On July 28, the Monetary Authority of Singapore (MAS) announced that dividend restrictions on locally-incorporated banks and finance companies headquartered in Singapore will not be extended.
In July and August 2020, MAS called on banks and finance companies respectively to cap their total dividends per share (DPS) for FY2020 at 60% of FY2019’s DPS, and offer shareholders the option of receiving the remaining dividends to be paid for FY2020 in shares in lieu of cash.
The dividend restrictions were a pre-emptive measure, introduced to ensure that local banks and finance companies maintain strong lending capacity to support the economy throughout the pandemic, given the significant uncertainties at that time.
According to MAS, the global economic outlook has since improved and 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.
MAS further stated that local banks and finance companies 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.
The ratios are projected to “remain resilient”, even under worst-case scenarios where delays in vaccine deployment and resurgences in the pandemic lead to the Singapore economy slipping again into recession in 2021.
“Local banks and finance companies have weathered the pandemic well and are in a strong position to support the economic recovery. As downside risks remain, Local Banks and Finance Companies should exercise continued prudence in their discretionary distributions, whilst prioritising support to customers,” says Ho Hern Shin, MAS’s deputy managing director.
“Particularly when COVID-19 is not yet endemic, businesses may face added liquidity strains when COVID-19 measures are tightened from time to time. Banks and finance companies will do well to proactively work with customers to navigate these challenges,” she adds.
Lee Wai Fai, UOB’s group CFO, welcomes MAS’ announcement. “In our commitment to helping our affected customers overcome the challenges from the prolonged pandemic, we remain prudent and disciplined in capital management. We believe that our strong balance sheet ensures that we are well-placed to support the economic recovery and to see our customers through to better times.”
DBS CFO Chng Sok Hui says the group’s dividend considerations for the 2QFY2021 ended June will take into account MAS’ lifting of dividend restrictions. DBS will be announcing its 2Q results on August 5.
“With the onset of the pandemic last year, DBS’ solid financial position allowed us to lend strong support to customers and communities. We will continue to do the same going forward,” Chng says.