In recent years, DBS, UOB, and OCBC have experienced robust share price growth.  

The pressing question for investors now is whether these banks can maintain their upward momentum amid an easing rate cycle, or if a pullback is imminent? 

Reasons Behind the Surge in Bank Stocks

Higher interest rates have widened the spread that banks earn between loan interest and deposit interest. 

This metric, known as net interest margin (NIM), has expanded from the COVID years through 2024, driving strong growth in Singapore banks' net interest income (NII). 

Consequently, the banks achieved record profits and paid out generous dividends.

From 2022 to 2024, the three banks collectively achieved an average compound annual growth rate (CAGR) of 16.5% in net income. 

They also strengthened their capital positions during this time.

These moves likely contributed to their impressive share price growth up to 2024.

This year, DBS has stood out with a year-to-date return of 21.4%, outperforming the Straits Times Index’s 17% gain. OCBC, however, saw a modest 1.0% increase, while UOB’s stock fell by 5%.

DBS Group (SGX: D05)

As Singapore’s largest bank, DBS Group Holding Limited (SGX: D05) has been diversifying away from NII, with significant growth seen in its fee-income business, especially in wealth management.  

In the second quarter of 2025 (2Q 2025), DBS’s NII grew 2% year-on-year (YoY) to S$3.6 billion, and remained unchanged quarter-on-quarter (QoQ). Management expects YoY growth in NII for 2025.  

NIM stood at 2.05% as of June 2025.

Management has indicated a potential decline in NIM in the upcoming quarters. 

Meanwhile, wealth management income surged 25.3% YoY to S$649 million, mitigating the slower growth in NII. Wealth management accounted for 46.5% of DBS’s total fee income, helping stabilize overall profits. 

DBS reported a net profit of S$2.8 billion in 2Q 2025, showing a 1% YoY increase though it declined 3% QoQ. 

Known for its generous dividends, DBS increased its ordinary dividend per share (DPS) by 70.8%, from S$1.37 in 2022 to S$2.34 over the last twelve months (LTM).   

The bank’s DPS for the first half of 2025 is S$1.20, up 11% YoY. Management has guided for similar growth in DPS for the second half of 2025.  

UOB (SGX: U11)

Since United Overseas Bank Ltd (SGX: U11) completed its acquisition and integration of Citigroup’s consumer banking assets in November 2023, it has provided investors with greater exposure to regional economic growth.   

In 2Q 2025, UOB’s NII fell 3% YoY and QoQ to S$2.3 billion due to lower interest rates.

NIM came in at 1.91% for 2Q 2025, with management projecting this to range between 1.85%-1.95% for 2025, down from 2.03% in 2024.    

However, UOB noted a 6% YoY rise in loans to S$115 billion, and fee income of S$636 million, a 3% increase from the prior year. Non-interest income reached S$1.1 billion, making up 32.5% of total income.  

Management expects loans to grow at a low single-digit pace and fee income to rise at a high single-digit rate in 2025.

In contrast to DBS, UOB’s DPS declined 3% YoY in the first half of 2025 to S$0.85. 

OCBC (SGX: O39)

For 2Q 2025, Oversea-Chinese Banking Corporation Ltd (SGX: O39) saw its NII drop by 6% YoY and 3% QoQ to S$2.3 billion.  

NIM compression had a more significant impact on OCBC than its peers, leading to a 7% YoY and 4% QoQ decrease in net profit to S$1.8 billion. Lower margins offset the 7% loan growth in 2Q 2025 compared to 2Q 2024. 

OCBC's management projects a 2025 NIM of 1.90%-1.95%, with a YoY decline in NII. 

Despite having its insurance segment, Great Eastern (SGX: G07), and non-fee income (predominantly wealth management) to diversify away from NII, overall net income might become more volatile.   

Contributions from Great Eastern (6.4% of total income) fell by 23.1% YoY due to lower rates, leading to a devaluation of its insurance contract liabilities. 

Reduced earnings prompted OCBC to cut its interim dividend for the first half of 2025 to S$0.41 per share, down 6.8% YoY, to maintain a 50% payout ratio. 

Challenges Ahead

Rate cuts will result in lower NIM for all three banks. 

While loan growth may offset some margin pressure, Singapore’s mature market limits potential substantial increases.

Global economic uncertainty may adversely affect credit quality, pressuring earnings. 

However, the banks have reported stable non-performing loan ratios (NPLs) over the past twelve months. 

In terms of valuations, OCBC’s trailing price-to-book (P/B) ratio of 1.3 times offers relative value compared to its three-year average of 1.1 times. 

Similarly, UOB’s trailing P/B ratio of around 1.2 times is favorable compared to its three-year average of 1.14 times. 

DBS stands out with a trailing P/B ratio of 2.2, compared to the three-year average of 1.57. 

Implications for Investors

Investors should consider that each bank offers different exposure: DBS’s resilience stems from its diversification and strong fee income, UOB provides regional growth potential, and OCBC is a value investment with its insurance arm facing more intense NIM pressure.