DBS (Development Bank of Singapore)

[karlmarx]

I've not done a lot of research on Chinese state owned banks, but they are generally known to have nationalist agendas. And that may sometimes interfere with their profit-making objectives.

To support their retail and commercial customers during difficult periods, these banks may have NPLs which are at a higher level than what is publicly stated. They may not make high provisions and cause the banks to report losses, but the low dividend payout ratio may be a sign of stress.

BOC has very low NPL of 1.4%, high allowance of 180% to NPL, low loan to deposit ratio of 85%, and a decent ROE of 11-12%. Based on these numbers, BOC looks to be as strong as DBS. But DBS is paying out 50% of its profits as dividends, while BOC is only doing 30%. Regardless, if you are willing to accept their reported numbers, and look past the low payout ratio, BOC at 0.4 p/b is even cheaper than ICBC.

OTOH, HSBC's numbers look worse, and it is paying out almost all of its profits, which looks quite aggressive (or difficult to sustain). And yet it is more expensive, even after its price has fallen so much.

[dreamybear]

From my experience as a retail investor, investing in China's big 4 is different from investing in the likes of DBS, HSBC, BAC, BCS etc :

The Big 4 are long term yield plays, if one invests in a price with a 6% yield(preferably net of 10% div tax) for 10 years, one wld get ard 60% return(ignoring forex/custody/admin fees). Their valuation / share prices do not fluctuate that much as they function more like state banks and their size is huge. So, the earlier one gets in, the better. Bonus if the RMB appreciates in the long run as China becomes a more powerful economic power.

E.g. BOC(3988.HK)
Dividend ard HKD0.21 per yr for past 5 years.
Assuming bought at the price of HKD3.20(approx 6% yield) in Year 2014, after 5 years, the effective purchase price becomes HKD3.20(initial purchase price) - HKD1.05 (5yrs cumulated div) = HKD2.15 vs current share price ard HKD2.9. After 16 years of div, the share wld be free. It cld be one of those investments we cld pass on to our children, providing them with passive income.  

For SG / international banks, it is better to buy during economic contractions where the valuation are more attractive, e.g.  based on book value, and sell during boom times. Of course, our local banks pay respectable yields, but lower than the Big 4.

In terms of size, China's Big 4 dwarf our local banks. I am not suggesting any banks are not safe, just to put into perspective for comparison's sake, in terms of too big to fail, the global repercussions of failure of China's Big 4 wld probably be more than our local banks(due to the size).

Just sharing my experience for discussion purposes(feedback is welcome), pls DODD.

[karlmarx]

I am inclined towards the view that the Big 4 can at least maintain their dividend, and may make a suitable investment for a 'yield investor.' But the opacity of information means that the investor has to believe that the people running these banks will not do (or have not done) anything which may lead to the dividends being cut, some time in the future. In other words, the investor is to have faith in the Chinese government. I guess if such an investment in the portfolio is small, and the purchase price is low (like now), making such a faith-based decision may be acceptable to most.

Like most investors, I will prefer if my portfolio company is paying increasing dividends, since I will get not just the dividends, but also likely capital appreciation as a result of valuation re-rating. The valuation of BOC seems to suggest that the market does not think that this will be happening, or if it does, that it will be significant. If at some later time BOC does hike its dividends significantly, that will be great news for shareholders.

But if I want a concentrated position, and I have to choose between a Big 4 bank and some other bank -- and all key consideration factors for comparison return similar results (e.g. both are equally 'strong') -- I will pick the 'other bank' if it has a high probability of paying more dividends in the future.

[¯|_(ツ)_/¯]

23 July 2020 1H Result (as at 30 Jun 2020) will be annouced on Thursday, 6 Aug 2020 before market start - DBS
https://links.sgx.com/FileOpen/2Q20Finan...eID=624821

Wear mask and keep your social distance, everyone.

[¯|_(ツ)_/¯]

29 July 2020 18 cents dividend cap per Qtr DBS
https://www.mas.gov.sg/news/media-releas...-dividends

Wear mask and keep your social distance, everyone

[weijian]

MAS to adjust banks' capital requirements amid Covid-19 pandemic

The new measures will effectively put a stop to banks' share buyback activities. In its statement, MAS said that the release of capital buffers "should not be used to finance share buybacks during this period".

https://www.businesstimes.com.sg/compani...9-pandemic

Back in 7th April, they didn't restrict the dividend. So 4 months down the road, what data has MAS seen that made them do a 180 degree change? 

Sustaining lending activities should take priority over discretionary distributions. While MAS does not see a need to restrict banks’ dividend policies, the release of capital buffers should not be used to finance share buybacks during this period

https://www.mas.gov.sg/news/media-releas...-customers

[brattzz]

business loans defaults coming sir... sg gov may impose further waivers to biz loans... just pay maintenance interests can liao... drag it out another 12 months... vaccines are going online soon!!

[edragon]

MAS to adjust banks' capital requirements amid Covid-19 pandemic

The new measures will effectively put a stop to banks' share buyback activities. In its statement, MAS said that the release of capital buffers "should not be used to finance share buybacks during this period".

https://www.businesstimes.com.sg/compani...9-pandemic

Back in 7th April, they didn't restrict the dividend. So 4 months down the road, what data has MAS seen that made them do a 180 degree change? 

Sustaining lending activities should take priority over discretionary distributions. While MAS does not see a need to restrict banks’ dividend policies, the release of capital buffers should not be used to finance share buybacks during this period

https://www.mas.gov.sg/news/media-releas...-customers

A lot of terms have been used in the Media Release, 'call', 'restrict', 'adjust', 'encourage' ... What does it means?

[¯|_(ツ)_/¯]

DBS 1H20 Result
Total income $7.7b (vs 7.2b)
Profit before allowances $4.7b (vs 4.2b)
Net profit $2.4b (vs 3.2b)
Dividend 18cents XD 14 Aug 2020
The Group’s liquidity and funding positions remained robust with this quarter’s average all-currency liquidity coverage ratio (LCR) at 136% and net stable funding ratio (NSFR) at 119%, well above the minimum regulatory requirements. The loan-to-deposit ratio (LDR) was stable at 85.8%.
As at 30 June 2020, the Group's Common Equity Tier 1 CAR remained strong at 14.0%. The Group's leverage ratio of 7.3% was well above regulatory requirement of 3%. The Group remains well capitalised to navigate the macro uncertainties ahead 
https://links.sgx.com/FileOpen/2Q20_perf...eID=626427

Stay home and stay safe, valuebuddies.

[¯|_(ツ)_/¯]

announce its third-quarter 2020 Financial Results before the trading market opens on Thursday, 5 Nov 2020
https://links.sgx.com/FileOpen/3Q20Finan...eID=636018

Stay home and stay safe, everyone.