Analysts from UOB Kay Hian projected modest QoQ profit growth, but YoY declines for both DBS and OCBC.

Singapore’s major banks are expected to report mixed first-quarter 2025 results, as earnings come under pressure from narrowing interest margins, even as fee income from wealth management provides some support.

Analysts from UOB Kay Hian have projected modest QoQ profit growth, but YoY declines for both DBS and OCBC.

DBS is projected to post a net profit of $2.75b, down 7% YoY but up 9% from the previous quarter. OCBC’s net profit is expected at $1.87b, reflecting a 5% YoY decline and an 11% QoQ increase.

The decline in profits is largely attributed to net interest margin (NIM) compression, following a 50-basis-point cut to the US Fed Funds Rate in late 2024 and a corresponding 51-basis-point drop in the 3-month SORA to 2.56%. DBS’s NIM is expected to ease by 6 basis points to 2.09%, whilst OCBC’s may drop by 7 basis points to 2.56%.

Non-interest income, particularly from wealth management, remains a bright spot. DBS is expected to see a 17% YoY rise in wealth management fees, whilst OCBC is forecast to register 12% growth in the same segment.

Overall fee income is estimated to rise 10% for DBS and 9% for OCBC compared to the same period last year.

Operating expenses are trending higher, with DBS expected to report a 13% YoY increase and OCBC a rise of nearly 8%. Both banks are maintaining cost-to-income ratios within management guidance, at approximately 41%.

Asset quality remains stable in the near term. DBS’s NPL ratio is forecast to hold at 1.1%, whilst OCBC’s is expected at 0.9%. However, analysts note the potential for deterioration in the second half of the year due to rising macroeconomic risks and trade tensions.

Capital return initiatives are in focus. DBS plans to maintain its quarterly dividend of 60 cents and introduce a Capital Return Dividend of 15 cents per quarter. It also announced a new $3b share buyback program. OCBC intends to return $2.5b in capital over two years through special dividends and a $1b share buyback.

Following these developments, UOB Kay Hian has maintained a “Market Weight” rating on the sector. It issued a BUY recommendation on OCBC, citing its lower valuation and dividend profile, and a HOLD on DBS, given expected pressures from global tax changes and slower earnings growth.

At a broader level, Singapore’s economy remains exposed to external risks. The Ministry of Trade and Industry has revised 2025 GDP growth expectations downward to 0–2%, reflecting softer global demand and persistent trade uncertainty. Authorities have indicated a readiness to introduce targeted support measures if conditions weaken further.

Despite macroeconomic challenges, bank stocks continue to offer relatively attractive dividend yields, with the sector averaging 6.8% for 2025.