How to Evaluate Singapore Banks (DBS, OCBC, UOB) — The Metrics That Truly Matter

A step-by-step framework to analyse bank profitability, risk, funding strength and dividend sustainability — so you can read quarterly earnings like an analyst and invest with more confidence on SGX.

Published: 15 November 2025 | Category: Investor Education / Earnings Analysis

Key Takeaways (If You Only Have 30 Seconds)

For Singapore banks, Net Interest Margin (NIM) is often the #1 driver of profitability across rate cycles.
CASA ratio (low-cost deposits) supports funding stability and helps protect margins.
Healthy banks balance loan growth with disciplined risk control — not growth at any cost.
Fee income reduces reliance on interest rates and can cushion NIM compression when rates fall.
Risk indicators like credit cost (ECL), NPL ratio, LCR, and CET1 tell you whether dividends are durable.
Dividend sustainability is not just yield — it’s earnings resilience, payout policy, and cycle awareness.
This guide gives a repeatable checklist you can use during SGX earnings analysis each quarter.

1. Big Picture

Singapore’s three major banks — DBS, OCBC, and UOB — are among the strongest and most stable banks globally. They operate in a conservative regulatory environment, with strong capital requirements and disciplined risk management.

But banks do not perform the same in every cycle. To understand them properly, you need to focus on a specific set of metrics that drive earnings, risk, stability, and dividends.

This guide is written in clear, accountant-level terms — so you can apply it when you read quarterly earnings, and build a more confident long-term strategy on SGX.

2. Results Summary

When you analyse a bank, you are answering four questions:

Profitability: How efficiently does the bank turn assets into earnings? (NIM, fee income, CIR)
Growth: Is the loan book expanding sensibly? (loan growth, business mix)
Risk & resilience: How healthy is the loan book? (credit cost, NPL)
Safety buffer: Can the bank survive stress and still pay dividends? (LCR, CET1, capital strength)

The rest of this guide maps each metric into a clean framework. Think of it as your “bank analyst checklist” for income statement explained, balance sheet safety, and dividend sustainability.

3. Income Statement

The bank income statement is mainly driven by two engines: (1) net interest income and (2) fee (non-interest) income. This is where interest rate cycles first show up clearly.

3.1 Net Interest Margin (NIM)

The #1 driver of bank profitability.

Definition: NIM = (interest income – interest expense) ÷ average interest-bearing assets
Meaning: how profitably the bank lends money.
Direction: higher NIM = higher earnings; lower NIM = earnings pressure.

NIM often rises when interest rates rise because loan yields increase while deposit costs can be “sticky” (especially when CASA is strong). This is why banks can look like clear winners during certain rate-hike cycles.

Explaining it like you’re 11

A bank is like a shop that “buys” money (from depositors) and “sells” money (as loans). If the shop can sell at a higher price, but its buying cost doesn’t jump immediately, it earns a bigger gap. That gap is NIM.

Analyst Insight

NIM drives earnings more than any single metric, so track it every quarter.
Also watch management commentary on deposit competition — rising deposit costs can compress NIM.
Across the Big 3, it is commonly observed that DBS tends to have higher NIM, UOB close behind, and OCBC sometimes lower but with stronger non-interest income.

3.2 Fee Income (Non-Interest Income)

Critical for diversification.

Fee income typically includes wealth management fees, credit card fees, FX trading, investment banking income, and insurance contributions (notably relevant for OCBC via Great Eastern).

It provides stability and reduces reliance on interest rates.
It can offset NIM compression when rates fall.
It tends to grow in good markets and strong customer activity periods.

4. Margins & Profitability

For banks, “margins” are not gross margin like a retailer. The two key profitability lenses are NIM (pricing power + funding cost) and cost efficiency (how well expenses are controlled).

4.1 Cost-to-Income Ratio (CIR)

Definition: CIR = operating expenses ÷ operating income
Meaning: lower CIR = better cost control; higher CIR = inefficiency.
Rule of thumb: < 45% very efficient; 45–50% healthy; > 50% room for improvement.

Explaining it like you’re 11

If you run a lemonade stand and you earn $100, but you spend $60 on cups and lemons, you keep only $40. CIR is like asking: “How much did the bank spend to earn a dollar?”

Analyst Insight

CIR is where operational discipline shows up — especially across multi-year periods.
In bank earnings analysis, cost control can cushion weaker revenue quarters.
Efficiency gains (e.g., digitalisation) often support sustained ROE over time.

4.2 Loan Growth (Earnings engine size)

Loan growth determines how much interest income banks can generate. Look at the sources of growth: Singapore loans, regional corporate loans, mortgages, SME loans, and wealth management lending.

Low loan growth can mean slower earnings momentum.
High loan growth can support stronger medium-term earnings, but only if risk standards remain disciplined.
Loan growth depends on the economy, interest rates, and business confidence.

5. Balance Sheet

For banks, the balance sheet is the business model. You are effectively assessing: (1) funding strength, and (2) capital buffers that protect depositors and shareholders.

5.1 CASA Ratio (Low-cost deposits)

Definition: CASA = Current Account + Savings Account balances
CASA ratio: CASA ÷ total deposits
Why it matters: CASA deposits are usually low-interest cost and help support higher NIM.

Banks with higher CASA ratios can maintain stronger margins, pay less for funding, and enjoy better stability. A CASA ratio above 50% is often considered excellent.

Explaining it like you’re 11

If your friends lend you money for almost free, you can run your “money business” cheaply. CASA is like having lots of “almost free” money to work with.

Analyst Insight

CASA supports profitability and reduces sensitivity to rising funding costs.
When deposit competition increases, CASA quality becomes even more valuable.
In quarterly earnings, check both CASA ratio and management commentary on deposit mix/cost.

5.2 CET1 Ratio (Common Equity Tier 1 Capital)

CET1 is the bank’s high-quality capital buffer to absorb losses. Strong CET1 is one reason Singapore banks are widely viewed as safe.

Interpretation: > 14% very strong; 12–14% healthy; < 12% caution.
Stronger capital supports resilience and long-term dividend capacity through downturns.

6. Cash Flow

Banks are different from industrial companies, so cash flow statements can look less intuitive. For many investors, the practical takeaway is this: use cash flow as a “sanity check” together with capital, liquidity, and earnings quality.

In simple terms, the goal is to avoid situations where reported profit looks fine but the bank is quietly taking excessive risk. This is the same mindset behind cash flow vs profit checks in non-financial companies.

Explaining it like you’re 11

Some businesses “sell things” and collect cash. Banks “move money around”. So instead of only looking for cash, you focus on safety rules: Do they have enough savings (capital) and enough emergency cash (liquidity)?

Analyst Insight

For banks, “earnings quality” is closely linked to credit discipline, provisioning, and capital strength.
If a bank is growing fast, your first question is: “Is risk rising too?” (credit cost, NPL, capital).
Use liquidity and capital metrics as the practical investor’s equivalent of a cash flow safety net.

7. Dividends

Singapore banks are popular income holdings because they tend to be profitable, well-capitalised, and dividend-paying. But dividend sustainability still depends on earnings resilience and credit discipline through cycles.

What to assess

Payout ratio sustainability: does the dividend match earnings capacity across cycles?
Earnings stability: NIM + fee income mix + cost efficiency.
Risk cycle: credit costs can rise in recessions and reduce distributable earnings.
Rate cycle awareness: when rates fall, NIM tailwinds can moderate even if dividends remain solid.

Typical dividend yields are often discussed by investors (e.g., DBS 5–7%, OCBC 4–6%, UOB 4–6%), but yield alone is not the decision tool. The decision tool is dividend sustainability.

Explaining it like you’re 11

A dividend is like a regular allowance you receive from a business you own. If the business keeps earning well and stays safe, the allowance can continue. If the business starts losing money or taking big risks, the allowance can shrink.

Analyst Insight

Bank dividend sustainability is anchored by profitability (NIM), diversification (fees), and risk outcomes (credit cost, NPL).
In a downturn, provisions can rise quickly — so “good times” dividends should be tested against stress conditions.
Long-term investors should prefer stable, well-capitalised banks over chasing the highest yield.

8. Management Commentary

When you read quarterly earnings, management commentary helps you interpret whether the numbers are sustainable. Focus on commentary that links to measurable drivers.

What to listen for

NIM guidance: deposit competition, loan repricing, and outlook for margins.
Loan growth quality: which segments are growing and why (corporate, mortgages, SME, regional).
Fee income drivers: wealth management activity, markets conditions, and customer flows.
Asset quality signals: early stress indicators, sector exposures, and provisioning stance.
Capital and liquidity stance: comfort with buffers and dividend policy intentions.

Calm investors treat commentary as a hypothesis — then check it against the metrics below. That is how you build an analyst mindset without overcomplicating.

9. A Simple Analyst Framework

Here is a clean, repeatable framework you can apply every quarter. It turns a long bank report into a structured checklist.

The “Big 3 Bank” scorecard

Profit engine: NIM trend (and why it moved).
Funding strength: CASA ratio and deposit cost pressure.
Growth: loan growth by segment (and whether it matches the cycle).
Diversification: fee income trend and key drivers (wealth, cards, FX, IB, insurance).
Efficiency: CIR trend (cost discipline).
Risk: credit cost / ECL allowances trend.
Asset quality: NPL ratio trend and key stressed sectors (if any).
Liquidity: LCR comfort level versus regulatory needs.
Capital: CET1 buffer and management posture.
Shareholder return: dividend payout stance and sustainability.

This framework keeps you grounded in fundamentals — it is the practical version of “how to read quarterly earnings like an analyst” for banks on SGX.

10. Common Red Flags

Singapore banks are generally well-run, but disciplined investors still watch for early warning signs. Here are red flags that matter more than headlines.

NIM falling faster than peers without a clear, credible explanation.
Loan growth accelerating while credit cost or NPL indicators start rising.
Credit cost / ECL moving up persistently (especially if management downplays it).
NPL ratio rising beyond “normal” ranges (and concentrated in specific sectors).
CIR worsening without investment rationale or productivity improvements.
Dividend increases not supported by earnings resilience — dividend sustainability must be earned, not declared.
Capital buffers trending down toward caution levels without a clear capital plan.

The goal is not to panic at small movements. The goal is to observe trends — and understand what they imply for long-term returns.

11. My Overall Take as an Accounting-Trained Investor

A simple explanation for an 11-year-old

A bank earns money by lending. If it lends at a good “price” (NIM), keeps costs under control (CIR), and avoids bad loans (credit cost and NPL), it can stay strong and keep paying dividends. The safer the bank, the steadier the “allowance” (dividend).

What matters most: NIM + funding strength (CASA) + credit discipline (credit cost/NPL) + capital (CET1).
What to ignore: short-term noise that isn’t reflected in multi-quarter trends.
How this improves decision-making: you stop chasing narratives and instead track the actual earnings engine and risk controls.
Why consistency beats prediction: banks are cyclical — a steady framework helps you stay rational through rate cycles and recessions.

If you want one practical takeaway: treat bank investing as a study of earning power + safety buffers. When you get those right, dividend sustainability becomes much easier to judge.

12. FAQ

Is NIM the most important metric for Singapore banks?
NIM is often the #1 driver of profitability, but it should be read together with funding strength (CASA), efficiency (CIR), and risk outcomes (credit cost and NPL). A high NIM is not helpful if risk is rising.

How do analysts spot credit problems early?
They watch trends in credit cost (ECL allowances), NPL ratio, sector exposures, and management guidance on stressed portfolios. Direction and persistence matter more than one-quarter noise.

Can bank dividends be misleading?
Any dividend can be misleading if it is not supported by sustainable earnings and strong capital buffers. For banks, dividend sustainability is anchored by profitability, asset quality, and CET1 strength through cycles.

How often should I read bank earnings reports?
Quarterly is ideal. Banks are cycle-sensitive, so regular reading helps you connect rate cycles to NIM, loan growth, and provisioning trends.

Is this framework suitable for other financial stocks (insurers, brokers)?
The mindset is useful, but the exact metrics differ. Insurers are more sensitive to investment yield and liability dynamics; brokers/exchanges depend more on market activity. For each sector, use a tailored metric set.

About the Author
HenryT is a Fellow Chartered Accountant (FCA) based in Singapore and the writer behind The Accounting Investor. He combines professional accounting training, corporate finance experience and personal dividend investing to help everyday investors read financial statements with confidence.

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Disclaimer

This article is for education and general information only. It does not constitute investment, legal, tax or any other form of professional advice, and it is not a recommendation to buy, sell or hold any securities mentioned.

My sole intent is to help readers learn how to read financial statements and think more clearly about businesses. Please do your own research or consult a licensed financial adviser before making any investment decisions. I may or may not hold positions in the securities discussed at the time of writing and am under no obligation to update this article.

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