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Singapore banking stocks rise after MAS lifts dividend restrictions

Singapore banking stocks rise after MAS lifts dividend restrictions

FILE PHOTO: A man wearing a protective face mask walks past the Singapore Exchange (SGX) which stays open during "circuit breaker" measures to curb coronavirus COVID-19) in central business district area in Singapore, April 7, 2020. REUTERS/Edgar Su

SINGAPORE: Shares of Singapore’s banks edged up on Thursday morning (Jul 29), after the Monetary Authority of Singapore (MAS) said it will lift dividend restrictions imposed during the COVID-19 pandemic last year.

At about 10.40am, DBS shares were trading at S$30.15, up about 0.27 per cent. OCBC gained 0.9 per cent to S$12.19, while UOB rose 0.6 per cent to S$26.08.

They were among the most actively traded counters by value on the bourse in morning trade.

The broader Straits Times Index was 0.5 per cent higher at 3,157.28.

READ: MAS lifts dividend cap on banks, finance companies

Since July last year, the MAS has called on local banks to cap their total dividends per share for FY2020 at 60 per cent of the previous year's level and offer shareholders the option of receiving the remaining dividends as shares instead of cash.

This was done as a “pre-emptive” move to bolster the resilience of banks and ability to support lending under the current economic downturn.

However, the global economic outlook has since improved, the central bank said on Wednesday.

In a press release announcing its decision to lift dividend restrictions, the MAS said: “While some uncertainties remain, Singapore’s economy is expected to continue on its recovery path, given strengthening global demand and progress in our vaccination programme.” 

It added that local banks have maintained strong capital adequacy ratios and continued to meet the credit needs of individuals and businesses despite higher levels of provisioning made during the pandemic.

Analysts said the Singapore central bank’s move followed similar relaxations by other central banks, such as the European Central Bank and the US Federal Reserve this year.

“The removal of dividend caps by the MAS is a sign that the economic conditions in Singapore have improved and the banks are well capitalised,” said Mr Eugene Tarzimanov, vice-president and senior credit officer at Moody’s Investors Service.

Moody’s in March had changed its outlook on Singapore’s banking system to stable from negative, acknowledging the improving economy, upside in banks’ earnings and broadly stable asset quality.

“We expect the large Singaporean banks – DBS, OCBC and UOB – to increase dividend payments to around pre-pandemic levels of around 50 per cent of their net income,” Mr Tarzimanov added.

RHB’s Singapore research team said while the central bank’s decision had been widely anticipated, it was still “a positive development” as it signalled “confidence and strength in Singapore’s banking system, notwithstanding any potential adverse economic development”.

In a research note, they reiterated an “overweight” rating on the sector and said there is now upside for its FY2021 dividend forecasts for Singapore banks.

Source: CNA/sk

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