UOB, in contrast, reported earnings of $443 million, down 72% y-o-y due to “pre-emptive” additional general provision of $615 million. The bank will maintain its share buyback, and CEO Wee Ee Cheong stresses that the provisions will have no bearing on its final dividend for FY2025.
Of the three banks, only DBS’s non-performing assets (NPAs) fell. The bank reported 3QFY2025 NPAs of $4.69 billion, down from $5.08 billion in 3QFY2024. New NPAs also fell to $113 million in 3QFY2025, down from $452 million in 3QFY2024. Customer loans during the quarter rose by 5% y-o-y and 1% q-o-q to $437 billion. The bank’s non-performing loan (NPL) ratio remained steady y-o-y and q-o-q at 1%.
At OCBC, NPAs rose to $3.01 billion in 3QFY2025, up from $2.9 billion in 3QFY2024. New NPAs rose to $349 million in 3QFY2025, up from $285 million in 3QFY2024. Its NPL ratio held steady y-o-y and q-o-q at 0.9%. Customer loans for the 3QFY2025 rose by 7% y-o-y and stood steady q-o-q at $327 billion.
UOB, in the same period, saw its NPAs grow to $5.81 billion from $5.06 billion in 3QFY2024. New NPAs stood at $838 million in 3QFY2025, up from $212 million in 3QFY2024. The higher general provisions meant stronger coverage of 1%, up from the 90 basis points (bps) previously guided. It also brought the bank’s NPA coverage to 100% and to 240% in unsecured NPA coverage, up 88% and 209% in the previous quarter. For the quarter, UOB’s customer loans rose by 5% y-o-y and 2% q-o-q to $351 billion.
Shares in the three banks performed accordingly. DBS reached a new high of $55.55 on Nov 6, while OCBC crossed the $18 mark, similarly hitting new highs. UOB hovered around $33 and $34, down more than 2% year to date as of Nov 11.
At the bank’s results briefing on Nov 6, UOB’s Wee Ee Cheong says the provisions — the bank’s largest so far — should be seen as something “positive” and likened it to “buying insurance”.
“We are here to make sure that our balance sheets continue to be strong… It’s no different than during Covid-19 [when] we set aside $3 billion to help the customers. That will give the market confidence. Then we give ourselves to react, to recover,” says Wee, referring to the relief assistance he gave SME customers when the pandemic struck in early 2020.
He expects total credit costs to normalise with asset quality risk contained, barring any unexpected global volatility. UOB’s CFO Leong Yung Chee adds that the provisions are mainly for loans made in Greater China and the US.
PhillipCapital’s Paul Chew, noting UOB’s “dismal” results, believes the spike in provisions was due to the disposal of several office assets in New York and Hong Kong, which were collateral, at around 10% below their internal valuations.
Consequently, UOB had to recognise more NPLs in Greater China of $180 million and $100 million for the US. NPLs were also forming in Thailand and Australia at $60 million and $80 million, respectively, Chew adds.
Citi Research’s Tan Yong Hong flags that while general provision in FY2026 could be benign after this recent pre-emptive provision charge, asset quality concerns should weigh if the special provisions charge remains elevated.
He adds that investors are likely seeing if the bank’s NPA could stabilise over the coming quarters while assessing its non-interest income and volume growth.
CGS International’s (CGSI) Tay Wee Kuang and Lim Siew Khee warn that confidence in UOB’s credit management could “take time to restore” even though the pre-emptive provisions were a one-off.
Downgrades for UOB
For more stories about where money flows, click here for Capital Section
Goldman Sachs’ Melissa Kuang has downgraded the bank to “neutral” as she sees “strong upside potential elsewhere”, while asset quality concerns, especially in its Hong Kong and US commercial real estate (CRE) book, are likely to linger in the near term.
“Limited disclosures on NPLs and other potentially vulnerable CRE loans and corresponding coverage levels make it difficult to fully assess the adequacy of buffers, especially with UOB noting that general provision coverage will be maintained at 0.9% to 1%. As such, we think near-term valuations may be capped,” says Kuang, who has lowered her target price to $38 from $42.10.
Citi Research, CGSI, Maybank Securities and PhillipCapital have also kept their “hold” and “neutral” calls, but with lower target prices. Citi’s Tan figures UOB is worth $33.70 after cutting his FY2025 earnings estimates by 18%. He expects UOB to pay a final dividend of 71 cents and $1.65 in FY2026. Both estimates are about 10% behind the consensus’ expectations pre results.
Tay and Lim of CGSI have a lower target price of $36.50 as they expect further provisions should the bank’s credit quality deteriorate. Maybank Securities’ Thilan Wickramasinghe has lowered his FY2025 and FY2027 earnings by 3% and 19% respectively, leading to a lower target price of $36.80, taking into account higher provisions and falling dividends. PhillipCapital’s Glenn Thum has lowered his target price to $30.40 as he lowers his FY2025 earnings estimates by 18%.
OCBC Investment Research’s Carmen Lee remains positive on UOB. Any price correction means investors should accumulate into the bank, says Lee, who has kept her “buy” call and fair value estimate of $38.20.
Lee notes that UOB’s core earnings held steady while wealth and credit card income grew for the 9MFY2025. “While the global outlook is still mixed, risk assets have done well globally this year, which has led to better investment and fee income,” Lee says, noting that Asia has proven to be relatively resilient despite higher trade tariffs. “Broad changes for the Singapore equity market have also led to a re-rating for Singapore equities. Overall, we remain fairly optimistic about the outlook for this region.” She believes that UOB, with its extensive regional footprint, should enable it to tap into regional trades and cross-sell more investment products to its growing customer base.
DBS Group Research’s Lim Rui Wen has kept her “hold” call with an unchanged target price of $33.90 as she sees valuations will reflect a slower growth environment and accelerated rate cuts going forward.
Analysts upgrade OCBC
Analysts have also mostly upgraded their calls for OCBC. With the exception of UOB Kay Hian, which already has a “buy” call, CGSI, Citi, DBS, and Maybank have upgraded their calls to “buy” from “hold” or “neutral”, as OCBC’s wealth management franchise put in a better showing.
During the period, OCBC saw the highest amount of net new money at $12 billion, compared to UOB’s $5 billion and DBS’s $4 billion. “The bank has done extremely well in wealth management,” notes PhillipCapital’s Chew, adding that the market gets “nervous” when banks invest outside their core markets.
CGSI’s Tay and Lim have a higher target price of $19.50 as OCBC’s 3QFY2025 patmi went above expectations and further growth is seen from wealth management. They also believe there could be potential upside to its capital return exercise. “To date, OCBC has conducted [some] $370 million in share buybacks, which means that there could be more than [around] $600 million, 13 cents per share, to be further returned to shareholders either via more share buybacks or potential special dividends by end-FY2026.”
Citi’s Tan has increased his earnings estimates by 2% to 7% and raised his target price to $20.30. He expects OCBC’s FY2025 dividends to be $1.01, on a 62% payout ratio, which is flat on a y-o-y basis. He observes that OCBC’s “AUM (assets under management) efficiency” has caught up with the larger DBS. OCBC’s wealth management income percentage of total AUM in the quarter rose by 15 bps q-o-q to 135 bps.
DBS’s ratio stood at 134 bps, 10 bps higher q-o-q. “With a similar proportion of AUM invested in investment assets ([around] 60%), robust 3QFY2025 wealth income could be driven by rotation from low margins fixed income products into higher margins products (e.g. structured products), potentially higher leverage (higher residents’ share financing) and higher AUM churn,” he writes.
In a prior report, just after OCBC’s results were announced, Tan noted that investors disappointed with UOB’s results could rotate into OCBC for a value play. In his overall sector report, Tan suggested an open pair trade where investors “overweight” OCBC and “underweight” UOB. “UOB could lag as investors assess asset quality over the next few quarters,” he says.
DBS’s Lim Rui Wen and Ng Jia Hui have increased their target price to $19.80 as they see OCBC’s dividend policy revised to further enhance shareholder returns as a potential re-rating catalyst.
However, they remain watchful of asset quality risks in a slower growth environment on the back of accelerating Fed cuts on top of the weak CRE sector.
To Maybank’s Wickramasinghe, OCBC’s group synergies, resilient asset quality and the prospect of more capital returns are positives. The
analyst has a higher target price of $20.52. “We think capital management initiatives could continue given a high 16.9% CET1 (common equity tier 1) and management’s own admission that there are limited synergistic M&A (mergers and acquisitions) opportunities available.”
UOB Kay Hian’s Jonathan Koh notes OCBC’s “solid” capital base and has raised his FY2025 net profit forecast by 2.5%. His target price remains at $20.22. Goldman Sachs’ Kuang has also maintained her “buy” call with a target price of $21.20 as she notes the bank’s medium-term CET-1 goal of 14% and potential for higher payouts. PhillipCapital’s Thum is the exception with an unchanged “neutral” call but with a higher target price of $17.
DBS to hit $60?
DBS’s shares could hit $60 and above after the bank saw a new high of $55.55 on Nov 6 after its 3QFY2025 results,
according to analysts from Maybank, Citi and CGSI, who have raised their target prices to $62.79, $61 and $60.50, respectively. Other analysts from RHB Bank Singapore, PhillipCapital and OCBC Group Research have higher target prices of $59, $58 and $55,
respectively.
UOB Kay Hian has maintained its target at $55.50. With the exception of UOB Kay Hian and OCBC’s “hold” calls, the rest have maintained their “add” or “buy” calls.
Citi’s Tan says the 3QFY2025 themes reiterated his thesis to position in DBS for exposure to strong deposit inflows into Singapore, wealth management upside for Asia and a growing dividends pathway alongside currency strength. Tan has also increased his earnings estimates by 2%.
Maybank’s Wickramasinghe has raised his FY2025 to FY2027 earnings by 1% to 3%. “Overall, DBS’s scale, strong execution, and safe-haven beneficiary status give it a “significant advantage over peers”.
CGSI’s Tay and Lim increased their estimates by 1.3% to 2.8% for FY2025 to FY2027 as they see the bank as a beneficiary of broad-based growth. “We believe DBS has benefited from the bifurcation of capital into Asia, given its position as one of the largest banks in Asia (ex-China) by total assets.”
UOB Kay Hian’s Koh has also increased his net profit forecasts for FY2025 by 2% due to the bank’s good 3QFY2025 results. RHB has also raised its FY2025 to FY2027 estimates by 5%, 1% and 1% respectively. In addition, it has increased its FY2026 to FY2027 dividend estimates by 20% and 10% after taking into account the capital return dividend.
JP Morgan expects DBS to continue outperforming, while UOB should continue to underperform expectations. OCBC turned in “good” results, but it is “not enough” to take a meaningful performance lead despite its lower valuations compared to DBS. “A shift in payout at OCBC, and guidance for steady cash dividend per share, accompanied by specials as well as buyback, can be a potential catalyst, as the new CEO takes the helm.”
