SHARES of Singapore banks made gains on Thursday as investors reacted positively to the Monetary Authority of Singapore (MAS)'s lifting of dividend payout restrictions.

DBS D05 : D05 0%shares were up S$0.43 or 1.43 per cent, to close at S$30.50 on Thursday.

OCBC O39 : O39 0%shares closed at S$12.32, up S$0.25 or 2.07 per cent.

UOB U11 : U11 0% shares ended trading at S$26.28, up S$0.36 or 1.39 per cent.

No married deals were recorded for all three banks, according to ShareInvestor data.

MAS on Wednesday lifted its dividend cap on locally-incorporated banks and finance companies based in Singapore.

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

RHB on Thursday said it views the decision positively as "this signals confidence and strength in Singapore's banking system, notwithstanding any potential adverse economic development".

In a research note, RHB maintained its "overweight" rating on the sector and said it sees upside for its FY2021 dividend forecasts for Singapore banks.

IHS Markit last week also said it expects dividend payouts for the three banks to make a "strong comeback" in 2021 if MAS removes the dividend cap.

Moody’s Investors Service noted the move follows a similar relaxation by the European Central Bank in July, and by the United States Federal Reserve in March. Moody's expects the banks will increase dividend payments to pre-pandemic levels of around 50 per cent of their net income. 

“The removal of dividend caps by the MAS is a sign that the economic conditions in Singapore have improved and the banks are well capitalised,” said vice president and senior credit officer at Moody’s Eugene Tarzimanov on Thursday.

CGS-CIMB said banks will likely reinstate FY2021 dividends closer to the levels seen in FY2019.

In a report on Thursday, the research team estimates dividends per share (DPS) for the quarter ended June will be S$0.30 for DBS, S$0.25 for OCBC, and S$0.55 for UOB. DBS paid out S$0.18 in Q1. OCBC and UOB paid out S$0.159 and S$0.39, respectively, for Q4 2020. CGS-CIMB maintained its “overweight” rating on the sector.

DBS, however, said in a research note on Thursday that banks may not be in a rush to pay out all excess capital in 2021, especially as they evaluate merger and acquisition plans.

MAS had last year asked local banks and finance companies to cap their DPS for FY2020 at 60 per cent of FY2019’s DPS, and offer shareholders the option of receiving the remaining dividends in shares instead of cash.

MAS said dividend restrictions imposed last year were a pre-emptive measure to ensure financial institutions maintain strong lending capacity to support the economy throughout the pandemic, given the significant uncertainties at that time, but noted that the global economic outlook has since improved.

It further said local banks and finance companies have maintained strong capital adequacy ratios and continued to meet the credit needs of individuals and businesses.

Under MAS’s latest stress tests, these ratios are projected to remain resilient even under an adverse macroeconomic scenario. The latter was defined as a stalled global recovery associated with delays in vaccine deployment and a global resurgence in the pandemic due to mutated virus strains, leading to the Singapore economy slipping again into recession this year.

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