Singapore banks: DBS crosses $58 for the first time in record-breaking rally
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DBS shares have gained more than 30 per cent in the past 12 months, while OCBC is up about 19 per cent.
ST PHOTO: KUA CHEE SIONG
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- Shares of DBS and OCBC hit record highs, driving the STI to 4,765.29, before seeing a slight dip.
- Attractive dividend yields (around 5%), excess capital, and robust tailwinds support the banking sector, with DBS offering the best yields.
- Analysts suggest UOB is a more attractive risk-reward investment, despite DBS's higher dividend payout and leading position.
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SINGAPORE - Singapore bank stocks on Jan 7 extended a multi-week rally
Shares of DBS, South-east Asia’s largest bank by assets, crossed $58 for the first time in morning trade, reaching as high as $58.80.
The stock ended at a new closing high of $58.40, up 0.8 per cent, or 47 cents.
OCBC climbed as high as $20.25 on Jan 7, after crossing $20 for the first time a day earlier. The counter closed at $20.06, down 0.6 per cent, or 12 cents, from its record high of $20.18 the previous day.
UOB shares rose as much as 0.6 per cent to $36.14, before paring gains to close up 0.3 per cent, or 11 cents, at $36.02. While the counter has gained in the weeks-long bank share rally, it has not come close to its all-time closing high of $38.67 in March 2025.
The local banks – which are heavyweights of the STI – helped pushed the benchmark index up 0.16 per cent to a fresh all-time high of 4,747.62 on Jan 7.
DBS shares have gained more than 30 per cent in the past 12 months, while OCBC is up about 19 per cent. UOB, whose third-quarter profit tumbled 72 per cent as it hiked allowances by $1 billion, is down more than 3 per cent in the same period.
Morningstar director of Asia equity research Lorraine Tan said that with interest rates expected to fall, quality companies with attractive dividend yields are being seen as a proxy to holding Singapore government bonds.
“While we think that the current share prices of DBS and OCBC are quite rich on an intrinsic valuation basis, we can’t deny that their dividend yields, which are around 5 per cent, are attractive presently,” said Ms Tan, adding that both banks have room to continue share buybacks, although dividend payouts may stay at the current level.
“This still should lead to dividend growth as long as earnings are stable. However, we feel that on a risk-reward basis, UOB is slightly more attractive at this stage and we project its dividend yield to be 5.8 per cent based on Jan 5’s closing share price of $35.50,” she added.
UOB Kay Hian director of research Jonathan Koh said the sustainability of the banks’ dividend payouts is supported by resilient earnings, strong capital adequacy and discipline in capital management.
“Banks are attractive yield plays given the current low-interest-rate environment in Singapore,” Mr Koh said in a Jan 7 report.
The brokerage firm has a price target of $68.95 for DBS and $23.65 for OCBC.
CGS International research analyst Tay Wee Kuang noted an outperformance in OCBC’s share price.
“I believe it is because investors are holding out for second-half 2025 dividends. OCBC’s 50 per cent payout in the first half means their committed 60 per cent payout ratio for the financial year of 2025 will be more backloaded into the second half,” he said.
Mr Tay added that there could also be some optimism around OCBC’s new chief executive Tan Teck Long, who may help unveil the bank’s strategy over the next three years, following predecessor Helen Wong’s completion of her three-year strategic goal.
According to a DBS Group Research report on Dec 9, Singapore’s banking sector remains supported by robust tailwinds, specifically excess capital and attractive dividend yields of up to 6 per cent.
DBS’ dividend yield is forecast to be at 6.1 per cent in 2026, while those for OCBC and UOB are at 5.4 per cent each, estimates DBS Group Research.
Analysts told The Straits Times that DBS offers the most attractive dividend yields among the local banks, as it looks to increase quarterly dividends by 6 cents to 66 cents in 2026.
There is also an additional 15 cents per share to be paid in capital return dividend, which has been committed up to financial year 2027, making up a total of 81 cents per quarter.
DBS also retained its position as Singapore’s leading investment bank in 2025
Net interest margins (NIM) for the local banks are expected to remain under pressure in 2026, with DBS better hedged than OCBC and UOB with unexpired hedges and strength in deposit growth, the analysts said.
