Further to The kind of FT turned citizen that S’pore needs, here’s more on why DBS is a favourite among ang moh investors.
And the CEO is paid peanuts compared to JP Morgan’s CEO and the CEOs of the other banks referenced in the chart. Mamas provide cheap labour.
Btw, my banking exposure here is in UOB via Haw Par: Haw Par: Rediscovered yet again
Further to The kind of FT turned citizen that S’pore needs, I tot I’ll share this so that someone overseas can KPKB about our banks very, very large exposure to the local property sector.
DBS estimates that approximately 44%-50% of Singapore banks’ loan books are exposed to Singapore properties via residential mortgages and via lending to REITs or other private vehicles may be captured under “financial institutions, investment and holding companies”
https://www.theedgesingapore.com/capital/brokers-calls/dbs-explains-what-higher-interest-rates-spell-banks-and-developers-cdl-uol
As the PM’s Mrs made me $ (Tempting fate but thanks again Ho Ching), and I’m not one of those PAP running dogs from our constructive, nation-building media who turn on the PAP like hyenas and jackals once they no longer get paid (Another running dog turned self-appointed tribune of the HDB plebs ), I’ll just keep quiet and look at my bank statement.
I also got exposure to UOB and UOL (via Haw Par: Haw Par: Rediscovered yet again) and Reits.
I’ve never voted for the PAP. But to quote the FT minister, “I’m invested in S’pore”and that is the way I show my appreciation of what the PAP does to keep me in prosperity.
OK, OK, I only have an economic interest in UOB via shares in Haw Par. The underlying reasons for investing in Haw Par haven’t changed since 2011: Haw Par: Rediscovered yet again. More recent analysis: https://www.fool.sg/2019/02/28/haw-par-declares-bumper-special-dividend-for-their-full-year-2018-earnings/
As a result of the high cash balance and also to celebrate Haw Par’s 50th anniversary, the group has declared a bumper special dividend of S$0.85 per share in addition to its final dividend of S$0.15 per share. The sum of its final and special dividend amounts to S$1 per share, and if we include its interim dividend of S$0.15 per share, the full-year dividend would be S$1.15 per share. At Haw Par’s last done share price of S$12.39 on 27 February 2019, that represents a trailing dividend yield of 9.3%.
(Bear in mind that the huge dividend yield is due to “special” dividend. It’s normal dividend yield is between 3-4%. FYI, UOB has a 4%+ yield.)
Btw, OCBC and DBS recommending UOB. So do ang moh brokers.
Back to why I own HSBC and Haw Par shares: S’pore and HK are very kind to banks:
In https://atans1.wordpress.com/2015/08/10/pm-aiming-left-to-hit-the-centre-axed-pap-mps-who-dont-get-it/ I pointed out that MP Liang Eng Wah didn’t have a clue about financial sustainability. Turns out
Liang Eng Wah in his day job is an MD at DBS it appears and he is also chairing the Parliamentary committee on finance and trade. If this is the kind of talent we have in banking and politics……. jeez!
Chris K
I didn’t realise that DBS would employ as a MD someone who doesn’t know finance.
Thank God I don’t own DBS shares. Btw, I have Haw Paw shares which has a stake in UOB. Depending on the relative share prices, I get a big discount on the operating biz of Haw Par. The Wees also control Haw Par.
Lower economic growth prospects and tighter credit conditions could create a tougher operating environment for the banking sector here and in the region, said a report by Standard & Poor’s (S&P) late last week.
S&P expects S’pore’s GDP) growth to fall to 3.4 % this year, from 3.7% last year.
The report also notes that corporate and household indebtedness has been on the rise here. The situation could worsen this year, in anticipation of interest rates rising; higher borrowing costs amid rising. See DBS’s CEO’s tots below* and related post https://atans1.wordpress.com/2014/01/16/why-banks-tested-for-50-plunge-in-property-prices-and-other-wonderful-tales/
Related articles: The three local banks posted their reports last week too and for quick snap-shots (not the usual ST or BT fluff)
— http://sbr.com.sg/financial-services/news/5-highlights-you-should-know-about-uobs-2013-results
— http://sbr.com.sg/financial-services/news/find-out-what-badly-hurt-ocbcs-fy13-results
Charts on banks’ loans etc
http://sbr.com.sg/financial-services/news/10-charts-prove-singapore-banks-mixed-finish-2013
Cheap way of owning UOB shares
https://atans1.wordpress.com/2011/09/05/haw-par-rediscovered-yet-again/
Update at 6.ooam:
South-east Asia’s three biggest lenders, DBS, Oversea-Chinese Banking Corp and United Overseas Bank, have seen their share prices rise this week after posting solid results last Friday. Common trends in the fourth quarter were better margins, trade finance-driven loan growth, seasonally softer treasury earnings and no asset quality weakness, CIMB noted.
UOB, despite being the smallest of the trio, has been particularly impressive with its fee income and regional strategies, CMC Markets Analyst Desmond Chua told TODAY.
“In terms of fee income, it has performed relatively well while the market has been lacklustre, in part due to a higher interest outlook. Its diversification to grow in regional emerging markets has also helped it maintain loan growth despite weaker mortgage demand in Singapore,” he said.
“On the other hand, OCBC’s share price might have been affected by the prospect of its overpriced acquisition of Wing Hang Bank in Hong Kong while DBS hasn’t been able to impress with its fee-based revenue in recent times despite aggressively attacking this space,” he added.
UOB’s net interest margin, which is the highest among local banks at 1.72 per cent full-year, is another advantage for the lender, Voyage Research’s Deputy Research Head Ng Kian Teck added. “UOB has historically been good on this front, and it means the bank can churn the most value out of every dollar loaned — that’s what’s attracting the investors,” he said.
All three banks ended last year on a positive note, with their fourth-quarter net profit rising between 6 and 11 per cent on the back of strong growth in net interest income.
The banks have also continued to solidify their regional presence, drawing more revenue from overseas than before.
….
“Their return on equity is healthier vis-a-vis the other industries, which are facing greater margin pressure due to higher wages. But the banks have been able to control this issue better.”
CMC Markets’ Mr Chua is also bullish, saying: “I’m looking at the banking space being an outperformer this year even though interest rates are bound to rise. Their tactical diversification across this region allows them to tap into Indonesia’s emerging affluent segment, for example.
Update at 5.15pm:Can Singapore safely deflate its property market? http://www.cnbc.com/id/101409247
————————
*DBS Bank chief executive Piyush Gupta expects home prices to fall by 10-15 per cent this year – more than the 10 per cent forecast by property consultants – but says that this decline would not make a material impact on the bank’s loan book. Speaking at DBS’s Q4 results briefing, he said it is likely that the prices of high-end homes will slide 15 per cent, and that for lower-end ones, by 10 per cent.
As for the higher interest rates expected with the shrinking of monetary stimulus policy by the US, he said he was not expecting it to have any effect on DBS. “The Singapore portfolio is really driven on income considerations . . . As I’ve said before, the pressure will likely start coming when unemployment rises – more than when property prices change.” Singapore’s unemployment rate is now at a low 1.8 per cent.
Mr Gupta said: “All our stress tests in the past have shown that we can easily withstand a 20 per cent reduction in Singapore property prices without material impact on our portfolio. We stress-test (for a) 20 (per cent fall in property prices), but don’t expect it to happen; our stress tests are always calibrated to go off the charts. My own sense is that there will be a correction of 10-15 per cent.”
He noted that the market was already stabilising and that the froth was running off, but that if this continued, the government would roll back some of the macro prudential measures. Sales of new mortgages have plunged 30-35 per cent at DBS, and by 40-50 per cent at OCBC Bank as a result of the stricter loan rules.
Mr Gupta likened the Singapore property market to that of New York and London, where prices held up even during the financial crisis between 2008 and 2012. While prices in the rest of the US fell by about a third, prices in New York slipped by only 10 per cent. It was a similar situation in London, another city where the demand is not dependent on the state of the domestic economy.
Mr Gupta said he expects regional money buying properties here to also put a floor under prices. With the slower sales, DBS’s $49.1 billion mortgage book is likely to grow by $2 billion to $2.5 billion this year, down from $3.5 billion last year and $5 billion the year before that, said Mr Gupta.
OCBC Bank chief operating officer Ching Wei Hong said of the new mortgage sales having declined across the board: “That’s expected, given all the cooling measures that have been imposed. We’ve built up a healthy inventory level. The inventory drives the growth of (the loan) book, going into 2014 and 2015. Beyond 2015 H2 and 2016, if conditions remain the same, we’ll see a bit of tapering in that period.”
(BT article last Saturday)
Bank results down 4%, CEO’s salary down 18%.
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1193445/1/.html
Own shares in Haw Par which has stake in UOB.
So another investor and blogger discovered last yr that Haw Par is undervalued and blogged abt it recently. Welcome to the Haw Par Tan Kuku club brudder.
If you read the latest annual report, you will know that Cundill and Eagle Investments are substantial shareholders. Both are value investors. Cundill has held the shares for over 10 yrs. Yes, the valuation gap has existed for at least that long.
I bot the shares more than 10 yrs ago and the gap has has narrowed, widened, going round and round. Some brokers recommend buying it when the gap is historically wide and selling it when the gap narrows.
But I don’t mind holding onto the shares. I looked at it, and still do, as buying into a listed investment trust that invests in the Wees’ financial empire (UOB, UOL and UIC). The operating businesses I get for almost free, and the dividends are decent. True there is a big gap between the share price and valuation but so what? No such thing as a free lunch.
And who knows? If the Wees’ empire is broken up, the valuation gap closes.
Another way for the gap to narrow, is if one or more of the operating businesses hits a winner, and the market recognises the value of the business or businesses. Actually 20 over yrs ago, people bot Haw Par because of its operating businesses.
My 2009 post https://atans1.wordpress.com/2009/12/11/hidden-tiger/
Haw Par historically trades at a big discount to its assets and businesses. The discount has got even bigger. Its 4% stake in UOB is now worth more than Haw Par’s market capitalisation — by about 4%.
UOB closed yesterday at S$19.84. This works out to S$6.05 a Haw Par share. Haw Par closed at S$5.83.
And Haw Par has a rat-bag of businesses and assets ranging from healthcare products (‘Tiger Balm’), oceanriums, an aquarium (there seems to be some legal trouble here), properties, and 5.2% of UOL (an SGX-listed property company where the UOB Wees have a controlling interest (29.13); like in Haw Par (30.6%). OK rat-bag is unfail, its businesses are usually profitable, and the assets have value.
So at the these prices of Haw Par and UOB, one gets UOB shares at a 4% discount if one buys Haw Par shares. And the other businesses and assets are thrown in for “free”.
And who knows, one day the value of Haw Par’s UOB shares; and its other assets, and businesses may be unlocked. Two long-term value investors have been around for years: MacKenzie Cundill Investment Management has 11.67% and Arnhold and S.Bleichroeder has 14.74%.
Meantime, we long-term investors get decent dividends: present yield is 4%.
Thoughts of a Cynical Investor 