The second earnings season of the year is in full swing, and many blue-chip companies have started to announce their latest financial results.
All eyes, however, are on the trio of Singapore banks as they report their first quarter of 2025 (1Q 2025) earnings.
DBS Group (SGX: D05), United Overseas Bank (SGX: U11) and OCBC Ltd (SGX: O39) are being scrutinised as they form the pillars of the Singapore economy.
With Trump unleashing a wave of reciprocal tariffs, investors will be curious to know how the banks are dealing with them.
The three banks have warned of dark skies ahead as they bumped up their general provisions.
If you plan to invest in the banking sector, let’s compare the banks on several attributes to determine which is the best to buy.
Financials
First, let’s look at each bank’s financials for 1Q 2025.
Of the three banks, DBS chalked up the highest total income growth of 6.3%, driven by a 2% year-on-year rise in commercial book net interest income and a strong 22% year-on-year jump in non-interest income.
UOB reported a 2% year on year increase in net interest income while OCBC saw its net interest income decline by 4% year on year.
But when it came to the operating profit line, UOB saw the best improvement of the three with a 7.4% year-on-year increase as the bank’s total expenses dipped by 1% year on year.
UOB was the only bank that registered a year-on-year increase in net profit, albeit a low one at just 0.2%.
However, investors should note that DBS was impacted by a global minimum tax rate of 15%, which resulted in a fall in net profit.
DBS’s profit before tax increased by 1.4% year on year to S$3.4 billion.
Winner: UOB
Net interest margin (NIM) and loan growth
Next, we move on to each bank’s net interest margin, or NIM, and also review its loan book.
The good news is that all three banks registered year-on-year increases in their loan book, but OCBC saw the highest increase of 7.1% year on year.
When it came to NIM, though, DBS boasted the highest NIM of the three at 2.12%, and only experienced a slight 0.02 percentage point fall in NIM from 1Q 2024.
OCBC saw the sharpest decline in NIM, which more than offset the increase in loan growth, resulting in net interest income tumbling year on year.
Winner: DBS
Cost-to-income (CIR) ratio
The next attribute is the bank’s cost-to-income (CIR) ratio, which measures how efficiently a bank manages its expenses.
A lower CIR implies that a bank is keeping costs low concerning its total income.
DBS once again wins this category with the lowest CIR among the three banks. Incidentally, 4Q 2024 also saw DBS with the lowest CIR of the trio at 43.5%.
Winner: DBS
Non-performing loans (NPL) ratio
The next metric we looked at is the non-performing loans ratio, or NPL ratio.
A lower NPL ratio means that a bank is seeing a lower level of bad loans that it needs to wite off.
In this aspect, OCBC is the clear winner with a 0.9% NPL ratio, and this ratio has also declined from 1% in the previous corresponding quarter.
Winner: OCBC
Return on equity (ROE)
Return on equity, or ROE, comes next.
This is an important financial metric that measures the level of profitability of the bank with respect to its equity base.
DBS has the highest ROE of the three at 17.3% for 1Q 2025, and it also boasted the highest ROE for both 1Q 2024 and 4Q 2024 as well.
Winner: DBS
Valuation
Finally, we look at each bank’s valuation to determine if its shares are cheap or expensive.
DBS is by far the most expensive of the three banks, with a price-to-book ratio of 1.81 times.
UOB and OCBC are trading at relatively similar valuations but UOB still takes the cake with a price-to-book ratio that is below 1.2 times.
Winner: UOB
Get Smart: General provisions are increasing
Out of six attributes, DBS wins on three, UOB is the best for two, and OCBC had just one attribute (NPL ratio) where it scored the best.
Hence, the winner here is DBS, but investors should note that Singapore’s largest bank also has the most expensive valuation.
Beyond the above factors, investors can also look at the quantum of increase for general provisions across all the three banks.
DBS, UOB and OCBC hiked their general provision to prepare for a potential trade war and possible weak economic sentiment.
An additional consideration will be dividends.
DBS is the only bank among the trio to pay a quarterly dividend and for 1Q 2025, the lender paid a S$0.60 ordinary dividend and a S$0.15 capital return dividend, taking its total dividend for the quarter to S$0.75.
This dividend was 53% higher than the S$0.49 paid out a year ago.
Disclosure: Royston Yang owns shares of DBS Group.
