DBS Reports 3% Profit Decline as Singapore Banks Face Margin Squeeze
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DBS Group reported a 3% decline in full-year 2025 net profit to SGD 10.93 billion (~USD 8.1 billion) on February 9, 2026, as Singapore's three major banks confronted their most significant net interest margin compression in recent years. The results, which showed DBS's fourth-quarter net interest margin falling to 1.93% (down 22 basis points year-over-year), set the tone for sector earnings as OCBC and UOB prepare to report later this month.
Despite the profit decline, DBS maintained its quarterly dividend at 15 cents per share and reaffirmed its SGD 3 billion (~USD 2.2 billion) share buyback program, signaling confidence in the bank's ability to weather margin pressures through deposit growth and hedging strategies.
Margin Compression Drives Sector-Wide Earnings Pressure
All three Singapore banks experienced significant margin contraction throughout 2025, with OCBC's NIM declining to 1.84% (down 34 basis points) and UOB's to 1.91% (down 13 basis points) by the fourth quarter. The compression stemmed from falling Singapore dollar short-term rates and elevated funding costs, which prompted aggressive deposit repricing campaigns across the sector.
Banks implemented deposit rate cuts ranging from 120 to 175 basis points between the third quarter of 2024 and third quarter of 2025, with UOB adding another 60 basis points reduction in December 2025. These actions, while necessary to protect margins, reduced near-term profitability as loan repricing lagged behind funding cost adjustments.
Lim Rui Wen, analyst at DBS Group Research, noted that "coupled with the ongoing repricing of flagship current accounts, wholesale and fixed deposits, we believe these factors will culminate in a turning point for the net interest margin downtrend."
Banks Pivot to Income-Focused Communications Strategy
Facing margin headwinds, Singapore's banks shifted their investor communications from margin-centric narratives to emphasizing total net interest income stability and diversified revenue streams. DBS's forward guidance for 2026 assumes SORA (Singapore Overnight Rate Average) at 1.25% with net profit "slightly below 2025 levels," a messaging approach that acknowledges pressure while highlighting mitigation efforts.
Wealth management emerged as a critical alternative revenue narrative, with assets under management growing 18% year-over-year for both DBS and OCBC and 8% for UOB in the third quarter of 2025. Investment-to-AUM ratios reached 40% to 56% across the three banks, providing substantial non-interest income to offset core margin compression.
Rena Kwok, senior credit analyst at Bloomberg Intelligence, observed that "funding costs are expected to decline further in 2026 due to abundant liquidity and deposit-rate cuts flowing through against modest loan demand."
Market Performance Reflects Communications Effectiveness
The divergent stock performance of Singapore's three banks during 2025 demonstrated how communications strategies translated directly to investor confidence. DBS shares rose 28% and OCBC gained 19%, while UOB fell 4% following third-quarter earnings disappointment and asset quality concerns related to US commercial real estate and Greater China holdings.
DBS maintained the strongest competitive positioning through superior return on equity of 17% to 18% compared to OCBC and UOB's 12% to 14%, combined with the sector's lowest non-performing loan ratio at 1.0%. The bank's capital strength, with a Common Equity Tier 1 ratio of 17.0% (exceeding regulatory requirements by more than five percentage points), supported its aggressive capital return commitments.
Outlook Hinges on Rate Stabilization and Wealth Growth
System-wide loan growth in Singapore reached 5% for full-year 2025, with OCBC leading at 9% in the first half, followed by UOB at 4% and DBS at 3%. The moderation of SORA declines to 27 basis points in the fourth quarter versus 60 basis points in the third quarter provided banks with a "margin relief" narrative for their February 2026 earnings releases.
Singapore's safe-haven status and the Equity Market Development Programme continued to drive fund inflows of SGD 2.85 billion (~USD 2.1 billion), supporting deposit growth and NIM stabilization. With forward dividend yields of 6.1% for DBS and 5.4% for both OCBC and UOB, the banks maintained shareholder return commitments despite limited forward earnings visibility.
UOB is scheduled to report fourth-quarter results on February 24, with OCBC following on February 25.
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