Singapore banks' dividends expected to make comeback in FY2021: IHS Markit

DIVIDEND payouts for DBS D05 , UOB U11 and OCBC O39 are expected to make a "strong comeback" in 2021, provided the Monetary Authority of Singapore (MAS) removes the cap on dividends, IHS Markit said.

The data analytics company believes that MAS will remove the cap due to the banks' strong capital positions as a result of last year's conservative measures and improving economic outlook.

It also expects the three Singapore banks will increase dividends by an average rate of 40 per cent on a dividend per share (DPS) basis in fiscal 2021. The estimated total dividend payout is projected to hit US$5.1 billion, compared with US$3.6 billion in 2020.

IHS Markit forecasts that DBS, UOB and OCBC will pay a DPS of S$1.17, S$1.18, and S$0.52, respectively, for FY2021, in a best-case scenario.

On Wednesday, shares of DBS closed 0.3 per cent or S$0.10 higher at S$29.68, UOB was down 0.2 per cent or S$0.06 to S$25.63, while OCBC climbed 0.3 per cent or S$0.04 to S$11.90.

Although DBS and UOB's management have indicated the possibility of resuming their payout ratio to be at 50 per cent after MAS removes the dividend cap, IHS Markit assumes both banks will continue to pay dividends below pre-pandemic levels.

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The same goes for OCBC, whose dividend payout ratio has fluctuated between 37 per cent and 47 per cent in the past five years. IHS Markit said the historical payout ratio range demonstrated by the bank provides flexibility to increase the dividends this year.

That said, IHS Markit does not rule out the possibility of a "soft" restriction from MAS to continue to call for the moderation of dividends for fiscal 2021 due to uncertainties in the global economy on resurging pandemic cases arising from the Delta variant.

In a "bear" scenario, IHS Markit expects DBS, UOB and OCBC to pay out a dividend per share of S$1.08, S$1.14 and S$0.48, respectively. This represents about 45 per cent, 50 per cent and 44 per cent of the median earnings consensus estimate.

It projects DBS to pay S$0.30 per share for the remaining quarters of FY2021. UOB is expected to pay S$0.52 per share for the interim and final dividend and S$0.10 per share for the special dividend. As for OCBC, IHS Markit estimates S$0.24 per share for both the interim and final dividend in fiscal 2021.

The trio of Singapore banks lead among South-east Asian markets in terms of aggregate dividend payouts recovery in 2021, compared with Malaysia and Indonesia, which are projected to report largely flat dividends, the report noted.

In the Asia-Pacific, banks from Australia and India aside from Singapore are projected to see the most robust recovery in dividend payouts. The central banks of all three countries had imposed different forms of restrictions on dividends in 2020. Australia and India's central banks have since removed or relaxed these restrictions.

On the flipside, IHS Markit forecasts Malaysia, Thailand, and Indonesia to see muted recovery in bank dividends in FY2021, as they are still grappling with a relatively large number of virus cases and the accompanying hits on their economies.

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