The second earnings season of the year is underway, with Singapore’s three major banks – DBS Group, United Overseas Bank (UOB), and OCBC Ltd – reporting their first quarter 2025 earnings. Investors are keenly watching these banks, which form the backbone of the Singapore economy, to gauge their performance amidst global trade tensions. The banks have warned of potential challenges ahead, increasing their general provisions to prepare for a possible trade war and weak economic sentiment.
A comparison of the banks’ financials reveals that DBS Group posted the highest total income growth of 6.3% in the first quarter, driven by a strong increase in non-interest income. UOB, however, saw the best improvement in operating profit, with a 7.4% year-on-year increase. DBS was impacted by a global minimum tax rate, resulting in a fall in net profit.
In terms of net interest margin (NIM) and loan growth, DBS boasted the highest NIM of 2.12%, while OCBC saw the highest loan growth of 7.1% year-on-year. DBS also had the lowest cost-to-income ratio, indicating efficient expense management. OCBC, on the other hand, had the lowest non-performing loans (NPL) ratio of 0.9%.
DBS also topped the chart in terms of return on equity (ROE), with a ratio of 17.3% for the first quarter. However, in terms of valuation, UOB is the most attractive, with a price-to-book ratio of below 1.2 times.
Overall, DBS emerges as the winner in three out of six attributes, including financials, NIM, and ROE. UOB wins in two attributes, including operating profit and valuation, while OCBC scores best in terms of NPL ratio. However, investors should note that DBS has the most expensive valuation among the three banks.
In addition to these factors, investors should also consider the increase in general provisions across all three banks, as well as their dividend payout policies. DBS is the only bank to pay a quarterly dividend, and its dividend payout for the first quarter was 53% higher than the same period last year. Ultimately, investors should carefully evaluate these factors before making a decision to invest in the banking sector.