The Singapore stock market’s three local banks, DBS Group Holdings (SGX: D05), Oversea-Chinese Banking Corporation (SGX: O39), and United Overseas Bank (SGX: U11) have long been staple holdings of Singaporean investors.
Owning these banks gives investors exposure to Singapore and the surrounding regional Asian economies.
All three have been posting solid earnings and rewarding shareholders with good dividends.
Given the strong rally in their stock prices in recent years, do they still present a value buy at these prices?
Let’s find out.
Why Singapore Banks Have Performed Strongly
Singapore banks have been the prime beneficiaries of higher interest rates (in recent years), which have bolstered their net interest margins (NIMs).
NIMs refer to the interest rate spread between what the banks charge to borrowers and what they pay on deposits. The NIM is the core metric that determines how much net interest income (NII) a bank earns.
Higher NII earned in recent years has also strengthened the banks’ capital positions.
Combine higher NIMs with good loan growth and diversifying streams of non-interest income, and the three local banks have been compounding their earnings, which are then distributed to shareholders via increasing dividends.
Bank Overview: What Makes Each Different?
Starting with DBS, the largest bank in Southeast Asia by market capitalisation, it is renowned for its strong digital banking franchise, broad regional presence, and wealth management that is showing serious momentum.
DBS’s shares are trading at around S$60 each at the moment, near its 52-week high.
In DBS’s latest quarterly update for the first quarter of 2026 (1Q2026), its NIM came in at 2.29%, with a stable non-performing loan (NPL) ratio of 1.0%, while maintaining a sound capital position, with a common equity tier one (CET1) ratio of 14.8%.
DBS also saw increased efficiency in generating profits, with a high return on equity (ROE) ratio of 17.0%.
Next is OCBC, the oldest local bank which was founded in 1932.
The bank is often favoured for its conservative lending and its insurance exposure through majority ownership of Great Eastern (SGX: G07).
OCBC is also trading near its all-time high, currently at S$22.90 per share.
OCBC’s latest update, for 1Q2026, printed a NIM of 1.76%.
The NPL ratio was unchanged at 0.9%, while the CET1 ratio was healthy at 15.2%.
OCBC’s ROE picked up slightly from Q4 2025, coming in at 13.0%.
Finally, UOB is prized for its strong ASEAN presence, with the bank expanding its consumer and commercial banking footprint in the region over recent years.
At S$37.18, UOB’s share price is sitting in the middle of its annual range of S$33.25 to S$39.50.
For 1Q2026, UOB reported a NIM of 1.82%, a stable NPL ratio of 1.5%, and a good CET1 ratio of 15.3%. Its latest ROE is 11.5%.
Dividend Comparison: Which Bank Pays Best?
DBS stands out with the highest trailing twelve-month (TTM) dividend yield of roughly 5.2%.
OCBC is a little behind, with a trailing annualised yield of approximately 4.3%.
Finally, UOB sports a trailing annualised yield of 4.2%, given the S$1.56 dividend paid for 2025.
Overall, all three banks have shown a consistent track record of paying dividends in recent years and this is unlikely to change moving forward, given their robust CET1 ratios.
Do also note that all three banks have a recent tendency to pay special dividends, but this is subject to management’s discretion.
Of the three, DBS presents the most compelling dividend story, given that the bank has guided for its quarterly capital return dividend of S$0.15 per share to run until 2027.
Furthermore, its dividend growth, since 2020, has also been the strongest.
Growth Potential: Which Bank Has More Upside?
Moving forward, DBS’s growth is likely to come from its wealth management segment, which has seen impressive growth over the last couple of quarters.
The bank’s increasing efficiency in generating profits (with its record ROE) could also unlock further upside.
Similar to DBS, OCBC has been making good headway in growing its wealth management segment.
Unlike the other two banks, OCBC’s insurance arm (Great Eastern) also provides decent diversification for the bank.
With its conservative lending profile, as seen in its low NPL ratio, OCBC’s defensiveness can provide some buffer during downturns.
Finally, UOB’s presence in the ASEAN region provides a solid growth driver for the bank.
Should the regional economies grow better than expected, UOB is well-positioned to capitalise on this tailwind.
Valuation: Which Bank Looks Cheapest Today?
DBS is priced for perfection: its last twelve months (LTM) price-to-book (P/B) ratio is at 2.4, while its next twelve months (NTM) price-to-earnings (P/E) ratio is at 14.6; both metrics are comfortably higher than their five-year historical averages.
Similar to DBS, OCBC’s LTM P/B ratio of 1.5 and its NTM P/E of 13.4 are both also stretched compared to their own histories.
Conversely, UOB’s LTM P/B ratio of 1.2 and a NTM P/E of 10.9 are more in line with their historical averages.
Does this mean OCBC and DBS are a sell and you should buy UOB?
Not quite.
The elevated valuations for DBS and OCBC reflect investors’ willingness to pay up for quality, while UOB’s relatively cheaper valuation is because of the market’s concerns regarding its increased credit provisions.
Key Risks Investors Should Watch
As always, some key risks facing banks include the possibility of lower interest rates, which will further hamper their NIMs and NII.
A slowdown in the global, regional, or even local economy will also pressure loan quality and growth, which are headwinds for all three local banks.
Get Smart: Choosing the bank that fits your priorities
In sum, all three local banks still possess strong fundamentals.
The key question of which bank to own depends on what you prioritise: DBS for its quality and strong profitability, OCBC if you want a conservative, stable income, or perhaps UOB if you’re looking to beef up your portfolio with some regional growth exposure.
Owning the bank that best suits what you’re looking for is better than simply choosing the one with the cheapest valuation.
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Disclosure: Wilson H. does not own any of the companies mentioned.
