• After averaging a 19% total return in 1H21, DBS, OCBC and UOB have extended their average 2021 YTD total return to 24%. While earnings and local economic developments have continued to firm over the past six weeks, the gains were in-line with the largest global banks by market value.
   
• For 2Q21, DBS, OCBC and UOB reported combined net interest income (“NII”) of S$5.13 billion, which was up from S$5.08 billion in 1Q21 and the highest QoQ increase in combined NII since 3Q19. The three banks have been reporting more than S$5.0 billion in combined quarterly NII since the end of 2017.
   
• Combined wealth management net fee and commission income for the three banks has approximately tripled from near S$700 million in 1H14 to close to S$2.0 billion in 1H21. As an international wealth management centre Singapore ranked #2 in competitiveness and performance in a Deloitte Industry report in 2018. 

DBS Group Holdings (“DBS”), Oversea-Chinese Banking Corp (“OCBC”) and United Overseas Bank (“UOB”) together make up 20% of the total market capitalisation of all stocks listed on SGX, while also contributing 20% to the combined turnover of all stocks listed on SGX.

The trio have generated average total returns of 15.4% in 1Q21, 3.1% in 2Q21 and 3.9% in the 3Q21 to 12 August. In the 2021 year to date, the trio have been recipients to S$1.4 billion in net institutional inflows.

Beyond the recent returns to investors, the tradability of the trio has moderately increased since the end of the 2Q21. During 1Q21, the trio averaged intraday volatility of 18% and an amplitude of 123 basis points (“bps”) between daily high and low. In 2Q21 these tradability gauges both declined, to 16% average intraday volatility and daily amplitude of 108 bps. However, for the first month of 2H21, the average intraday volatility and daily amplitude of DBS, OCBC and UOB increased to 18% and 125 bps. This coincided with the 30 day volatility of Global Bank Indices rising from 12% at the end of June to 17% at present. As a result, the trio have marginally increased their share in the combined turnover of all stocks listed on SGX, while demonstrating elasticity to the mega-theme of global monetary policy outlooks and yield curve developments. 

The past week has seen UST yields increase across the curve, with the 2/10 UST yield curve moderately steepening from 100 basis points to above 110 basis points, supporting global banks that borrow short and lend long. The catalyst for this has been increased calls by members of the Federal Reserve to exploring tapering asset purchases since the conclusion of the 28 July FOMC.

On 11 August, DBS formed a new all-time high at S$31.74. The stock first traded above S$31.00 on 2 May 2018 for one session, and then returned above S$31.00 on last week, on 6 August. On the morning of 5 August, DBS reported 1HFY21 (ended 30 June) net profit at S$3.7 billion, 54% higher than 1HFY20. While net interest income (“NII”) declined 12% YoY to S$4.2 billion as lower interest rates offset 7% loan growth, non-interest Income increased 9% to S$3.2 billion with 1HFY21 Allowances declining 95% to S$89 million. OCBC reported 1HFY21 (ended 30 June) group net profit at S$2.7 billion, 84% higher than 1HFY20, attributed to a 29% increase in non-interest income and substantially lower allowances. UOB reported 1HFY21 (ended 30 June) net profit at S$2.0 billion, 29% higher than 1HFY20, with pre-provision operating increasing 9% YoY, on the back of 28% growth in net fee income.

For 2QFY21, DBS, OCBC and UOB reported combined NII of S$5.13 billion, which was up 1% from S$5.08 billion in 1QFY21. For the trio this was the highest QoQ increase in combined NII since 2QFY19 to 3QFY19.

As illustrated below, the trio have been reporting more than S$5.0 billion in combined quarterly NII since the end of 2017

Combined wealth management net fee and commission income for DBS, OCBC and UOB has almost tripled from near S$700 million in 1HFY14 to close to S$2.0 billion in 1HFY21. As an international wealth management centre, Singapore ranked second in competitiveness and performance in the Deloitte International Wealth Management Centre Rankings 2018. In 1HFY21 the combined wealth management net fee and commission income, of the trio increased 21% from 2HFY20, which was the strongest sequential growth since the 31% growth in 1HFY17 from 2HFY16. Wealth Management was earmarked as a growth segment going into 1HFY21 with UOB noting that wealth management fees reached record levels amid returning investor confidence on the market recovery.

Compared to 1HFY20, the combined wealth management net fee and commission income of the trio increased 27% in 1HFY21. Similarly, iFAST Corporation noted that as a result of the Group’s assets under administration, the Group’s recurring net revenue continued to grow at a robust pace, increasing 34% YoY in 1HFY21 (ended 30 June). Looking ahead, as highlighted in a Morgan Stanley and Oliver Wyman report in 2020, wealth management business should double down on technology investments, strategically cut costs, build differentiated product offerings and consider inorganic opportunities.