Singapore’s banks, the trio of DBS (SGX: D05), OCBC (SGX: O39), and UOB (SGX: U11), reported their latest results for the third quarter of 2025 (Q3 2025) recently.
Save for UOB, the local banks reported resilient earnings for the quarter.
Only DBS has declared higher dividends for the first nine months of 2025 compared to a year ago.
Both OCBC and UOB still pay dividends, but their amounts were lower year-on-year.
The question for investors is: Can I buy these banks here, or should I wait for a decline?
Why Singapore Banks Are Income Powerhouses
Singapore’s banks all have a long track record of paying annual dividends.
From 2022 to 2024, the average dividend yield they have provided during this time has at least 3.6%.
The long history of dividends is made possible partly because of the banks’ fortress balance sheets, with CET1 (Common Equity Tier 1) ratios exceeding regulatory requirements. It allows the local banks to provide steady dividends through market cycles.
The pandemic is a great example.
DBS, OCBC, and UOB all paid a dividend in 2020, although each bank’s dividend was lower than the year before.
The three banks also dominate the banking and finance industry in Singapore and the surrounding region, with strong positions across corporate banking and wealth management.
Their diversification in wealth management could provide earnings-resilience even in a cycle of lower interest rates.
The Case for Buying Now
So why should you consider buying the banks now?
First, all three banks have generous dividend yields.
DBS has a yield of 5.2%, while OCBC and UOB have yields of 4.3% and 5.1%, excluding special dividends, respectively.
This is on the back of resilient earnings for 9M2025 for DBS and OCBC.
On the surface, UOB’s net profit performance was poor with a 28% year-on-year decline for the same period.
But this happened for a good reason: The bank proactively increased allowance for credit and losses from S$699 million a year ago to S$1.93 billion.
Secondly, as we enter a world of possibly lower interest rates, banks might benefit from increased loan demand.
So there’s a possibility where the effects of earning a lower net interest margin (NIM) could be softened by increased loan volumes.
Finally, let’s look at their valuations.
OCBC trades at a price-to-book (P/B) ratio of 1.48, while UOB has a P/B of 1.23.
This compares with their five-year averages of 1.06 and 1.15, respectively.
Meanwhile, DBS has a P/B ratio of 2.26, compared to a five-year average of 1.47.
At first glance, OCBC and DBS are trading rather richly compared to their five-year averages.
However, if you adopt a longer-term outlook, there are reasons that make the banks compelling investments.
First, there is the potential for capital appreciation in their stock price stemming from earnings growth as a result of the banks’ dominant positions in Singapore and the surrounding region.
Second, they have solid dividend payments.
The Case Against Buying Right Now
Bears may argue that Singapore’s banks have seen peak-earnings from a possible decline in net interest margins (NIMs) from lower interest rates.
Lower NIMs will cause a drag on a bank’s net interest income (NII); despite diversifying into non-interest fee income, all three banks are still heavily reliant on NII.
Furthermore, any economic slowdown in Singapore and/or the broader region could dampen loan growth and hamper the banks’ profits.
There is an argument to be made that investors should instead wait for sharp selloffs, as seen during August 2024 (blow-up of yen carry-trade) and April 2025 (Trump’s Liberation Day), before investing in the banks.
What Long-Term Income Investors Should Focus On
Do not buy Singapore’s banks simply because of their attractive yields. Instead, you should evaluate if their dividends are sustainable. Look for consistent dividend growth, not just a high payout.
To do so, you can check their dividend payout ratios: Over the last 12 months (LTM), OCBC, UOB, and DBS, are sporting payout ratios of 50.5%, 62.6%, and 75.2%, respectively. These are respectable numbers.
Then, you would want to check if the banks have a track record of paying dividends regardless of market cycles. As mentioned earlier, all three have a long history of consistently paying a dividend. It’s worth mentioning that over the past decade, the banks had faced numerous tough economic conditions. There’s the oil bust of 2015-2016, COVID in 2020, and the high inflation years of 2022-2023.
Having a strong capital buffer (CET1 ratio) is also important, as it provides a buffer for the payment of dividends during tough times. Earlier, I shared that the banks have CET1 ratios that exceed regulatory requirements. Right now, their CET1 ratios are as follows: DBS at 15.1%, OCBC at 15.0%, and UOB at 14.5%.
Speaking of capital buffers, you should also pay attention to the banks’ loan loss coverage ratios, their asset quality (do they have lots of non-performing loans and are they heavily exposed to countries with troubled economies?
Finally, are they trading at fair valuations (current P/B vs historical averages)?
Are Singapore Banks Still a Buy for Long-Term Income?
Despite severe downturns in markets such as during 2008, 2015-2016, and 2020, patient investors who stay invested in Singapore’s banks have tended to do well. This is thanks to their dividends and share appreciation.
Get Smart: Focus on What You Can Control
This may or may not be the best moment to buy Singapore’s banks. But they remain among the best bang for your buck in Singapore’s stock market if you are seeking stable income.
Look to purchase these banks consistently for steady income – accelerate your purchases during moments of large drawdowns – to enjoy steady dividend income, and to consistently compound your capital.
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Disclosure: Wilson.H does not own shares in any of the companies mentioned.
