Shares of Oversea-Chinese Banking Corporation (OCBC) climbed 0.9% to S$21.42 on Monday, contrasting with a 1.1% decline for DBS Group after it reported weaker-than-expected quarterly earnings. The divergence highlights investor anticipation for OCBC's upcoming financial results, scheduled for release on February 25.
Earnings Spotlight Turns to OCBC
DBS, which commenced the local reporting season, posted a 10% drop in fourth-quarter net profit, with its net interest margin contracting to 1.93%. While the bank increased its ordinary dividend and announced a capital return program extending through 2027, soft markets trading income disappointed analysts. CEO Tan Su Shan cautioned investors to prepare for a volatile year ahead.
The market reaction saw capital rotate within the sector, with OCBC attracting flows as the next major lender to report. Traders are scrutinizing whether OCBC's interest income has peaked and if fee-based revenue from wealth management can compensate for potential margin pressure.
Key Investor Concerns: Margins and Capital Returns
Two primary issues dominate the outlook for Singaporean banks. First, the trajectory of interest rates directly impacts loan spreads. A faster-than-anticipated decline in rates could swiftly pressure profit forecasts. Second, with share prices near record levels, investor demand for robust dividends and capital returns is intensifying.
DBS's explicit commitment to capital returns has set a benchmark, placing rivals under scrutiny to articulate their own plans for deploying excess capital, particularly if earnings momentum slows.
Credit quality remains an additional risk factor. Given significant exposure to corporate and property loans, any sudden increase in bad-loan provisions could rapidly offset gains achieved elsewhere in the operations.
All eyes are now on OCBC's full-year 2025 results. Management's commentary on net interest margins and capital distribution plans will be critical in determining whether Monday's share price strength can be sustained through the week.
