DBS, OCBC and UOB have continued to climb higher. Both DBS and OCBC continued to hit record highs.
Meanwhile, UOB shares have traded down largely because of its provisions, breaking record highs.
Overall, all three Singapore banks have continued to perform well.
What’s more, dividends have also traded around 4-5% yield.
With 3Q results released last month, are Singapore banks worth a buy today? Let’s dive in.
In case you missed my recent posts: |
Singapore banks’ 3Q2025 results
First things first, what stood out for 3Q2025 was a more resilient wealth management business. But net interest income continued to drop.
DBS 3Q net interest income fell…
Same thing for OCBC…
And UOB…
The good news is, Singapore banks are built for profits – DBS, OCBC and UOB have established a strong deposit franchise with a low deposit cost.
My goal is to extract these profits and dividends over time without taking enormous risk here.
Simply put, I want to avoid the risk of permanent capital loss from overpaying these assets.
Which brings me to my crucial point…
Are Singapore bank shares worth buying now?
The thing is, aberrations do happen in the stock market.
But they must ultimately pass the test of a “perfectly reasonable price”.
What does this mean?
Well, this is a telltale signal that based on both current dividend yield and price-to-book ratio, a stock would grow reasonably with the quality of its underlying business’s earnings growth.
In other words, if a bank doubles its earnings over the next five years, we should comfortably expect share price performance to grow accordingly – nothing more, nothing to less.
Having said that, as long-term investors, we see ourselves as forensic scientists.
And the most practical way to identify a perfectly reasonable price is to draw conclusions from facts at hand – not what share price movement is telling us.
In this case, it’s not hard to understand why Singapore bank shares continue to perform.
Despite lower net interest income, wealth management has been an enormous tailwind for local banks, especially DBS.
And my theory is much of the strong wealth assets inflow was really due to China’s bear market over the last couple of years.
This has sent hundreds of billion dollars searching for a safer home. And has forced a lopsided advantage for Singapore banks to capture as much wealth as possible over the past years.
In fact, DBS management said this:
“Commercial book net interest income fell 6% or $238 million to $3.56 billion as the impact of lower rates was partially mitigated by balance sheet hedging and strong deposit growth.
The Group’s net interest income of $3.58 billion was little changed. Fee income rose 22% or $248 million to a record $1.36 billion led by wealth management, while other non-interest income increased 12% or $61 million to $578 million as treasury customers sales reached a new high.”
In fact, DBS’s wealth management assets hit a record S$474 billion in its latest quarter.
Now what I find it hard to understand in today’s environment is Mr. Market would pay for such growth regardless of the price levels of these shares.
Singapore banks have normally been called a “value stock”, or what I call a Flying Elephant – reliable blue-chips with a durable economic moat and track record of a strong reputation.
Unlike high growth companies that normally trade at much higher P/B ratios, Singapore banks normally trade at an average 1-1.5x PB ratio.
But what I don’t get is Singapore banks are now trading at much higher P/B ratio: DBS trades at a whopping 2x P/B ratio.
Even OCBC is trading close to ~1.6x P/B ratio. Both trade at a much higher average P/B historically. And these Singapore bank shares seem to continuously keep going higher.
With China rebooting its economy, the heavy stimulus, and Hong Kong’ stabilizing of its retail and residential market is now creating a potential reversal of fortune.
With my recent Hong Kong trip, I’m personally observing a potential reversal of these fortunes.
So to Mr. Market who’s seen as know-it-all: Don’t be so sure. Don’t be so sure.
At some point, when prices run far ahead in its earnings, this misunderstanding in valuations today will simply lead to self-correction of price levels of Singapore bank shares.
It has happened before. It will happen again.
Special mention: UOB shares are down, is this a buy for dividends?
What’s interesting is that UOB shares have fallen 6.5% year to date.
As I’ve written about UOB shares previously here, Singapore’s third largest bank’s net profits have stumbled – hit with higher provisions and lower net interest income.
Would I buy it today?
For UOB it depends on what price you paid. This is unique for me. I bought UOB shares at a much lower price, which I believe has sufficient margin of safety. And a healthier yield on cost for my UOB stock position.
While I don’t see a massive bargain in UOB shares at current prices, some investors are happy locking in a 5% yield. Others prefer a lower yield. Some just trade these banks for short-term profits.
My case is simple – I make sure my average purchase cost of my UOB stock position has a reasonable margin of safety. This gives me confidence to accumulate accordingly. Diligence members will know this as My Right Price Gauge.
My final thoughts
Today, all three Singapore bank shares have just become a contest to reach stratospheric heights.
As investors, our job is not to bet on horses that come in first. Instead, our job is to figure out whether the price we pay now is a perfectly reasonable price. Why?
Over the long run, I aim to compound my dividends. I’ll obtain the best returns possible based on the prices at which I pay.
And how much the stock price in the next six months or so is less important than providing the kind of regular compounding over the long term.
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
Hi Mr Willie,
I think the analysis is very shallow.
Rather than focus on what has happened focus on the why.
What does the book value represent in a bank? And why do the 3 banks trade at different price to book values?
Why have the price to book value risen over the years?
If you read the appendix in the intelligent investor Ben Graham will tell you that a company trades inversely to it’s book value given that their earnings are the same. Why is this so?