In case you’ve been too busy watching regional currencies – nay, global currencies – get hammered this week, it’s worthwhile taking a wee moment to appreciate the city-state that’s great, Singapore.

Via Getty

Singapore’s apparently indestructible economic fundamentals and the city-state’s all powerful, all-knowing central bank’s (and one-stop financial regulatory authority) – The Monetary Authority of Singapore (MAS) – penchant for action on inflation have begun to attract attention from just about everywhere.

According to Max Lin, Asia FX and rates strategist at Credit Suisse, the combo of cracking monetary policy and economic hard-headedness have – in a time of crumbling currencies vs the USD – made the local dollar a stand-out in dark times.

And while the Singapore dollar is down some 6% against the USD year to date, it makes just about every other Asian Pacific currency look feeble. Lin says it’s even acting as an unsung safe haven.

And it’s not just the dollar which looks safe, there’s always the Singapore banks who have them.

Singapore enjoys an enviable track record of cautious fiscal discipline, fabulous foreign currency reserves, a strong current account surplus and a well managed currency policy.

All happy factors when considering a good bank as a good investment.

ASIC: Not something that’s happening here

According to the Australian Securities and Investments Commission (ASIC) Australia’s financial sector will pay customers $7.2bn for all its various wrongdoings of late, (and has even issued a guide and warning for how to pay, and to pay up quickly).

Last year, the Big Four Aussie lenders put in a bumper $27bn of combined profits thanks largely to our insane housing market, consequent loan growth and despite the squeeze of shrinking margin pressure.

As the economy teeters toward the final quarter of 2022 it’s almost time to see what the cats have dragged in for this year.

ANZ gets the full year earnings ball rolling on October 27, while Westpac and NAB are going for early November.

The banks are blue chip defensive all the way, and even Bloomberg reckons they can top the profit line delivered last year, but after that, it could be anyone’s guess.

Which is why, in honour of turning defence into attack, we’re heading to Singers, right now.

Meeting us at the airport in a Hawaiian shirt is Geoff Howie, the Singapore Exchange’s (SGX) market strategist (and author of the SGX My Gateway Report which highlights key market developments and has served investors for the last decade). A former Treasury Adviser to the Leader of the Queensland Liberal Party in that wonderful Parliament, Geoff is abut to take you on a crash course through Singapore’s Big Three Banks.

Geoff says: Big banks, big stocks

Singapore’s triumvirate of Big Banks are necessarily a big part of Singapore’s stock market and rank among the five largest stocks across Southeast Asia by market capitalisation.

Together, the three stocks DBS Group Holdings (DBS), Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) make up 20% of the total market capitalisation of the Singapore stock market, 25% of its day-to-day turnover and 45% of the Straits Times Index (STI) benchmark.

Supporting the comparative higher yield of the STI, the trio are among the 10 biggest constituents of FTSE Developed Asia Pacific ex-Japan Sustainable Yield. This Index excludes extreme yielding stocks and examines the financial and operating strength of prospective constituents with specific emphasis on companies with strong balance sheets and the ability to generate cash flow.


Rising rates, income & loan growth by the numbers

Unlike Australia, Singapore’s monetary policy hinges on the exchange rate, with domestic interest rates largely determined by global interest rates and foreign exchange market expectations of the Singapore dollar. Going into 2022, majority expectations were for the FOMC Fed Funds Rate to reach 75-100bps by the end of year, with those expectations gradually pressing higher to 400-425 bps, on accelerating inflation.

These rising interest rates have provided a boost to net interest incomes (NII) of DBS, OCBC, UOB through net interest margins (NIMs). NIMs are largely determined by the average rate paid on the liabilities versus the average rate received on the assets of the banks, which contributes to NII along with growth of loan books.

🏦 For the June quarter, 2Q22 NIMs rose 13bps YoY for both DBS and OCBC, and 11bps YoY for UOB.

🏦 For the loan books, UOB and OCBC maintained loan growth of 8% YoY, with DBS reporting loan growth of 7% YoY.

🏦 All three banks expect loan growth in the mid-single digits for the remainder of the year.

🏦 At S$6.0 billion for 2Q22, the combined quarterly net interest incomes (NII) of the trio surpassed the previous combined NII high of S$5.75 billion in 3Q19.

🏦 This was also the seventh consecutive quarter of QoQ NII growth.

🏦 The higher NIM and loan growth has seen NII growth offsetting the headwind impact of the slowing growth outlook on non-interest income (NOII).

🏦 DBS’ 2Q22 NOII was down 11% YoY, UOBs 2Q22 NOII was comparable and OCBC’s NOII was up 6% YoY.

🏦 For OCBC, the gains were mainly from higher trading income and life insurance profit.

🏦 For the trio NII contributes around 60% to 70% of their total income, with the balance generated from NOII.

🏦 On the NOII front, broader reopening of economies and resumption of activities saw higher fees from credit cards, while wealth and investment banking fees were driven by investment sentiments and market conditions globally.

🏦 Belt-tightening amid inflationary fears globally could impact NOII for all three.

🏦 Both DBS and OCBC’s non-performing loan (NPL) ratio declined from 1.5% to 1.3% YOY while UOB’s asset quality remained resilient as its NPL ratio increased from 1.5% to 1.7% as of 30 June due to some exposure to the China property sector.

🏦 Second quarter net profit growth varied – from DBS reporting 7%, UOB reporting 11% and OCBC reporting 28%.

🏦 This has seen the trio average 9% total returns in the 2022 year-to-date.

🏦 At the same time, globally, banks have been among the most defensive sectors this year, seeing less than a third of the declines of the technology sector.

🏦 Key downside risks ahead for the trio include regional geopolitical tensions, and global growth deceleration stemming not just from inflationary pressures.



DBS is one of the largest financial services groups in Asia.

The largest bank in Singapore as measured by assets, and a leading bank in Hong Kong. Covers leading positions in corporate, SME and consumer banking, treasury and markets, wealth management, securities brokerage, equity and debt fund raising.

Beyond its anchor markets of Singapore and Hong Kong, DBS serves corporate, institutional and retail customers through its operations in China, India, Indonesia, Malaysia, Thailand and The Philippines. 


Geoff’s take:

DBS announced in January this year that it was acquiring Citi’s consumer banking business in Taiwan, and most recently became the first bank in Southeast Asia to announce a landmark set of decarbonisation commitments as part of the bank’s commitment to being net zero in its financed emissions by 2050.

The stock maintains a 1.4 beta coefficient, with a P/B of 1.5x which is more than 1 s.d. above its 5-year P/B mean of 1.3x.

With its 2Q22 results, the CEO of DBS, Mr Piyush Gupta, maintained NII sensitivity of S$18 million to 20 million per basis point of USD rates.


In 2Q22, DBS maintained a current and savings accounts (CASA) ratio of 72%, and a Common Equity Tier 1 (CET1) ratio of 14.2%.

With a market value of S$87 billion, the stock has generated 6% in total returns in the 2022 year to date on annualised volatility of 19%, taking its 5-year annualised total return to 16%. On average, the stock sees S$150 million in trading turnover a day.



OCBC Bank is Singapore’s longest established local bank with S$170 billion of assets, a network of over 420 branches and representative offices in 15 countries.

The Group offers a wide range of financial services, from consumer, corporate, investment banking to treasury and stock-broking services.

Geoff’s take:

Following its recent 2Q22 results announcement, CEO Ms Helen Wong noted that overall economic growth in its key markets is expected to remain positive this year but at a slower pace due to the heightened headwinds in the operating environment.

Ms Wong added that the bank’s diversified earnings base and strong capital, funding and liquidity positions will allow it to have the flexibility to navigate uncertainties and pursue its strategic growth objectives. In 2Q22, the Group’s CET1 stood at ratio of 14.9%.


OCBC maintains a CASA ratio of 60.9%.

With a market value of S$56 billion, the stock has generated a 14% in total return in the 2022 year to date on annualised volatility of 17%, taking its 5-year annualised total return to 6%. On average, the stock sees S$80 million in trading turnover a day.


United Overseas Bank  (SGX: U11)

Like its peers, UOB offers a wide range of financial services, including corporate finance and debt capital market activities.

Its corporate finance services comprise initial public offering, secondary fund raising, mergers and acquisitions advisory services, corporate restructuring and other corporate advisory services.  


Geoff’s take:

UOB also announced in January this year that it was acquiring Citi’s consumer business in Indonesia, Malaysia, Thailand and Vietnam.

With the results, the Group had continued to see economic activity picking up as borders reopen and investment flows resume.

For Singapore, deputy chairman and CEO, Mr Wee Ee Cheong, noted consumer sentiment was holding up well and employment was strong with institutional and private wealth inflows remaining steady given the country’s safe-haven and regional hub status.

The stock maintains a 1.2 beta coefficient and is presently trading marginally above its 5-year P/B mean of 1.1x. UOB maintains a CASA ratio of 54.7% and healthy CET1 ratio of 13.1%.

Via UOB Group

With a market value of S$46 billion, the stock has generated 7% in total returns in the 2022 year to date, on annualised volatility of 19%, taking its 5-year annualised total return to 8%. On average, the stock sees S$90 million in trading turnover a day.


And just quickly, this is Fitch Ratings’ take:

  • DBS Bank ( AA-Stable)
  • OCBC (AA-/Stable)
  • UOB, (AA-/Negative)

In its half year report, Fitch reckons all three are poised to benefit from the rise in global interest rates and that their asset-quality risks remain contained.

According to Fitch, as the economic recovery continues across the banks’ core markets…

The banks’ diversified non-interest revenue has supported the resiliency of their operating income, even though interest rates have remained low.

Together with a resilient asset quality, these have underpinned their high earnings stability through credit cycles. Rising interest rates should provide further benefits to earnings.

We believe Singapore is one of the APAC markets with the largest pass-through of higher US interest rates into local lending yields. This should boost banks’ operating profit/risk-weighted asset ratios towards their pre-Covid-19 levels.