To The Moon

Singapore’s second-largest bank, Oversea-Chinese Banking Corporation (OCBC), has reported a smaller-than-expected rise in fourth-quarter profit, citing expectations of moderated loan growth in 2025. Alongside this, OCBC unveiled a S$2.5 billion capital return, but it remained the only Singapore bank to miss analysts' forecasts in what was otherwise a strong earnings season for local banks.

In contrast, DBS Group Holdings (DBS) and United Overseas Bank (UOB) exceeded expectations, delivering multi-billion capital return packages. Their strong financial performance propelled their share prices to record highs, reinforcing their positions as dominant players in Singapore’s banking sector.

Should Investors Buy Singapore Bank Stocks Now?

Personally, I won’t be buying Singapore bank stocks at current levels because of my investment philosophy of buying low and selling high. While I acknowledge that OCBC, DBS, and UOB are financially robust institutions, their current valuations appear stretched, making them less attractive for entry at this point.

Valuation Concerns: Are They Overpriced?

All three banks are trading near their 52-week highs, which raises concerns about potential overvaluation:

• OCBC: Closed at S$17.210 last week, with a 52-week range of S$12.161 to S$17.930.

ocbc bank (O39.SI)

• DBS: Closed at S$45.90, with a 52-week range of S$28.557 to S$46.850.

DBS Group Holdings (D05.SI)

• UOB: Closed at S$38.20, with a 52-week range of S$26.446 to S$39.200.

UOB (U11.SI)

Since they are all near their 52-week highs, I prefer to avoid FOMO (fear of missing out) and wait for a potential pullback before considering an entry.

Dividend Appeal: A Safe Haven for Income Investors

Despite their high valuations, Singapore banks remain attractive for dividend investors due to their high dividend yields. Their strong balance sheets, solid earnings, and consistent dividend payouts make them a safe bet for those prioritizing passive income over capital appreciation.

Key Risks & Considerations

1. Slower Loan Growth

   OCBC’s guidance for weaker loan growth in 2025 suggests that the strong earnings momentum of Singapore banks may start to moderate. If DBS and UOB issue similar warnings in future quarters, it could signal a slowdown across the sector.

2. Market Volatility & Global Economic Risks

   The global economic environment remains uncertain, with factors such as China’s slowing growth and a potential recession affecting investor sentiment. Although many do not expect a recession, concerns remain over inflationary pressures, which could impact market stability and banking sector performance.

Final Thoughts: Hold or Wait for a Pullback?

For existing shareholders, holding onto DBS, UOB, or OCBC for their dividend income makes sense, given their stability and strong balance sheets. However, for new investors, current valuations may not offer the best risk-reward ratio.

Instead of chasing record highs, I prefer to wait for a market correction before entering. Singapore bank stocks are undoubtedly high-quality investments, but timing matters when maximizing returns.