OREANDA-NEWS. Over the past week, Singapore’s three listed banks, which together represent just over a third of the Straits Times Index (STI) weighting, reported results for the three months and full year ended 31 December 2015.

DBS Group Holdings (DBS), Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) averaged net interest income of S$1.49 billion for the fourth quarter, reflecting an average increase of 8.4% year-over-year and 2.5% quarter-on-quarter.

DBS posted the best quarterly performance, with a 10.8% YoY surge in net interest income to S$1.85 billion.

The three banks averaged a net profit of S$917 million for the quarter. OCBC’s net profit registered the largest YoY increase of 21.4% to S$960 million, while DBS posted the highest net profit of S$1.0 billion, up 19.6% YoY, and UOB posted a net profit of S$788 million, nearly flat from a year-ago. On a quarter-on-quarter basis, both DBS and UOB registered declines of 6.0% and 8.1% in their net profits respectively.

For full-year 2015, DBS posted the highest net profit – a record S$4.45 billion, up 10.1% YoY. This was followed by OCBC with S$3.90 billion, reflecting an increase of 1.6% YoY, and UOB with S$3.21 billion, down 1.2% YoY.

DBS’s net earnings were buoyed from the year ago by higher net interest margin and broad-based non-interest income growth, it said in its results statement dated 22 February. Fourth-quarter earnings fell QoQ due to lower non-interest income and higher allowances.

DBS CEO Piyush Gupta (click here to read his kopi-C profile) said in the statement that the bank’s consistent performance across the past four quarters reflects the quality of its earnings profile. “While unsettled financial markets in recent weeks have created short-term uncertainty, the region’s economic fundamentals are sound and the risks associated with slower growth are manageable,” he added.

OCBC’s 2015 results were boosted by a full-year consolidation of OCBC Wing Hang’s earnings, the bank said in its results statement dated 17 February. Higher net interest income reflected growth in interest-earning assets and a seven basis-point gain in net interest margin, due to higher loan yields. Core net profit was also lifted by increased life assurance profits.

OCBC remains unfazed despite the challenging global and regional macroeconomic backdrop, OCBC Bank CEO Samuel Tsien (click here to read his kopi-C profile) said in the statement. Management is positive on OCBC’s continued ability to deliver sustainable growth, and the bank will be conservative, prudent and focused on its long-term strategic priorities, he added.

UOB said in its results statement dated 16 February that net earnings for the fourth quarter were impacted by lower gains from the sale of investment securities and higher one-off expenses incurred for Singapore’s Golden Jubilee (SG50) and UOB’s 80th anniversary commemorative events.

UOB Chief Executive Officer Wee Ee Cheong noted in the results statement that financial markets will continue to grapple with volatility and uncertainty this year from falling oil prices and the effect of China’s slowdown on the global economy. “Our view is that the risks are largely manageable and the underlying economic fundamentals are strong enough to withstand the shocks, even as we enter an environment of slower growth,” he added.

Net Interest Margins

The three banks averaged a net interest margin (NIM) of 1.79% for the October-December quarter, compared with 1.69% in the year-ago quarter, and 1.74% in the July-September quarter.

DBS registered a five-year high of 1.84% for its NIM, which was also the highest among the three banks, due to a rise in Singapore dollar interest rates.

NIM is a measure of the difference between interest income generated by banks and the amount of interest paid out to their lenders, relative to the amount of their interest-earning assets.

Bad Loans

The three banks averaged a non-performing loan (NPL) ratio of 1.1% in the December quarter, compared with 0.9% YoY and 1.0% QoQ.

UOB registered the highest NPL ratio of 1.4% among the three banks in the fourth quarter, up from 1.2% YoY and 1.3% QoQ, while DBS’s NPL ratio was steady versus the year-ago quarter and the previous quarter. OCBC’s NPL ratio rose to 0.9% in the quarter versus 0.6% YoY, but held steady from the previous quarter.

Key Financial Ratios

The three banks averaged a Return on Equity (ROE) of 10.8% in the fourth quarter, compared with 10.3% YoY and 11.3% QoQ.

OCBC registered the highest ROE among the three at 11.5%, while DBS had the lowest ROE of 10.1%.

In terms of Common Equity Tier 1 Capital Adequacy Ratios, the three banks posted an average of  13.8%, up YoY and QoQ. OCBC had the highest Common Equity Tier 1 CAR of 14.8% among the three banks, while UOB registered the lowest ratio of 13.0%.

DBS, OCBC and UOB have averaged a total return of minus 13.5% in the 2016 year thus far. Over a 12-month and three-year period, their dividend-inclusive total returns were a negative 23.7% and negative 4.3% respectively.