Singapore banks drive share buybacks, set to be biggest in four years, after dip in share prices
According to Bloomberg data, from April 1 to 23, buybacks by Singapore's largest bank, DBS Group Holdings Ltd., accounted for nearly half of the total corporate stock repurchases in Singapore, while United Overseas Bank Ltd. (UOB) made up 25% and Oversea-Chinese Banking Corp. (OCBC) just over 8%.
Banks in the city-state, known for being among the most well-capitalised in the region, pledged in recent months to return billions of dollars in extra funds to investors after reporting record-high earnings. This move proved useful during global stock sell-offs caused by US President Donald Trump's tariff actions.
The Edge Singapore reported that besides banks in the city-state, lenders in Europe also became the biggest contributors to buybacks, while in China, share repurchase plans announced this month hit the highest level since a stock sell-off in February 2024.
Maybank analyst Thilan Wickramasinghe noted that while Singapore banks have had excess capital for some time, this could change due to growing uncertainty in the 'operating environment'.
Shares of DBS, UOB, and OCBC dropped to multi-month lows earlier this month, along with the rest of the global market, but have since recovered some of their losses. Investors remain concerned that slow economic growth could lead to interest rate cuts and hurt banks' lending margins. Singapore banks are scheduled to report their quarterly results next month.
Morgan Stanley Southeast Asian analysts, led by Nick Lord, downgraded their earnings estimates for Singapore banks by up to 11% for 2025 and between 8% and 11% for 2026. However, Morgan Stanley kept its capital return forecast unchanged, expecting the banks' 'fully loaded' common equity Tier 1 ratios to stay strong, helped by lower loan growth and steady returns on equity.
Meanwhile, Goldman Sachs has maintained a 'buy' rating on DBS, UOB, and OCBC, praising their 'robust and sustainable profitability and the capability to increase capital returns'. The investment bank and wealth management firm expects the three banks to build up extra capital by 2027, given that they remain capital generative.
Jefferies analyst Sam Wong raised some concerns, pointing out that the three banks are trading above their book value, meaning that buybacks may not be the best way to return capital to shareholders. However, he also noted in an email that '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).' /TISG
Read also: Investor confidence in S-REITs grows as Orchard Road malls hit record prices: DBS
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