Singapore’s major banks have demonstrated resilience in the second quarter of 2025, according to a report by UOB Kay Hian. Despite facing significant net interest margin (NIM) compression, banks like DBS, OCBC, and UOB have managed to maintain stable earnings. DBS reported a marginal NIM compression of 7 basis points quarter-on-quarter to 2.05%, aided by balance sheet hedging, whilst OCBC and UOB experienced more pronounced compressions of 12 and 9 basis points, respectively.
DBS’s net interest income saw a slight year-on-year increase of 1.5%, contrasting with declines of 6% for OCBC and 2.7% for UOB. UOB strengthened its deposit franchise, with its current account and savings account (CASA) ratio improving by 5 percentage points year-on-year to 56.5%.
The wealth management sector also saw a recovery, with DBS and OCBC reporting substantial fee surges of 25% and 32% year-on-year, respectively. UOB, adopting a cautious approach, saw a 9% increase. DBS’s asset quality remained stable, with a non-performing loan (NPL) ratio easing to 1.0%.
Capital management remains a priority, with DBS declaring a quarterly dividend of 60 Singapore cents and a capital return dividend of 15 Singapore cents for Q2 2025. OCBC and UOB declared interim dividends of 41 and 85 Singapore cents, respectively.
The report maintains an “OVERWEIGHT” rating on the sector, highlighting attractive dividend yields and capital management strategies. OCBC is recommended as a top buy for its focus on ASEAN trade and investment flows, whilst DBS is noted for its robust yield.
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