DBS outshines rivals in terms of pre-provision operating profit

It registered the highest PPoP growth with an 8% CAGR.

Out of the three big banks in Singapore, DBS reported the highest growth in terms of pre-provision operating profit (PPoP), clocking in a 3-year CAGR of 8%. This is in comparison to OCBC's 6.8 and UOB's 4.5% CAGR in PPoP.

According to UOB KayHian, DBS outperforms the other two banks in delivery and execution.

"It is also more sensitive to higher US interest rates, which filters down to higher interest rates in both Singapore and Hong Kong," the brokerage firm added.

Meanwhile, in terms of non-performing loans, the formation was higher at OCBC.

The brokerage firm explained that the NPL formation at DBS surged from 49bp in 2015 to 120bp in 2016 due to deterioration in asset quality from the oil & gas (O&G) sector.

On the other hand, OCBC recognised NPLs from the O&G sector early since 3Q15. " Thus, its NPL formation was relatively higher at 93bp in 2015 but relatively lower at 106bp in 2016. DBS’s NPL formation is lower at 85bp compared to OCBC’s 99bp if we compare the average NPL formation for 2015 and 2016."