SINGAPORE — December 16, 2025. Singapore’s bank-heavy equity market delivered a fresh headline on Tuesday: DBS and OCBC both notched new all-time highs, reinforcing a late‑2025 narrative that the “big three” banks remain core holdings for income-focused investors—just as the debate shifts to whether the rally can hold into 2026. [1]
But the story is bigger than a single day’s price action. What’s driving the sector now is a powerful mix of capital return expectations, structural wealth inflows, a loan-growth rebound, and a new China-linked payments milestone for DBS—while UOB’s asset-quality and provisioning profile continues to keep it a step behind its peers. [2]
Today’s key headlines: DBS and OCBC at fresh highs, UOB still trailing
By mid-morning Tuesday, DBS touched S$56 (up 28.1% year-to-date) while OCBC hit S$19.44 (up 16.5% year-to-date). UOB, by contrast, traded around S$34.79 and remained down more than 4% year-to-date, underscoring how the market is no longer treating the three banks as a single “bundle trade.” [3]
Even with the broader Singapore market ending slightly lower on the day, the banks were mixed: DBS finished higher, OCBC ended higher, and UOB was marginally down, a snapshot that captures the sector’s current dynamic—strong demand for the leaders, selective caution on the laggard. [4]
The catalyst behind the headlines: DBS’ renminbi clearing role and a digital RMB pilot
A major news driver this week is DBS’ elevation in the offshore renminbi (RMB) ecosystem.
Reuters reported that DBS was appointed Singapore’s second RMB clearing bank, joining ICBC’s Singapore branch (designated in 2013). Singapore’s central bank, the Monetary Authority of Singapore (MAS), said the move is intended to support further growth of Singapore’s offshore RMB market and facilitate RMB use for trade and investment aligned with regional needs. [5]
In a related development, Singapore and China also agreed to a pilot programme that will allow Singapore travellers to open and top up digital RMB wallets for merchant payments in China by year-end, and both sides agreed to begin an over-the-counter bond market arrangement that enables institutional access (via designated banks) to selected fixed-income products in China’s interbank market. [6]
For investors, this matters for two reasons:
- It strengthens DBS’ strategic relevance in cross-border settlement and treasury services at a time when regional corporates are diversifying currency exposure.
- It reinforces Singapore’s positioning as a financial hub for Asia-related flows, which ties directly into the banks’ wealth-management and fee-income narratives heading into 2026. [7]
Why the rally isn’t only about one headline: dividends, “excess capital,” and policy-driven inflows
Tuesday’s record highs came alongside renewed attention on a theme that has become increasingly central for Singapore bank stocks: shareholder returns.
A Business Times “Hot Stock” report noted that the sector is projected to enjoy tailwinds from dividend yields of up to 6% and excess capital, and it pointed to expectations of continued inflows into the banking sector into 2026, including further deployment of Singapore’s Equity Market Development Programme funds. [8]
That view is echoed by DBS Vickers’ Group Research, which framed the sector’s 2026 setup around high dividend yields and capital flexibility. The research cited FY26F dividend yields of 6.1% for DBS, and 5.4% for both OCBC and UOB, alongside potential support from general provision (GP) writebacks and excess capital—though with UOB more constrained versus peers. [9]
Singapore Business Review similarly reported expectations of sustained 2026 momentum supported by high dividend yields, strong capital positions, and ongoing fund inflows, including continued deployment of the second batch of EQDP funds (valued at $2.85b) into 2026. [10]
For Google News readers tracking market structure, the implication is clear: Singapore bank performance is increasingly being explained not only by quarterly earnings, but by a capital-return “floor” that attracts both local and international income-seeking capital.
Loan and deposit trends: the “banking basics” are back in focus
Beyond capital returns, investors are watching whether Singapore banks can sustain earnings as rates trend lower.
A Phillip Securities Research sector note (published via POEMS) highlighted that November’s 3M SORA fell to 1.26%, the lowest since July 2022, reflecting the downshift in benchmark rates. Yet the same note also reported that Singapore loan growth continued climbing (October 2025: +6.5%) and that year‑to‑date 2025 loans were up 5.7% YoY, with banks guiding for low- to mid-single-digit growth. [11]
On the funding side, the report flagged a supportive trend: CASA rose 13% YoY, which can reduce funding costs (even though the CASA ratio to deposits dipped slightly). [12]
The message from analysts is nuanced:
- Lower rates can compress net interest margins (NIMs) and weigh on net interest income.
- But stronger loan demand, deposit repricing, and a healthier deposit mix can partially offset that drag—especially for banks with strong franchises and pricing power. [13]
DBS Vickers’ research went further into the mechanics, describing aggressive deposit repricing and deposit growth as key mitigants for declining NIMs. It noted that flagship current accounts and Singapore-dollar fixed deposits had been repriced down significantly from 3Q24 to 3Q25, and that UOB made an additional cut (up to 60 bps) to a flagship current account in December 2025. [14]
DBS, OCBC, and UOB: why investors are treating the “big three” differently now
The simplest takeaway from December’s trading is that Singapore banks are no longer moving in lockstep. The market is separating the trio based on dividend visibility, wealth-management strength, and perceived credit risk.
DBS: dividend visibility + strategic positioning
DBS’ latest rally has been tied to a combination of capital-return expectations and a steady drumbeat of strategic relevance—from wealth flows to RMB infrastructure.
On the dividend front, income-focused investors are watching both headline yields and payout sustainability. The Smart Investor pegged DBS’ dividend yield at about 5.2% (excluding special dividends) at the time of its Dec 16 analysis. [15]
Valuation is also part of the conversation. The same analysis noted DBS trading at a price-to-book of 2.26, above its five-year average (as cited in that piece), a reminder that the stock’s premium pricing is already reflecting a lot of optimism. [16]
Still, DBS Vickers’ research argued that wealth-management activity and inflows are increasingly “structural,” supported by Singapore’s haven status and the Singapore dollar’s defensive characteristics. [17]
OCBC: wealth-management momentum + improving “capital optionality”
OCBC’s record high comes as investors increasingly position it as a wealth-driven compounder with room for dividend upside.
The Smart Investor put OCBC’s yield at about 4.3% (excluding special dividends) at the time of writing, lower than DBS/UOB but still elevated versus many large-cap alternatives. [18]
On the research side, Phillip Securities Research upgraded OCBC from Neutral to Accumulate and lifted its target price from S$17.00 to S$20.00, citing strong wealth management growth and excess capital. [19]
DBS Vickers’ sector view also highlighted strong wealth management dynamics, noting that assets under management (AUM) grew 18% YoY at OCBC in 3Q25, matching DBS’ AUM growth rate over the same period (with UOB lower). [20]
UOB: higher yield, lower valuation—yet credit uncertainty dominates the narrative
UOB remains investable for income seekers—but it is also the stock where investors appear to want a bigger “risk discount.”
The Smart Investor estimated UOB’s yield at about 5.1% (excluding special dividends) and flagged that the bank’s earnings weakness was tied to a proactive ramp-up in credit allowances. [21]
That caution aligns with what markets saw in the latest reporting season. The Business Times reported that UOB’s 3Q earnings plunged 72% to S$443 million, missing consensus expectations, as its allowance for credit and other losses rose to S$1.36 billion as at Sep 30 versus S$304 million a year earlier. [22]
UOB’s own CFO slides underscored the scale of the provisioning reset and the resulting profitability hit, while also pointing to stabilizers:
- 3Q25 net profit: $0.4b (down 72% YoY), driven by pre-emptive provisions
- NPL ratio: 1.6%
- CET1 ratio: 14.6%
- NIM: 1.82%
- Additional $0.6b set aside in pre-emptive general allowance, with general allowance coverage strengthened to 1% of performing loans [23]
Singapore Business Review reported that analysts continued to view UOB as an “outlier” on asset-quality concerns, noting elevated new NPA formation (as cited by the report it referenced) and a cautious stance on the outlook despite the larger provisions already booked. [24]
In practical terms, UOB is increasingly being priced like a bank that must “prove” the worst is behind it—while DBS and OCBC are being rewarded for perceived resilience and fee-income/wealth management optionality.
“Is this the best time to buy Singapore bank stocks?” What long-term income investors are debating
The question now facing retail investors is straightforward: after record highs, is it too late—or still reasonable for long-term income portfolios?
A Dec 16 analysis by The Smart Investor framed the decision as less about perfect timing and more about discipline—especially for dividend-focused buyers. It emphasised that Singapore banks have long dividend histories and pointed to metrics investors often track, including:
- Dividend payout ratios (LTM) cited as ~50.5% (OCBC), 62.6% (UOB), 75.2% (DBS)
- CET1 ratios cited as 15.1% (DBS), 15.0% (OCBC), 14.5% (UOB)
- Current valuations versus historical averages (via price-to-book comparisons) [25]
The same piece also laid out the two-sided debate:
- The bullish case: dividend yields remain compelling, loan demand could pick up as rates ease, and wealth management can cushion earnings even if NIMs soften. [26]
- The bearish case: a lower-rate world can still pressure NIMs, and any regional economic slowdown could dampen loan growth and worsen credit costs. [27]
For Google Discover readers, here’s the key point: The “buy vs wait” decision in Singapore bank stocks is increasingly about whether you believe capital returns and fee income can outweigh NIM compression and credit risks—and whether current valuations already price in the best-case scenario.
The 2026 outlook: what investors should watch next
With 2025’s rally lifting multiples and pushing DBS/OCBC to records, 2026 will likely be shaped by a handful of measurable drivers:
1) Rate path and NIM vs volume trade-off
Falling benchmark rates have already contributed to NIM pressure, but the next question is whether loan growth and deposit repricing can keep net interest income from sliding too sharply. [28]
2) Wealth management flows and fee resilience
Both DBS Vickers and SBR highlighted that wealth inflows and investment activity are expected to remain strong, with investment-to-AUM ratios cited in the 40%–56% range. If those flows hold, they can meaningfully reduce reliance on pure spread income. [29]
3) Capital management and policy-linked inflows
Analysts are explicitly tying sector support to continued deployment of EQDP funds and to excess capital dynamics (including the possibility of GP writebacks in some cases). [30]
4) Credit costs and UOB’s “confidence rebuild”
UOB’s provisioning reset may ultimately prove prudent—but for the stock to catch up, investors will likely want clearer evidence that credit costs are peaking and that asset quality is stable. UOB’s own disclosures around coverage, NPLs, and capital will be closely watched. [31]
Bottom line on Dec 16, 2025: record highs, but a more selective market
Singapore bank stocks are entering 2026 with strong momentum—yet the market is becoming more discriminating:
- DBS is being treated as the sector’s premium name, supported by dividend visibility and expanding strategic relevance (including the latest RMB clearing role). [32]
- OCBC is increasingly framed as a wealth-driven play with room for capital-return optionality, reinforced by upgrades and target-price lifts. [33]
- UOB offers yield and potentially cheaper valuation—but remains under a credit-risk spotlight after a sharp earnings drop driven by provisions. [34]
For long-term investors, the big question isn’t whether Singapore banks will remain relevant—it’s whether today’s record-high prices still leave enough room for dividend compounding plus modest growth to deliver attractive total returns in a lower-rate world. [35]
References
1. www.businesstimes.com.sg, 2. www.businesstimes.com.sg, 3. www.businesstimes.com.sg, 4. www.businesstimes.com.sg, 5. www.reuters.com, 6. www.reuters.com, 7. www.reuters.com, 8. www.businesstimes.com.sg, 9. www.dbsvickers.com, 10. sbr.com.sg, 11. www.poems.com.sg, 12. www.poems.com.sg, 13. www.poems.com.sg, 14. www.dbsvickers.com, 15. thesmartinvestor.com.sg, 16. thesmartinvestor.com.sg, 17. www.dbsvickers.com, 18. thesmartinvestor.com.sg, 19. www.poems.com.sg, 20. www.dbsvickers.com, 21. thesmartinvestor.com.sg, 22. www.businesstimes.com.sg, 23. www.uobgroup.com, 24. sbr.com.sg, 25. thesmartinvestor.com.sg, 26. thesmartinvestor.com.sg, 27. thesmartinvestor.com.sg, 28. www.poems.com.sg, 29. www.dbsvickers.com, 30. sbr.com.sg, 31. www.uobgroup.com, 32. www.businesstimes.com.sg, 33. www.poems.com.sg, 34. www.businesstimes.com.sg, 35. thesmartinvestor.com.sg
