Singapore Banks Dominate With Buybacks at Four-Year High
The value of buybacks by DBS Group Holdings Ltd., Singapore's largest bank, account for nearly half of all the stock repurchases in Singapore from April 1 to April 23, followed by United Overseas Bank Ltd. at 25% and Oversea-Chinese Banking Corp. at just over 8%, according to data compiled by Bloomberg.
Singapore banks, among the most well capitalized in the region, pledged in recent months to hand over billions of dollars in surplus capital to investors on the back of record-high earnings. Such action came in handy during global stock selloffs triggered by US President Donald Trump's tariff measures.
Elsewhere, banks emerged as the biggest contributors to buybacks in Europe, while share repurchase plans announced in China this month have reached the most since a stock rout in February 2024.
Maybank analyst Thilan Wickramasinghe said Singapore lenders have been carrying excess capital for some time, despite spending on recent deals and integrating them. However, he noted there may be risks that capital returns could be reassessed given the heightened uncertainty in the operating environment.
Shares of DBS, UOB and OCBC fell to multi-month lows earlier this month as they joined a plunge in global equities, before paring losses. Investors are however concerned that weak economic growth would lead to interest rate cuts and impact banks' lending margins.
Still, the lenders appear less vulnerable to US tariffs than their Southeast Asian rivals as supply-chain shifts are set to promote cross-border business, Bloomberg Intelligence said in a report this month. Singapore banks report quarterly results in May.
Morgan Stanley's Southeast Asian analysts led by Nick Lord slashed earnings estimates of Singapore lenders by up to 11% for 2025, and 8%-11% for 2026. The bank said in a report that the main driver of the changes in estimates for 2025 is a 'pre-emptive provision charge based on deteriorating macro economic variables.'
Despite the cut to earnings forecasts, Morgan Stanley left capital return forecasts unchanged as it expects the banks' 'fully loaded' common equity Tier 1 ratios to remain healthy, part due to lower loan growth and still-robust return on equity.
Meanwhile, Goldman Sachs maintained a buy rating on the three banks, saying it favors stocks with 'robust and sustainable profitability and the capability to increase capital returns.' It expects excess capital for the trio to build up by 2027, given that the lenders remain capital generative.
Jefferies analyst Sam Wong said that given that all three lenders are trading above their book value, buyback is not the most value accretive form of shareholder return. 'That said, a buyback mandate would allow the banks to provide some stability to share price in an uncertain environment, and to develop a more sticky investor base (versus any one-off special div),' Wong said in an email.
--With assistance from Julie Chien.
(Adds comment from Bloomberg Intelligence in 7th paragraph, updates charts.)
More stories like this are available on bloomberg.com
First Published: 29 Apr 2025, 05:41 AM IST
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