Top three banks see profits sink but balance sheets remain strong

The rise in fee income was the buffer amidst falling NIMs.

Singapore’s three largest banks reported lower profitability in 2025 as declining interest rates weighed on margins, although their balance sheets remained strong despite global macroeconomic risks.

Return on average assets (ROA) for DBS and OCBC declined to 1.1% to 1.3% in 2025 from 1.3% to 1.5% a year earlier, whilst UOB’s ROA fell to 0.9% from 1.2%, according to Moody’s.

Net interest margins also compressed, with DBS’s NIM falling to 2.0% from 2.1% and OCBC’s declining to 1.9% from 2.2%, reflecting sharp interest rate declines in Singapore and Hong Kong.

Noninterest income provided some support to earnings. Moody’s said noninterest income at DBS and OCBC grew 7% and 16%, respectively, in 2025, driven by double-digit growth in wealth management fees and customer treasury income.

By comparison, UOB’s noninterest income declined 4%, as weaker investment and trading income offset gains from wealth management and loan fees.

Nonperforming loan ratios across the three banks were largely unchanged at 0.9% to 1.5% as of 31 December 2025, although exposures to Greater China deteriorated, with NPL ratios rising to 1.9% to 3.3% from 1.4% to 2.1%, mainly due to commercial real estate loans.

In a separate report, UOB Kay Hian said wealth management fees surged 24% year-on-year at DBS and 26% at OCBC in 4Q25, whilst DBS’s assets under management rose 19% to $488b and OCBC’s grew 15% to $343b.

Despite pressure on interest income, analysts said the sector’s earnings outlook remains supported by diversified revenue streams. UOB Kay Hian noted that banks may continue returning capital to shareholders through dividends if share buyback programmes are not completed.

Some analysts say that falling NIMs were buffered by a rise in fee income.