OCBC Bank shares: sometimes, it’s best to start with the facts.
Try these: 17% market share in deposits.
Huge deposit base.
Third-biggest branch network in Singapore. Returns on equity (ROE) of 12%.
Has paid dividends for 13 years in a row.
Owns one of the biggest insurance businesses in Singapore — Great Eastern Holdings.
OCBC Ltd (SGX:O39) is the second largest bank in Singapore by market capitalization.
Merged from three local banks in 1932, OCBC is also the longest-established bank.
But what many people may not know is this.
OCBC owns one of the biggest private banks — Bank of Singapore.
Private banks help manage money for the rich — whether it’s lending them money to buy a house, invest their savings or estate planning.
It’s called wealth management.
The thing is, OCBC has always been a traditional banking business.
And OCBC knows one of the fastest growing markets in Singapore today is wealth management.
That’s why over past the 10 years, a lot of capital was deployed grow OCBC’s private bank.
You know what I like about OCBC?
Well, OCBC knows where to look for opportunities.
And knows how to growing its wealth management business.
And that’s exactly what we should be looking at.
Especially if we want to make sure we continue to get our dividends paid from the second-largest bank in Singapore.
You see, OCBC is one of the big banks to get into wealth management business early.
OCBC first bought over ING Private Bank during the global financial crisis in 2009.
Then OCBC continued to scale the business.
It bought over Barclay’s, National Australia Bank’s and Hong Kong’s Wing Hang bank’s wealth management business.
Today, OCBC’s private bank is the fifth largest private bank in Singapore — A massive S$123 billion in assets under management (AUM).
Wealth management is big business.
That’s because when you gain access to rich clients, you know you help manage their investment, lend them money for their businesses, take care of their family’s insurance policies and provide their family estate planning.
It’s a win-win-win situation for OCBC’s loans business, private banking business and insurance business.
Why is wealth management so important in Singapore?
You’ll agree with me: Singapore is the best and safest place to park your money in the region.
And Singapore has one of the best financial system and infrastructure in place.
With the pro-democracy protests in Hong Kong, wealthy Chinese individual are also considering parking their wealth in Singapore.
More and more people are taking advantage of Singapore’s financial hub status to invest.
That’s how more and more financial assets keep coming into Singapore.
In fact, MAS reported that Singapore’s financial assets under management grew from S$2.3 trillion in 2014 and close to double S$4 trillion in 2019.
And it’s not stopping there.
Even some of the big investors are moving into Singapore, bringing along their wealth into the island city.
It’s good business for OCBC.
In its latest first quarter results, wealth management takes up 54.8% of its fee income (see blue label below).
Source: OCBC’s Company Presentation
And fees from wealth management is going to increase — All from helping manage wealthy clients’ money.
It also allowed OCBC to reward shareholders with abundance.
Since 2008, OCBC grew dividends from S$0.28 per share to S$0.53 per share in 2019.
Because of COVID last year, OCBC’s dividends was temporarily cut to S$0.318.
Source: Dividend Titan
But I’m sure at some point, OCBC will continue to grow its dividends.
Its wealth management business is all set to capture Singapore’s wealth management market.
How does OCBC shares
You see, banks are a cyclical stock — share prices tend to bounce up and down more often.
OCBC shares profile
But OCBC shares have performed fairly well over the past 20 years.
And this usually makes it a safe bet for new investors.
In fact, over the past 20 years, OCBC shares have steadily more than doubled.
Last year, OCBC shares fell from its peak in 2018 and crashed all the way to to a low of S$7.80.
But has since rebounded after that during the COVID pandemic last year.
The share price is right now sitting at S$12.20 per share.
Even during the global financial crisis and the U.S. debt crisis, shares fell but quickly recovered.
Right now, OCBC is offering a dividend yield of 2.7% (based on S$0.318 dividends per share in 2020).
Source: Dividend Titan
OCBC is more conservative with their dividends right now.
And at some point, I believe they will increase their dividends again.
OCBC has a long runway ahead with their wealth management business.
And this is on top of their solid commercial banking and insurance businesses.
Sometimes, investing can be simple.
Always here for you,
Willie Keng, CFA
Founder, Dividend Titan
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