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Local banks still offer yield plus growth despite global headwinds

Goola Warden
Goola Warden11/19/2018 07:30 AM GMT+08  • 8 min read
Local banks still offer yield plus growth despite global headwinds
SINGAPORE (Nov 19): At a time of rising market volatility, dividend growth investing could offer shelter from the storm. For this, look no further than the local banks. They may not offer the highest yields, but their dividends are likely to continue to g
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SINGAPORE (Nov 19): At a time of rising market volatility, dividend growth investing could offer shelter from the storm. For this, look no further than the local banks. They may not offer the highest yields, but their dividends are likely to continue to grow. All three have staked out slightly different growth strategies and are anticipating modest loan growth, firm net interest margins (NIMs) and continued wealth management traction in the coming years.

The trio announced 3QFY2018 earnings that were more or less within analysts’ expectations. The standout was the four-basis- point q-o-q rise in the common equity tier 1 (CET1) capital adequacy ratio (CAR) of Oversea-Chinese Banking Corp to 13.6%, the only bank to register CET1 growth in the third quarter.

The reason for the rise was twofold. First, the banking group’s risk-weighted assets (RWA) were stable at $200.3 million despite strong loan growth of 1.7% q-o-q and 10% y-o-y to $257 billion. This is probably because the loans disbursed by OCBC carried lower risk weights, that is, they were well collateralised (such as mortgages) to customers with good credit ratings. The RWA of the other two banks rose, causing their CET1 CAR to fall.

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