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Shares of Singapore banks jump after regulator lifts dividend cap

ATMs from the three banks listed in Singapore: OCBC, DBS and UOB.

Munshi Ahmed | Bloomberg | Getty Images

SINGAPORE – The stocks of Singapore’s top three banks rose Thursday after the country’s financial regulator lifted a dividend payout cap introduced following the Covid-19 pandemic.

Singapore’s largest bank DBS Group Holdings rose around 0.6% in early trading, while smaller competitors Oversea-Chinese Banking Corp and United Overseas Bank rose around 1%.

The three banks make up around a third of the Benchmark Straits Times Index, which is up 0.5%.

The Southeast Asian city-state’s financial regulator and central bank, the Monetary Authority of Singapore, said on Wednesday that the limits on dividend payments by banks “will not be extended.”

MAS asked banks last year to limit their total dividend per share for 2020 to 60% of the previous year’s amount in light of the economic uncertainties, some of which can be attributed to the pandemic.

“The global economic outlook has improved since then. Although some uncertainties remain, the Singapore economy is expected to continue on its recovery path as global demand and progress on our vaccination program increase, “the regulator said in a statement.

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Before the move from MAS, the European Central Bank and the US Federal Reserve made similar decisions to ease restrictions on dividend payouts from banks.

Eugene Tarzimanov, vice president and senior credit officer at Moody’s Investors Service, said in a statement that he expected the three major Singapore banks to increase dividend payments to pre-pandemic levels of around 50% of their net income.

He noted that Moody’s changed its outlook for Singapore’s banking system from negative to stable in March in recognition of the improving economy, growth potential in banking profits and largely stable asset quality.

DBS, OCBC and UOB are expected to release their second quarter results next week.

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