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Banks as yield plays, with upside from earnings growth

In print this week

Banks as yield plays, with upside from earnings growth

Goola Warden Published on Thu, Aug 15, 2019 / 5:49 PM GMT+8

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SINGAPORE (Aug 12): Slowing global growth and uncertainties over the escalating trade war, tech supply chain, China and Hong Kong have all taken their toll on the share prices of the three local banks — DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank. Interestingly, both DBS and UOB are still ahead (see Table 1) in terms of price gains, and OCBC is unchanged since the start of the year. Of course, at one point, the banks had double-digit share-price gains, with DBS up 20% since Jan 2.

In 2QFY2019 and 1HFY2019, all three banks reported net profit levels that were above expectations. DBS’s net profit for 1HFY2019 rose 12% y-o-y to $3.25 billion; OCBC’s increased 6% y-o-y to $2.45 billion and UOB’s gained 8% y-o-y to $2.22 billion. Return on equity (ROE) for DBS, OCBC and UOB stood at 13.7%, 11.7% and 12% respectively.