Singapore banks restore dividends as allowances fall, see improved outlook

OCBC and UOB returned their dividend payouts to pre-pandemic levels as the Singapore regulator lifted the cap on dividends paid against their 2021 earnings.

The move should signal that the Singapore banks see an improved economic outlook ahead, with the two lenders reporting lower allowances for bad loans as well.

Both banks reported on Wednesday markedly stronger earnings from the year-ago period. OCBC reported that its Q2 net profit rose 59 per cent, while UOB's Q2 net profit was up 43 per cent.

OCBC declared a dividend of S$0.25 per share for the period. This translates to a payout ratio of 42 per cent.

UOB declared an interim dividend of S$0.60 per ordinary share. This translates to a dividend payout ratio of 50 per cent.

Analysts have said that the banks are well-positioned to fully normalise dividend payouts to their pre-Covid-19 levels.

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In FY2019, OCBC's dividend payout ratio stood at 47 per cent, though the bank has not held strictly to a dividend payout ratio.

In pre-pandemic times, UOB kept a dividend payout ratio policy of about 50 per cent of earnings, subject to a minimum CET-1 (Common Equity Tier 1) ratio of 13.5 per cent. DBS had paid an absolute dividends per share (DPS) of S$0.33 per quarter.

In July and August last year, the Monetary Authority of Singapore (MAS) had called on local banks and finance companies to respectively cap their total DPS for FY2020 at 60 per cent of FY2019's DPS, and offer shareholders the option of receiving the remaining dividends to be paid for FY2020 in shares in lieu of cash.

MAS in late July this year lifted its dividend cap on locally incorporated banks and finance companies based in Singapore.

It joins other central banks that have recently eased dividend restrictions imposed on banks last year, as the global economy rebounds amid gradual reopenings and rapid vaccine roll-outs.

READ MORE:

• UOB Q2 net profit up 43%; declares S$0.60 dividend
• OCBC Q2 net profit up 59%; declares S$0.25 dividend