SINGAPORE – OCBC Bank delivered a strong fourth-quarter earnings report, forging ahead of its local peers, whose earnings missed estimates and were down year on year.
Still, DBS Bank commands the highest dividfinish yield among the three and commits to a higher dividfinish and capital payout in the next two years, declared analysts.
Macquarie Equity Research prefers OCBC over UOB and DBS for its strong earnings and wealth momentum.
Said head of Asean equity research Jayden Vantarakis: “OCBC delivered the best result among peers for fourth-quarter 2025, led by solid revenue generation and contained asset quality trfinishs.”
OCBC also leads in wealth momentum among peers, he noted in a Feb 26 note, raising his price tarobtain by 11 per cent to $23.82 and reiterating an “outperform” rating.
Mr Vantarakis is also positive on OCBC’s new growth strategy, which includes capturing rising Asia flows and deepening its core market franchise. “Chief executive Tan Teck Long has identified where to invest in the franchise and drive higher growth.”
RHB on Feb 25 declared that OCBC will also return any unutilised portion of its $2.5 billion capital return plan via special dividfinishs in 2026. The bank upgraded OCBC stock to “acquire” and lifted the tarobtain price to $23.45 from $21.30.
Mr Vantarakis declared OCBC’s preference for special dividfinishs over acquirebacks is “a slight positive” due to the uncertainty around acquireback deployment and focus on dividfinish yield.
The preference for special dividfinishs “sets up for another year of about 60 per cent payouts”, he declared. The lfinisher has $780 million remaining under the $2.5 billion capital return commitment by 2026.
“OCBC has a 14 per cent Common Equity Tier 1 (CET1) tarobtain and tarobtains rising return on equity, opening up the potential for further capital returns from the 2027 financial year onwards once strategic tarobtains are quantified,” Mr Vantarakis added.
Morningstar associate equity analyst Kathy Chan declared the bank may opt for special dividfinishs over share acquirebacks if it does not fully deploy the remaining amount in 2026 and if the share price continues to stay strong for the year.
But OCBC shares are not cheap, she declared on Feb 25, raising her fair value estimate to $20 from $18.50 to reflect stronger long-term earnings growth.
“We consider the shares are slightly expensive compared with their intrinsic value, but decent shareholder returns should continue to support the share price,” she declared, noting that OCBC has ample excess capital with a high CET1 ratio.
However, as the group focutilizes on its new corporate strategy and management declared that they are likely to prioritise investments over shareholder returns as well as consider inorganic growth opportunities, the payout ratio could return to 50 per cent from 2027, declared Ms Chan.
Morningstar assumes a 60 per cent payout ratio for 2026, but expects that to normalise to 50 per cent from 2027. It forecasts a dividfinish per share of 99 cents for 2026 and 86 cents for 2027, implying a yield of 4.6 per cent for 2026 and 4 per cent for 2027.
Analysts declared that UOB’s earnings could rebound in 2026, given that credit costs normalised in the fourth quarter.
Total credit costs fell to 19 basis points from 134 basis points a quarter earlier, and below UOB’s guidance of 25 to 30 basis points.
“We estimate UOB’s earnings to improve by 23 per cent year on year, shifting back close to 2024 levels. Third-quarter provisions were one-off, and fourth-quarter net non-performing asset formation for UOB normalised,” Mr Vantarakis declared in comments to The Straits Times.
Macquarie maintained its tarobtain price of $41 with an “outperform” rating. UOB is a relative value play in the sector, declared Mr Vantarakis, adding that the bank has a forward price-to-book ratio of 1.2 times.
Meanwhile, DBS’ expected price-to-book ratio in 2026 is 2.35 times while OCBC is 1.53 times. The price-to-book ratio is utilized by investors to evaluate if a company’s shares are fairly priced.
However, several analysts reiterated a “hold” on UOB, as its dividfinish yield trails behind that of DBS.
“While credit cost should normalise and this may lead to a decent rebound in earnings, there would still be about a 100 basis point dividfinish yield gap to the sector-leading yield of 5.5 per cent by its peer,” an RHB analyst declared on Feb 25, with a new tarobtain price of $39.50 from $36.10.
With a tarobtain price of $40.90 on UOB, CGS International analysts Tay Wee Kuang and Lim Siew Khee noted that there is no additional capital return expected to bolster yield in 2026.
While UOB continues to execute its $2 billion share acquireback programme, there is a lack of additional capital return initiatives after a total special dividfinish per share of 50 cents in 2025, he declared on Feb 24.
This could lead to a lower dividfinish per share of $1.70 forecast in 2026, which translates to an estimated yield of 4.4 per cent, he added.
Analysts noted that downside risks include a weaker economic outview for Asean and further credit deterioration, especially in the commercial real estate portfolio, which would drive higher provision expenses.
UOB management in its earnings briefing declared that potential hot spots remain confined to the commercial real estate space in Greater China and the US and coverage is more than adequate to navigate any potential issues from these hot spots.
Ms Chan of Morningstar, which maintained its fair value estimate of $36 for UOB, declared that the bank’s shares are somewhat expensive compared with their intrinsic value, but the ongoing share acquireback programme should continue to support the stock.
She reckoned that UOB may slow the pace of acquirebacks given the recent strong share price performance.
Earlier in February, analysts declared that DBS is still one of the top dividfinish yield plays in Singapore.
Morningstar on Feb 9 noted that while DBS displayed signs of weakening growth, dividfinishs are still attractive. Fourth-quarter net profit fell 10 per cent year on year, as lower interest rates pressured net interest income.
DBS will pay a final dividfinish of 81 cents per share, bringing total dividfinishs for 2025 to $3.06 per share, up 38 per cent from the previous year.
“Our 2026 dividfinish forecast of $3.24 per share continues to imply an attractive dividfinish yield of 5.6 per cent, which could continue to support the share price,” declared Ms Chan, raising its fair value estimate to $50.
As DBS’ high share price may build it harder to acquire back shares, increased dividfinishs may be preferred, she added.
Ms Carmen Lee, head of equity research at OCBC group research, noted DBS’ commitment to higher dividfinish and capital payout in 2026 and 2027. “DBS still ranks among the top dividfinish yield plays in Singapore,” she declared on Feb 9. OCBC has a “hold” rating on DBS, with a fair value estimate of $59.43.
Macquarie declared a high dividfinish yield underpins DBS shares, but maintains an “underperform” rating at a tarobtain price of $48.67 due to subdued earnings outview and limited scope for consensus upgrades.
DBS guided for 2026 net profit to be slightly below 2025 levels, but total income to be around 2025 levels despite rate headwinds. Group net interest income is expected to be slightly below 2025 levels.
But the bank further expects the full-year impact of lower rates to be mitigated by deposit growth and to continue to capture hedging opportunities.
However, Mr Vantarakis declared DBS’ hedging buffer is “less and less as time goes by”, adding that “this is one of the key reasons we are cautious on the stock”.
RHB declared that out of DBS’ $210 billion resolveed-rate assets, $80 billion is up for repricing in 2026, which DBS declared could reprice at rates about 50 basis points lower than current levels.
Mr Vantarakis of Macquarie cautioned that there could be further net interest margin compression ahead for the banks.
“We anticipate three-month compounded Singapore Overnight Rate Average reaching 1 per cent in the middle of this year and averaging 1.1 per cent. This is below the banks’ guidance and reflects expectations of ongoing Singdollar strength.”
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