• The combined weightage of DBS, OCBC, and UOB in the Straits Times Index has risen to 54.3%. Analysts significantly revised the 12-month Consensus Estimate Target Prices (CETP) for DBS, OCBC, and UOB upwards in 2024, with marginal upward revisions to the CETP over the past five weeks. 
   
• While their large weightage saw the three banks drive the 23.5% total return of the STI in 2024, all three were outpaced by Yangzijiang Shipbuilding, and OCBC and UOB were also outpaced by Hongkong Land. For 4QFY24 financials, DBS reports on 10 Feb, UOB reports on 19 Feb and OCBC on reports 26 Feb, all reporting pre-market. 
   
• Analysts will likely examine multiple aspects in financials and guidance, including the impact of lower interest rates in 4Q24, juxtaposed with higher than initially anticipated rates in 2025, and recent signs of overall loan growth in Singapore. Capital management initiatives, such as dividend policies and buybacks, are also being closely watched. 
   

The combined weightage of DBS Group Holdings (DBS), Oversea-Chinese Banking Corp (OCBC), and United Overseas Bank (UOB) in the Straits Times Index (STI) has risen from 39.6% at the end of 2019 to 54.3% currently. Simultaneously, their combined weightage in the FTSE APAC Ex-Japan Index has also increased by one-fifth to 1.6%. 

This has coincided with the trio averaging 109% total returns since the end of 2019. As detailed in the table below, the trio of banks have averaged a 2.5% gain in the 2025 year to 4 February, following on from averaging a 41.4% total return in 2024. 

All Data as of 4 February 2025, Source: SGX, Refinitiv & Bloomberg. Note ADT refers to Average Daily Trading Turnover; NIF refers to Net Institutional Flow. 

The trio are scheduled to report their 4QFY24 and FY24 (ended 31 Dec) results over the next three weeks, with DBS reporting on 10 February, UOB reporting on 19 February and OCBC reporting on 26 February, all before respective market opens. 

Singapore’s 4Q24 GDP report indicated that GDP growth in the finance and insurance sector was primarily driven by strong performances in banking, fund management, and payments firms. These trends were also previously highlighted in the October 2024 MAS Economic Review, which noted that Singapore’s financial sector is expected to benefit from increased trading activity and a rise in credit demand, spurred by the global easing of monetary policy. However, a key downside risk for 2025 is the potential constraint on growth rates due to less-than-anticipated global easing of monetary policy. While the US Federal Funds Rate (FFR) was cut by 100 basis points between September 18, 2024, and December 18, 2024, the anticipated further cuts of 100-150 basis points through to September 17, 2025, projected just five months ago, have been reduced to cuts of just 25 basis points.

Recent Income Trends 

In recent years, Net Interest Income (NII), broadly driven by Net Interest Margins (NIMs) and loan portfolios, has accounted for approximately two-thirds of the combined total income of the banks. For 4QFY24, NIMs are expected to be negatively impacted by the declines in both the Singapore Overnight Rate Average (SORA) and FFR. The 3-month compounded SORA declined from 3.49% at end of 3Q24 to 3.07% by the end of 4Q24. However, preliminary December MAS Commercial Banks loan data shows total loans to businesses had grown to S$511 billion, the highest since April 2022, and up 4.4% from the end of 3Q24, while total consumer loans also increased to S$324 billion, up 1.5% from 3Q24. 

For their 3QFY24, DBS, OCBC, and UOB all reported loan growth, with DBS's loans increasing by 2% YoY in constant-currency terms, OCBC's customer loans growing by 4% YoY in constant-currency terms, and UOB's loans rising by 5% YoY. OCBC noted its 3QFY24 YoY loan growth was led by an increase in corporate loans and mortgages and by geography, loan growth was largely driven by Singapore, Malaysia, and the Group’s international markets including the United Kingdom and Australia.  

The combined NII was S$8.49 billion in 3QFY24, a record quarterly high, and the eighth consecutive quarter combined NII surpassed S$8.0 billion. As illustrated in the table below, the combined quarterly NII of the trio has approximately doubled over the past 10 years.  

Source: SGX, MAS, Company Financials 

As illustrated in the table above and below, in March 2022 the combined Net Interest Income (NII) reached S$6.0 billion for the first time ever following the start of the previous FFR hike cycle and an increase in the 3-month compounded SORA reference rate by almost 50 basis points from the end of March 2022 to the end of June 2022. 

The combined Non-Interest Income (NOII) also hit a new quarterly high of S$4.90 billion in 3QFY24. NOII typically constitutes the remaining one-third of the trio's combined total income and has surpassed S$4.0 billion for the past three quarters. More dynamic markets, highlighted by the number of stocks reaching new highs, have boosted the trading, investment, and wealth functions of the banks in 2024. In 3QFY24, UOB highlighted its net fee income rose to a new high of S$630 million, supported by healthy trade and wealth demand, as well as pick up in card fees, adding that its other non-interest income surged 63% to S$744 million, bolstered by all-time high customer flow treasury income along a solid performance from trading and liquidity management activities. 

In 4Q24, the Straits Times Index and FTSE All-World Index posted respective total returns of 6.4% and 5.4% in SGD, while the FTSE APAC Ex-Japan Index declined by 2.3%, which overall, may support the combined growth of assets under management (AUM).

Source: SGX, MAS, Company Financials 

For 3QFY24, DBS, OCBC, and UOB also reported strong asset quality, with DBS's NPL ratio declining to 1.0% from 1.2% in 3QFY23, OCBC's NPL ratio decreasing to 0.9% from 1.0% in 3QFY23, and UOB’s NPL ratio at 1.5%, from 1.6% in 3QFY23. DBS added that 3QFY24 non-performing assets fell 8% from the previous quarter and specific allowances were at 14 basis points of loans for the 3QFY24 and 11 basis points for the nine months. 

Recent Analyst Outlooks

According to Bloomberg and Refinitiv, DBS's 12-month Consensus Estimate Target Price (CETP) was revised upwards by 35% in 2024, from S$33.57 at the end of 2023 to S$45.25 by the end of 2024. This coincided with the stock generating a 53% total return in 2024. The CETP has since been revised 1% higher to S$45.84 over the past five weeks.

OCBC's CETP increased by 22% in 2024, from S$14.24 to S$17.38, with the stock generating a 37% total return. The CETP has since been revised up another 2% to S$17.74. Meanwhile, UOB's CETP rose by 24% in 2024, from S$31.82 to S$39.59, with the stock generating a 39% total return. UOB’s CETP has since been revised up another 2% to S$40.21.

The target prices and ratings are expected to be relatively fluid and closely monitored over the next three weeks as analysts adjust their outlooks based on the FY24 reports. Generally, this period of adjustment is crucial as it reflects the market's response to the financial performance and future prospects of the stocks. 

Analysts are also looking for the trio to maintain enhanced capital management initiatives. DBS launched a S$3 billion share buyback program in November, with shares to be bought on the open market and cancelled. This marks the first time that DBS has cancelled shares after buying them back, as previous buybacks were for employee share plans, which had previously been done in March 2020 at S$16.97 per share. In total, DBS repurchased 4.55 million shares in November through to December 2024, at an average price of S$43.63 per share, representing 0.18% of its issued shares (excluding treasury shares). In its 3QFY24 Financial Results Media Briefing, UOB noted that with the ongoing phasing in of Basel-IV requirements, it would also explore utilising excess capital to return to shareholders, which may include buybacks and/or dividends; however, at that time no decision had yet been made.

Recent Trading Activity 

Trading activity has recently notched higher in the trio of STI Banks with S$344 million in combined average daily turnover (ADT) over the past five weeks, up from S$329 million for the full 2024 year. Relevant leveraged products have also seen increased participation in January, with Bank Daily Leveraged Certificates (DLCs) ADT increasing 39% from December, while January Bank Structured Warrant (SW) ADT has doubled December levels. The total Bank DLC and SW ADT in January was close to S$900,000, and the highest level since August 2024.

Comparative Yields

Meanwhile, from the investor prism, the trio also currently maintain highly competitive dividend yields at 4.75% for DBS, 4.98% for OCBC, and 4.64% for UOB as of Feb 4 according to the SGX Stock Screener. Given the significant 54.3% weight of the trio in the STI and FTSE Singapore Index, this is the key reason why the Singapore benchmarks maintain the highest dividend yields across Asia Pacific. For their FY23, the trio paid a total of S$11.5 billion in dividends to shareholders. 

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