorium (~10% of loan book); Close to 90% of these loans are secured with collateral or government guarantees |
Source:
Respective companies' 3Q20 results Data as of November 2020 |
|
Loan growth to offset the impact of flattish NIM
Chart 3: Loan growth for the three banks in 2021 and 2022
Fee income a bright spot
Chart 4: Strong wealth management fees growth
Healthy capital ratios and removal of dividend cap
Table 2: Singapore banks continue to maintain strong capital positions
| CET1 Ratio | Minimum CET1 ratio | 2021 dividend yield* | Actions from regulators | |
| DBS (SGX:D05) | 13.9% | 9.1% | 5.2% | Dividends limited to 60% of the amount paid in 2019 |
| OCBC (SGX:O39) | 14.4% | 9.1% | 5.6% | |
| UOB (SGX:U11) | 14.0% | 9.1% | 5.7% | |
Source:
Respective companies' 3Q20 reports *2021 dividend yield will be calculated assuming dividends return to
pre-COVID levels Data as of December 2020 |
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The long-awaited comeback of value stocks
Table 3: Singapore banks valuations
| PB ratio | Target price (SGD) | Current price (SGD) | Upside potential | Dividend yield | |
| DBS (SGX:D05) | 1.4 | 28.0 | 25.2 | 11.3% | 5.2% |
| UOB (SGX:U11) |
1.2 | 29.1 | 22.7 | 28.3% | 5.6% |
| OCBC (SGX:O39) | 1.2 | 13.0 | 10.1 | 29.2% | 5.7% |
| Average: | 22.9% | 5.5% | |||
Source:
Bloomberg Finance L.P., iFAST estimations Data as of December 2020 |
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