Periodic/Sector reports
Banking: 2Q26 Results Preview: OCBC Firing On Many Cylinders
OVERWEIGHT (Maintained)
Analyst
Highlights
- We expect 2Q26 to be characterised by mild NIM compression and sterling growth from wealth management, accentuated by the anticipation of a peace deal as well as a low base in 2Q25. OCBC also registered healthy growth from insurance.
- We expect a net profit of S$2,821m for DBS (flat yoy, -4% qoq) and S$1,947m for OCBC (+7% yoy, -1% qoq).
- Maintain OVERWEIGHT. The moderation of hostilities in the Middle East paves the way for continued economic expansion. Our top pick is OCBC (BUY/Target: S$31.60) for its strategic shift to accelerate growth. We like DBS (BUY/Target: S$76.85) for its attractive 2026 dividend yield of 4.7%.
Analysis
- The 2Q26 results season kicks off with DBS Group Holdings (DBS) reporting its results on 6 August, followed by Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) on 7 August.
DBS Group Holdings (DBS SP/BUY/Target: S$76.85)
- We forecast net profit to be flat yoy but decline 4% qoq to S$2,821m in 2Q26.
- Low single-digit decline in net interest income. We estimate a loan growth of 5.6% yoy and 1.0% qoq in 2Q26 with an expansion in corporate loans and residential mortgages. We expect NIM to compress 4bp qoq to 1.85% in 2Q26 (1Q26: -4bp qoq) due to: a) the re-pricing of fixed-rate assets at lower interest rates, and b) the deployment of surplus deposits in high quality-liquid assets (HQLA) that provide lower yields. 3M compounded SORA was relatively unchanged at 1.08% in 2Q26. We expect net interest income to decline 3.6% yoy in 2Q26 (1Q26: -5.1% yoy).
- Wealth management fees boosted by potential peace deal. We expect contribution from wealth management to increase 37% yoy to S$890m in 2Q26, driven by a buoyant equity market anticipating the successful conclusion of a peace deal. Fees from transaction services are likely to grow 8% yoy. Overall, fee income is expected to expand at a double-digit rate of 22% yoy in 2Q26 due to a low base last year.
- Stable treasury customer sales. We expect steady net trading income of S$800m in 2Q26 due to healthy growth in treasury customer sales.
- Maintaining cost discipline. We have factored in a 4% yoy increase in operating expenses. We expect cost-to-income ratio (CIR) to be healthy at 40.2% in 2Q26 (1Q26: 38.8%), in line with guidance of low-40%.
- Resilient asset quality. We expect asset quality to be stable. We expect total provisions of S$197m and credit cost of 17bp in 2Q26 (1Q26: 17bp). DBS has ample management overlay for general provisions of S$2.4b.
Highlights
- We expect 2Q26 to be characterised by mild NIM compression and sterling growth from wealth management, accentuated by the anticipation of a peace deal as well as a low base in 2Q25. OCBC also registered healthy growth from insurance.
- We expect a net profit of S$2,821m for DBS (flat yoy, -4% qoq) and S$1,947m for OCBC (+7% yoy, -1% qoq).
- Maintain OVERWEIGHT. The moderation of hostilities in the Middle East paves the way for continued economic expansion. Our top pick is OCBC (BUY/Target: S$31.60) for its strategic shift to accelerate growth. We like DBS (BUY/Target: S$76.85) for its attractive 2026 dividend yield of 4.7%.
Analysis
- The 2Q26 results season kicks off with DBS Group Holdings (DBS) reporting its results on 6 August, followed by Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) on 7 August.
DBS Group Holdings (DBS SP/BUY/Target: S$76.85)
- We forecast net profit to be flat yoy but decline 4% qoq to S$2,821m in 2Q26.
- Low single-digit decline in net interest income. We estimate a loan growth of 5.6% yoy and 1.0% qoq in 2Q26 with an expansion in corporate loans and residential mortgages. We expect NIM to compress 4bp qoq to 1.85% in 2Q26 (1Q26: -4bp qoq) due to: a) the re-pricing of fixed-rate assets at lower interest rates, and b) the deployment of surplus deposits in high quality-liquid assets (HQLA) that provide lower yields. 3M compounded SORA was relatively unchanged at 1.08% in 2Q26. We expect net interest income to decline 3.6% yoy in 2Q26 (1Q26: -5.1% yoy).
- Wealth management fees boosted by potential peace deal. We expect contribution from wealth management to increase 37% yoy to S$890m in 2Q26, driven by a buoyant equity market anticipating the successful conclusion of a peace deal. Fees from transaction services are likely to grow 8% yoy. Overall, fee income is expected to expand at a double-digit rate of 22% yoy in 2Q26 due to a low base last year.
- Stable treasury customer sales. We expect steady net trading income of S$800m in 2Q26 due to healthy growth in treasury customer sales.
- Maintaining cost discipline. We have factored in a 4% yoy increase in operating expenses. We expect cost-to-income ratio (CIR) to be healthy at 40.2% in 2Q26 (1Q26: 38.8%), in line with guidance of low-40%.
- Resilient asset quality. We expect asset quality to be stable. We expect total provisions of S$197m and credit cost of 17bp in 2Q26 (1Q26: 17bp). DBS has ample management overlay for general provisions of S$2.4b.
OVERWEIGHT (Maintained)
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at the following link: https://research-api.uobkayhian.com/assets/disclaimer/df64a6ea-7980-447c-ae9e-fd19b93257dc, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
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