Singapore is well-known for being a financial hub.
Our small island nation ranks third in the Global Financial Centre Index 2022, behind just New York and London.
With rising geopolitical tensions, Singapore is also viewed as a choice destination for the rich to park their money with its safe-haven status.
As a result, many financial firms are enjoying an influx of capital into the country.
Ultra-high net-worth families are seeking to shift their assets over to Singapore under the enhanced Global Investor Programme.
Investors who park their money in financial companies should look for characteristics such as a strong franchise, a long track record, and a durable competitive moat.
We highlight three such financial stocks that are poised to do well with the influx of family offices and high-net-worth individuals.
And with the increase in revenue and profits, share prices of the trio could also carry on climbing higher.
DBS Group (SGX: D05)
DBS is Singapore’s largest bank by market capitalisation.
The lender has safely navigated the pandemic and recently reported a stellar set of earnings, with net profit scaling new heights to hit S$8.2 billion.
In tandem with the strong numbers, DBS has hiked its quarterly dividend from S$0.36 to S$0.42 and also declared a special dividend of S$0.50.
Investors have confidence in DBS as it is also backed by investment firm Temasek Holdings, which owns around 29.1% of the bank.
There could be more good news to come.
The group is slated to benefit from further interest rate increases that will boost its net interest margin (NIM) and net interest income.
DBS’s group NIM hit 2.05% in the fourth quarter of 2022 and CEO Piyush Gupta believes that peak NIM should settle around 2.25%.
The lender is also forecasting mid-single-digit year on year loan growth as China’s reopening boosts the region’s economies.
In the wake of the collapse of Silicon Valley Bank, DBS has also enjoyed fund inflows amounting to several hundred million that should help to increase the assets under management parked under its wealth management division.
An increase in this AUM could attract higher fee income for 2023 which should boost non-interest income.
Hong Leong Finance Ltd (SGX: S41)
Hong Leong Finance, or HLF, is Singapore’s largest finance company with a network of 28 branches islandwide.
The group boasts an extensive suite of products and services including fixed deposits, savings accounts, mortgage and car loans, and share financing.
HLF reported a robust set of earnings for 2022 that saw its interest income on loans surge 48% year on year to S$266 million.
Fee and commission income climbed 46.3% year on year to S$16.4 million.
As a result, operating profit jumped 56.7% year on year to S$159.9 million while net profit improved by 54.3% year on year to S$130.9 million.
A final dividend of S$0.1325 was proposed, a significant increase over the S$0.0825 paid out in the prior year.
HLF intends to increase its digital adoption and expand its offerings to scale up the business and enhance customer engagement.
This digital strategy will complement its branch network to deliver an omnichannel experience for customers.
Credit Bureau Asia Ltd (SGX: TCU)
Credit Bureau Asia, or CBA, provides credit and risk information to a client base of banks, financial institutions, government bodies, and public agencies.
As of 31 December 2022, the group has more than 230 financial institution members across Singapore, Cambodia, and Myanmar.
2022 saw CBA report a decent performance with revenue rising 7.1% year on year to S$48.6 million.
Net profit improved by 7.2% year on year to S$8.4 million.
Free cash flow generation also increased by 18.4% year on year from S$16.8 million to S$19.9 million.
CBA declared a final dividend of S$0.017, unchanged from a year ago.
The group has made important progress in the past six months.
Last December, it announced that five Singapore-licensed digital banks have joined as members of Credit Bureau Singapore (CBS).
These include GXS Bank, a joint venture between Grab Holdings (NASDAQ: GRAB) and Singtel (SGX: Z74), as well as Maribank, the digital bank run by Sea Limited (NYSE: SE).
Trust Bank, a partnership between Standard Chartered Bank and FairPrice Group, is also a member of CBS.
In late February, CBS also partnered with Credit Bureau Cambodia (CBC) to launch an inaugural cross-border initiative between both countries.
Both CBS and CBC will work together to ensure sharing of credit reports and that regulatory frameworks and requirements are complied with.
By doing so, they can create a more holistic picture of a person’s creditworthiness and help credit providers and employers to gain better visibility when performing credit checks on individuals.
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Disclosure: Royston Yang owns shares of DBS Group.
