SINGAPORE, January 8, 2026, 10:37 (SGT)
- DBS touched S$58.80 and ended at a record S$58.40; OCBC hit S$20.25 before easing, keeping Singapore bank stocks in focus.
- Analysts point to dividend yields around 5% and excess capital for buybacks as investors position for lower interest rates.
- Some warn valuations are getting stretched, with UOB seen by some as a better risk-reward play.
Shares of DBS, Southeast Asia’s largest bank by assets, pushed past S$58 for the first time on Wednesday, hitting S$58.80 before ending at a new closing high of S$58.40. OCBC rose to S$20.25 and later eased to S$20.06, in a bank-led run that drove Singapore’s Straits Times Index (STI) to another record.
The move matters because the three local banks dominate the STI and have become a go-to trade for investors hunting income. With interest rates expected to fall, Morningstar’s Lorraine Tan said high-quality dividend payers are being used as a stand-in for Singapore government bonds.
Dividend yields — the annual payout as a percentage of the share price — are hovering around 5% for DBS and OCBC, analysts say. That has kept buyers coming even as share prices climb and some valuation measures start to look uncomfortable.
DBS has gained more than 30% over the past 12 months, while OCBC is up about 19%. UOB, the third local banking heavyweight, rose to S$36.14 on Wednesday before closing at S$36.02, still well below its all-time closing high of S$38.67 in March 2025.
Tan said the banks’ share prices look rich on her intrinsic valuation work, but added their “dividend yields, which are around 5 per cent, are attractive presently”. She also pointed to scope for further share buybacks, while cautioning that headline dividend payouts may not rise much if earnings cool.
UOB Kay Hian research director Jonathan Koh wrote that dividends look sustainable on resilient earnings and strong capital buffers, calling banks “attractive yield plays” in Singapore’s rate backdrop. CGS International analyst Tay Wee Kuang linked OCBC’s recent outperformance to investors “holding out for second-half 2025 dividends”, with the bank’s pledged 60% payout ratio for the 2025 financial year implying a heavier second-half distribution.
DBS Group Research estimates DBS’ dividend yield at 6.1% in 2026, versus 5.4% for both OCBC and UOB. Analysts expect DBS to lift its ordinary quarterly dividend by 6 Singapore cents to 66 cents in 2026, and to keep paying a 15-cent capital return dividend committed up to the 2027 financial year — bringing the quarterly total to 81 cents.
The trade has a catch. Net interest margin — the gap between what banks earn on loans and pay on deposits — is expected to stay under pressure in 2026, and dividend assumptions could be tested if earnings soften or credit costs rise. Analysts said DBS is better hedged than OCBC and UOB, but investors are still paying up for a sector where mistakes get punished fast.
Some strategists are already flinching at the price. The Business Times said DBS and OCBC have crossed some analysts’ target prices after this week’s rally, with calls that upside may be limited as valuations “look stretched”, while UOB draws more neutral views after a third-quarter earnings surprise. https://www.businesstimes.com.sg/companies…
A Yahoo Finance analysis also flagged the starting point: DBS’ share price rose 28.2% over 2025, leaving investors to decide how much more they will pay for dividends and buybacks if rates keep falling.
