Report Summary

• Singapore banks’ net interest margin (NIM) decline is bottoming out, with OCBC and UOB likely to show quarter-on-quarter NIM improvements in 4Q25 as short-term SGD rates stabilise and deposit repricing takes effect.
• Non-interest income is expected to soften in 4Q25 due to seasonal impacts and slower loan growth, following a strong 3Q25 performance.
• Singapore banks saw 5%-10% stock price gains in January 2026, supported by attractive dividends, stable capital returns, and ongoing fund inflows into the sector.
• Credit costs remain stable across peers, though UOB’s costs are elevated due to its real estate exposure; asset quality concerns persist for UOB amidst restructuring of certain loans.
• OCBC is rated BUY with a higher target price of SGD23, reflecting expectations for a more progressive capital return plan and possible dividend payout ratio increase.
• Loan growth in 4Q25 is softer compared to 3Q25, but infrastructure and construction sectors are expected to remain bright spots for 2026.
• Valuation for OCBC is based on rolling forward to FY27F, with a 13% ROE and 1.5x P/BV, above its historical average, on expectations of improved shareholder returns.
• DBS, OCBC, and UOB continue to focus on capital management, with potential for OCBC to exceed its existing dividend payout ratio and DBS maintaining stable dividend growth.
• The sector continues to benefit from defensive SGD characteristics and fund inflows, with ongoing deployment of government-supported equity market development funds.
• Risk factors include asset quality issues, especially in real estate exposures, and global macro uncertainties affecting loan and deposit growth.