For the longest time, many Singapore investors viewed the three local banks almost the same way. Pick DBS, OCBC or UOB, collect the dividends, reinvest if possible, and sleep peacefully at night. To be fair, that strategy worked very well for many years. The local banks were stable, profitable, well-regulated and deeply entrenched within Singapore’s economy.
(Picture credit: cegoh from pixabay.com)
But after going through the latest quarterly results from the three banks (see Fig. 1 for selected financial metrics), something is slowly changing. The differences between them are becoming much more meaningful; not just in terms of profits, but also in business quality, strategic direction and where future growth is likely coming from.
Selected Financial Metric (Latest Quarter) | DBS | OCBC | UOB |
Net Profit | S$2.93B | S$1.97B | S$1.44B |
YoY Profit Growth | +1% | +5% | -4% |
Net Interest Margin | 1.89% | 1.76% | 1.82% |
Wealth Management Fees | S$907M | S$422M | Not separately disclosed |
Fee Income Growth | +16% | +24% | -8% |
Fig.1: Selected financial metrics of DBS, OCBC and UOB from their recent quarterly reporting. Data sourced and calculated from their respective presentations.
More importantly, the banking story itself is evolving. A few years ago, investors mainly focused on loan growth, net interest margins and bad debts. Now the discussion increasingly revolves around wealth management, fee income, regional expansion, digital ecosystems and capital efficiency. The banks are quietly transforming to beyond traditional lending businesses.
The Bedokian’s Take
In my opinion, the most important takeaway from this earnings season is that Singapore banks are evolving. The easy phase of banking profits may already be behind us. When rates rose sharply after COVID, the banks benefited enormously from wider lending spreads. Profit growth became relatively straightforward.
Now things are becoming more complicated; as rates normalise, margins compress, deposit competition increases and loan growth moderates. The banks therefore need new growth engines, and increasingly that engine is wealth management.
This actually aligns very closely with Singapore’s broader economic direction. Singapore is becoming one of Asia’s major wealth hubs, supported by family offices, regional capital flows, affluent Asian clients and cross-border investments, not to mention possibly being a strong alternative candidate to two other Asian financial cities. The local banks are positioning themselves directly within this ecosystem, and I view this trend may define the next decade of Singapore banking.
DBS seems like the highest-quality franchise overall, with the best execution, scale and operational efficiency. But it is also the most expensive for now. OCBC, meanwhile, may quietly have one of the most interesting long-term setups today because of its growing combination of banking, insurance and wealth management. UOB remains the clearest ASEAN growth story among the three, although it probably also carries the highest execution risk.
And perhaps the most interesting part is this: the future winner may not necessarily be the bank with the biggest loan book or the widest net interest margin. It may be the bank that captures Asia’s rising wealth most effectively.
Disclosure
The Bedokian is directly vested in OCBC, and indirectly vested in all three banks via exchange traded funds.
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