DBS, OCBC, UOB: Who performed best in Q4 2021?

One of the three failed to meet market expectations.

The last quarter of the financial year 2021 wrapped up with loan growth picking up in Singapore's three major banks, DBS, OCBC, and UOB.

Amongst the three, UOB achieved the highest loan growth of 10.5% year-on-year (YoY), followed by DBS at 9.9% YoY, and OCBC at 8.4% YoY, data from UOBKayHian showed.

Meanwhile, net interest margin (NIM) across the three banks were “mostly stable” quarter on quarter (QoQ).

UOB likewise led in terms of increase in net interest income, recording an 11% YoY jump in the fourth quarter (Q4) of 2021, since it did not “suffer from NIM contraction in 2021.” The bank, however, succumbed to a sequential contraction in wealth management fees of 8% QoQ, as well as DBS (-9% QoQ) and OCBC (-17% QoQ).

Meanwhile,  DBS, OCBC, and UOB wrote back general provisions of $34m, $70m, and $76m in Q4 2021, respectively.

Overall, DBS and UOB were able to meet market estimates, whilst OCBC missed the expectations.

Looking forward, UOBKayHian said the banks will see NIM expansion starting in the second half (H2) of 2022 and will continue in 2023 and 2024 due to an “upcycle in interest rates.”

The analyst said it expects four interest rate hikes in both 2022 and 2023.

The positive outlook for the sector is also supported by the easing of COVID-19 restrictions and recovery in H2 2022 and banks reviewing their dividend payout ratio and paying more dividends.

In Q4 2021, DBS increased quarterly dividend from 33 to 36 Singapore cents, while OCBC increased final dividend from 25 to 28 Singapore cents. UOB, meanwhile, declared a final dividend of 60 Singapore cents based on a dividend payout ratio of 50%.

The only risk UOBKayHian is seeing in the banking sector is the possible escalation of geopolitical tension and trade conflict between the US, China, and Russia.