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The CFO, Miss Goh is right mathematically. Paying a dollar for <1dollar worth of assets on paper, will reduce your paper value.
In general, dividends are capital that is not retained and leaves the company - hence has an effect of "reducing the share price", if the company is been valued based on book value. OTOH, sharebuyback (SBB) retains the capital with the company and so has opposite effects.
Based on Miss Goh's logic, what DBS is doing in terms of SBB (after giving bonus shares) is not a clever move I suppose. So with both companies having excess capital, who's right?
I will bet my money on the venerable banker at DBS.
OCBC has enough capital for M&A, business growth: CEO Helen Wong
On the other hand, OCBC prefers to use dividends to manage its capital, given its price-to-book ratio of just above 1, chief financial officer Goh Chin Yee said last week during an earnings briefing. OCBC reported its third-quarter profit rose 9 per cent to S$1.97 billion, roughly in line with analysts’ estimates of S$1.91 billion. Wealth income, which includes banking and insurance, rose 15 per cent from a year ago.
https://www.businesstimes.com.sg/compani...helen-wong
In general, dividends are capital that is not retained and leaves the company - hence has an effect of "reducing the share price", if the company is been valued based on book value. OTOH, sharebuyback (SBB) retains the capital with the company and so has opposite effects.
Based on Miss Goh's logic, what DBS is doing in terms of SBB (after giving bonus shares) is not a clever move I suppose. So with both companies having excess capital, who's right?
I will bet my money on the venerable banker at DBS.OCBC has enough capital for M&A, business growth: CEO Helen Wong
On the other hand, OCBC prefers to use dividends to manage its capital, given its price-to-book ratio of just above 1, chief financial officer Goh Chin Yee said last week during an earnings briefing. OCBC reported its third-quarter profit rose 9 per cent to S$1.97 billion, roughly in line with analysts’ estimates of S$1.91 billion. Wealth income, which includes banking and insurance, rose 15 per cent from a year ago.
https://www.businesstimes.com.sg/compani...helen-wong