DBS, UOB and OCBC raise dividends. Still attractive at 6% yield?

What happened?

The strong share price performance of Singapore banks has caught the attention of many investors.

For example, DBS' share price reached an all-time high of S$46.85 recently after the bank reported its 2024 earnings.

Likewise, UOB and OCBC's share prices have edged higher so far this year too.

Over the past 1 year, Singapore banks have performed better than the benchmark Straits Times Index (STI).

However, with growing concerns of an economic slowdown and a fall in interest rates, I have seen discussion in the Beansprout community about whether it might still worthwhile investing in Singapore banks. 

In this article, I will look at the recent financial performance of DBS, UOB and OCBC to understand what is supporting their share price, and find out more about their prospects in the year ahead. 

Setting new income records in 2024

All three Singapore banks saw record net profits in 2024, with strong growth for the full year 2024 even as growth moderated in 4Q24. 

DBS reported a 10% year-over-year (YoY) increase in net profit for the fourth quarter, totalling S$2.62 billion. This growth was driven by robust performance in both the commercial book and markets trading divisions. 2024 full year net profit rose to a record of S$11.4 billion (+11% YoY).

UOB reported 4Q24 net profit of S$1.5 billion, up 9% YoY, bringing 2024 full year net profit to a record of S$6.0 billion. This represents a 6% increase compared to the previous year. This growth was largely driven by increased income from fees and solid performance in trading and investment activities. 

OCBC net profit of S$1.69 billion in 4Q24 was 4% higher compared to the previous year, while net profit reached record S$7.6 billion in FY24, up 8% YoY.

Moderation in loan growth 

Loans growth continue to moderate in 4Q24 across the Singapore banks. OCBC led with a 5% QoQ loan growth led by Singapore and Greater China, followed by DBS at 3% QoQ led by non-trade corporate loans while UOB saw a modest 1% QoQ led by Greater China. 

For the full year, loans growth was 8% YoY for OCBC, 5% YoY for UOB and 4% YoY for DBS. 

Moderation in loan growth in 4Q24 

Modest net interest margin compression 

In 4Q24, DBS saw a 4% QoQ increase in net interest income, supported by both loans growth and an expansion in net interest margin. Net interest income growth at UOB and OCBC were flat and up a marginal 1% respectively in the quarter, however, due to the effects of a compression in the net interest margin (NIM). 

DBS’s NIM rebounded from 2.11% in 3Q24 to 2.15% in 4Q24,    as higher markets trading more than offsets lower commercial book NIMs. UOB’s NIM compressed five basis points to 2.00% due to lower loan margins. OCBC’s NIM narrowed by three basis points to 2.15%, as funding costs rose faster than asset yields. 

Strong growth in non-interest income 

The fourth quarter is seasonally a slower quarter for non-interest income, due to softer trading and wealth-related activities. 

DBS’ 4Q24 fee income moderated 6% QoQ to S$1.2 billion due to seasonality, although total fee income was still up a strong 16% YoY, led by wealth management which saw a 41% YoY growth. For the full year, fee income rose to a record S$5.1 billion, up 23% YoY on an overall basis and 45% YoY for wealth management. 

UOB 4Q24 net fee income similarly moderated 10% QoQ to S$567 million but was flat YoY. For the full year, net fee income rose 7% YoY to S$2.4 billion. 

For OCBC, non-interest income was down 30% QoQ, but up 18% YoY to S$961 million in 4Q24. For the full year, non-interest income was up 22% YoY to S$4.7 billion, representing 32.6% of group income. 

Across all three banks, net interest income’s share of total income has been hovering at the 70-72% mark. 

Fee income will continue to take a bigger share of total income with larger assets under management. All three banks gathered more AUM in 2024, with 4Q24 AUM increases led by DBS at S$25 billion, followed by OCBC at S$15 billion and UOB S$5 billion.

Credit costs remain manageable 

Asset quality remains healthy, with stable non-performing loan (NPL) ratios. 

For UOB, credit costs continue to increase QoQ, up 16 basis points in 4Q24 to 52 basis points, after a 15 basis points QoQ increase in 3Q24, driven primarily by the Thailand retail portfolio. DBS credit costs rose marginally by 6 basis points QoQ to 20 basis points, while OCBC credit costs rose 9 basis points QoQ to 15 basis points. 

Strong capital ratios support sustainable dividend 

The improved earnings and continued strong asset quality of the banks have helped to sustain healthy Common Equity Tier 1 (CET1) ratios, which have all improved meaningfully YoY across all three banks. While DBS CET1 ratio dipped marginally from 17.2% to 17.0% as at 4Q24, this was higher than 14.6% as at 4Q23. For UOB, CET1 ratio was flat QoQ at 15.5%, but higher than 13.4% as at 4Q23. For OCBC, CET1 ratio dipped from 17.2% to 17.1%, albeit higher than 15.9% as at 4Q23.  

Even after considering the full effects of the Basel III regulatory reforms for banks, which is to be fully phased in on 1 January 2029, the three local banks’ remain well capitalised compared to their target operating range of 12 to 14%, and well above regulatory requirements set by the Monetary Authority of Singapore (MAS). 

DBS fully phased-in CET1 ratio stands at 15.1%, UOB at 15.4% and OCBC at 15.3%.

Dividends and capital management 

DBS announced Capital Return dividend

DBS announced a final quarterly dividend per share (DPS) of 60 cents per share, a six-cent increase from the 54 cents per share in from 1Q to 3Q24. In addition, the bank has unveiled an innovative 'Capital Return' dividend, set at 15 cents per share quarterly for the duration of 2025. In the subsequent two years, it expects to pay out a similar amount of capital either through this or other mechanisms, barring unforeseen circumstances.

The Capital Return dividend is the latest in a series of capital management initiatives undertaken by the Board in recent years, which included regular increases in the ordinary dividend including through a bonus issue, occasional special dividends and a share buyback programme which was announce earlier. 

DBS continues to consider all forms of returning excess capital to shareholders. 

Read also: DBS reports 10% profit growth and unveils capital return dividend: Our Quick Take

UOB announced special dividend 

For UOB, a final dividend of 92 cents per share was announced, in addition to an interim dividend of 88 cents per share previously announced. This brings total dividend of S$1.80 per share for FY24, an increase from S$1.70 per share for FY23. 

To celebrate its 90th anniversary, UOB is also proposing a special dividend of 50 cents per share in 2025, distributing a total of S$0.8 billion. 

The special dividend will be paid out over two tranches in 2025, with the first tranche of 25 cents per share to be paid in May 2025, and second tranches of 25 cents per share to be paid in August 2025. 

Furthermore, UOB will initiate a S$2 billion share buyback program, aimed at returning a total of S$3 billion in surplus capital (including special dividends) over the next three years.

Read also: UOB profit rises by 6% and announces special dividend: Our Quick Take

OCBC also announced special dividend 

For OCBC, the board has proposed a final ordinary dividend of 41 cents per share for FY24, slightly lower than 42 cents per share for FY23. This would bring the total ordinary dividend for FY24 to 85 cents per share with a payout ratio of 50%.

A special dividend of 16 cents per share is recommended, raising the total dividend payout for FY24 to 60% of net profit.

OCBC has also announced a strategic capital return plan totalling S$2.5 billion over FY24 and FY25, benefiting shareholders through both special dividends and share buybacks. That said, the special dividends, set at a 10% payout ratio, would represent the bulk of the S$2.5 billion plan. 

To recap, OCBC and UOB pays dividends on a semi-annual basis, unlike DBS which does so on a quarterly basis. Given the continued strong capital position of all three banks and prospects of earnings growth, there is scope for dividend increases in the upcoming earnings announcement in 2025. 

Read also: OCBC profit rises by 4% and announces special dividend: Our Quick Take

Stable outlook in 2025 despite geopolitical complexities 

DBS expects group net interest income to be slightly above 2024 levels, with a slight decline in Group NIM offset by loan growth. While credit costs are expected to normalise to 17-20 bps, management is not seeing signs of stress so far. Overall, 2025 pretax profits are expected to be around 2024 levels, with net profit lower due to the global minimum tax of 15%. 

For UOB, it expects high single-digit loan growth, double-digit fee growth and higher total income in 2025. At the same time, costs are likely to be contained with the cost-to-income ratio at around 42%, while credit costs are expected to be benign in the 25-30 basis points (0.25-0.3%) range. 

OCBC expects a further decline in its net interest margin to about 2% from 2.20% in 2024. The decline in net interest margin is expected to be partly cushioned by mid-single digit loan growth. OCBC also expects its cost-to-income ratio in 2025 to be in 'low-40s', which will mark a further increase from the 39.7% in 2024. 

Singapore banks offer a potential dividend yield of 5.9% above in 2025

While DBS was the standout performer in 2024, the three local banks have a comparable share price performance in the year to date, with DBS up 3.3%, UOB up 3.4% and OCBC up 2.3% as at 20 March 2025. 

This is likely driven by their strong earnings in 2024, as well as expectations for stable profits in 2025. 

DBS is now trading at a price-to-book ratio of 1.9x, while UOB and OCBC are trading at a price-to-book ratio of 1.3x. The price-to-book valuations for all three Singapore banks are currently above their historical averages. 

Annualising the last announced ordinary dividends, DBS is projected to provide the highest yield at 5.3%, followed by UOB at 4.9% and OCBC at 4.8%.

Annualising their latest announced dividends and adding the announced special dividends, DBS is expected to offer a potential dividend yield at 6.6%, followed by UOB at 6.2% and OCBC at 5.9%.

As this is above the dividend yield of the Straits Times Index (STI), Singapore banks continue to look attractive for dividend investors. 

Keen to learn more about what's ahead for Singapore banks? Join us for our free webinar on 26th March (Wed) at 7.30pm where we will share more about DBS, UOB and OCBC. Register for free here. 

Related links:

• DBS Group Holdings Ltd share price history and share price target
• United Overseas Bank Limited share price history and share price target
• Oversea-Chinese Banking Corporation Limited share price history and share price target

Download the full report here. 

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