DBS, OCBC or UOB: Which Bank Bond Offers the Best Value at Up to 5.55% Yield?

• DBS delivered the strongest absolute earnings, with 1H2026 net profit up 5.0% YoY to S$6.0 billion. Asset quality is resilient (NPL ratio 1.0%), and its LDR of around 74.0% is the lowest of the three.
• OCBC posted the fastest growth, with net profit up 13.4% YoY to a record S$4.2 billion on strong non-interest income. It also has the lowest NPL ratio (0.9%), though its CET1 of 14.0% now sits at management's target.
• UOB recorded the softest earnings (+3.0% YoY) and the highest NPL ratio (1.6%) on Greater China property, but has the strongest capital and liquidity buffers, with CET1 at 15.0%.

At A Glance

DBS: Largest Franchise, Strongest Funding

Asset quality is stable, with the non-performing loan (NPL) ratio at 1.0%. Specific provisions were 15 bps, below the bank's cycle average of around 19 bps. Total allowance reserves stood at S$6.2 billion, comprising S$3.8 billion of general allowances and S$2.4 billion of specific allowances. This covers 130.0% of non-performing assets (NPAs), or 196.0% of unsecured NPAs. Management expects specific provisions to rise modestly to 17 to 20 bps in 2H2026. Even so, the large pool of general allowances gives DBS a sizeable cushion if credit conditions turn.

The fully phased-in CET1 ratio eased to 14.6% from 15.1%. With S$2.6 billion left on its buyback programme, CET1 may drift closer to its target of around 13.0% ± 0.5%. This benefits shareholders but slowly thins the buffer for bondholders, though it remains well above requirements. Its loan-to-deposit ratio (LDR) of around 74.0% is the lowest of the three. The liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) stood at 142.0% and 113.0% respectively, both above the 100.0% regulatory minimum.

Additionally, DBS is facing a S$1.3 billion lawsuit from 1Malaysia Development Berhad (1MDB)-linked liquidators. While DBS has made no provision, the case is worth monitoring, as any settlement or adverse judgement could result in a one-off charge and modestly reduce capital buffers.

OCBC: Strongest Momentum and Cleanest Book

OCBC posted the strongest growth, with 1H2026 net profit up 13.4% YoY to a record S$4.2 billion. NII fell 3.1% as NIM narrowed 25 bps to 1.73%, the lowest of the three. Non-interest income rose 36.4% to a record S$3.5 billion, lifting total income 11.1% to S$8.0 billion. Operating expenses rose 9.8% to S$3.1 billion, mainly on higher performance-related pay and technology investment. With income outpacing costs, the cost-to-income ratio fell to 38.5%, the lowest among peers. Management raised its loan growth and income guidance. However, part of the growth came from trading and investment income (+46.0%), which was lifted by Great Eastern's gains from the equity rebound. As this market-sensitive income may not repeat if equity markets soften, OCBC's stronger growth may prove less recurring than DBS's fee-led growth.

OCBC has the cleanest loan book, with an NPL ratio of 0.9% and NPA coverage up to 163.0% from 156.0%. Two Greater China real estate accounts were downgraded in 2Q2026, but new NPAs were more than offset by recoveries, upgrades and write-offs. Annualised credit costs were 18 bps, below management's unchanged full-year guidance of 20 to 25 bps. While credit costs remain below management's full-year guidance, the higher expected range suggests OCBC is maintaining a cautious outlook amid ongoing credit uncertainties.

The fully phased-in CET1 ratio fell to 14.0% from 15.3%, now in line with management's target operating level. That leaves the least excess capital among peers, so further capital returns will depend more on earnings. Funding is deposit-led, with an LDR of 78.4%, while LCR and NSFR are 135.0% and 109.0%, the lowest of the three but still comfortably above the 100.0% regulatory minimum.

UOB: Softer Earnings but Strong Capital Buffers

Of the three, UOB delivered the softest result in 1H2026, ended 30 June 2026. Net profit rose 3.0% YoY to S$2.9 billion, while total income slipped 1.0% to S$7.0 billion. Despite healthy loan growth of 5.0% and active balance sheet management, NII eased 3.0% YoY to S$4.6 billion on margin pressure from lower interest rates, with NIM narrowing to 1.78%. Wealth income rose 16.0% YoY and customer treasury income reached a record half-year high of S$584 million, though loan-related fees softened on lower capital markets activity. Expenses rose 2.0% YoY as the bank continued to invest in strategic priorities, lifting the cost-to-income ratio to 44.9%. With costs growing faster than income and the July exit NIM falling to 1.71%, margin pressure is likely to persist into 2H2026.

The NPL ratio held at 1.6%, the highest of the three. This masks a 76.9% YoY rise in Greater China NPLs to S$2.3 billion, driven by one real estate account. Excluding Greater China, the NPL ratio improved to around 1.1%, suggesting the stress is name-specific rather than broad-based. Specific credit costs rose to 34 bps, while total credit costs were 27 bps after general allowance write-backs. NPA coverage remained at 88.0%, the lowest of the three, while coverage after collateral rose to 306.0% from 209.0% a year earlier. That higher figure relies on property values holding up, so the key risk is weakness spreading to other Greater China borrowers.

UOB has the highest fully phased-in CET1 ratio at 15.0%, and the sale of UOB Asset Management should add around 14 bps when it closes in 2027. Its LDR is also the highest of the three at 81.7%. LCR improved to 152.0%, while NSFR slipped to 114.0%, though both remain comfortably above the 100.0% regulatory minimum and are the strongest of the three. For bondholders, these buffers help offset UOB's weaker earnings trend.

Bond Comparison: Tight USD Spread, Wider Pickup in AUD

While all three banks remain fundamentally strong, credit quality alone does not determine which bond offers the best value. Investors must also consider the issuer, ranking in the capital structure, maturity and yield spread over comparable government securities.

Among senior unsecured USD bonds, DBS and UOB trade closely (see Table 1). The DBSSP 4.403% 21Mar2028 Corp (USD) yields 4.92%, around 29 bps over comparable US Treasuries, while the UOBSP 4.401% 02Apr2028 Corp (USD) yields 4.96%, offering a pickup of around 32 bps. With maturities less than two weeks apart, the UOB issue offers around 4 bps of additional yield over DBS despite carrying a one-notch higher Moody’s rating, suggesting modestly better relative value.

Table 1: Selected USD Senior Unsecured Bank Bonds – DBS and UOB

Covered bonds generally provide greater creditor protection than ordinary senior unsecured debt, as investors benefit from recourse to both the issuing bank and a dedicated pool of collateral. Senior unsecured bonds do not benefit from this additional security. However, DBS Group Holdings' senior unsecured notes are issued at the holding-company level, rather than directly by DBS Bank, introducing an additional distinction in creditor ranking and recourse.

As shown in Table 2, DBS’s covered bonds trade even tighter, reflecting the additional protection provided by the covered-bond structure. The DBSSP 3.989% 28Aug2028 Corp (USD) yields 4.98%, while the DBSSP 4.486% 29Jun2029 Corp (USD) yields 5.07%, offering 22 bps pickup over comparable US Treasuries. Against comparable issues, the OCBCSP 4.630% 11Sep2029 Corp (USD) yields 5.08%, just 1 bp pickup for around two and a half months of additional maturity. This is broadly in line with the curve, so the OCBC issue offers little additional relative value over DBS.

Table 2: Selected USD Covered Bonds – DBS and OCBC

For investors seeking higher absolute yields, the AUD senior unsecured market offers more, partly reflecting the higher yields on Australian government bonds (see Table 3). The AUD issues also offer wider spreads over their respective sovereign benchmarks than the USD bonds. The DBSSP 5.065% 13Feb2031 Corp (AUD) yields 5.55%, with a pickup of 63 bps, while the UOBSP 5.023% 29Jan2031 Corp (AUD) yields 5.61% and offers a pickup of 68 bps. With broadly similar maturities and ratings, UOB offers around 5 bps more yield than DBS, despite maturing about two weeks earlier.

Table 3: Selected AUD Senior Unsecured Bank Bonds – DBS and UOB

Overall, we view bonds from the three Singapore banks as fairly priced, with yield differences of just 3 to 5 bps between comparable issues. DBS generally trades at slightly tighter spreads, while selected UOB and OCBC issues offer a modest yield pickup.

For investors prioritising capital preservation, we favour the  OCBCSP 4.630% 11Sep2029 Corp (USD) covered bond, yielding 5.05%. It offers an additional layer of creditor protection through its covered-bond structure, carries Aaa/AAA ratings and provides a modest 1 bp yield pickup over the comparable DBS 2029 covered bond. However, the slightly longer maturity means the pickup is broadly in line with the yield curve rather than a clear pricing advantage.

For investors seeking higher yields, the UOBSP 5.023% 29Jan2031 Corp (AUD) senior unsecured bond offers an alternative, yielding 5.55%. It offers a 5 bp yield pickup over the comparable DBS AUD issue, although this is modest given UOB's softer asset-quality trends. The bond also provides a wider spread over Australian government bonds than the selected USD issues offer over US Treasuries, but investors should account for its longer maturity and AUD currency exposure.

Although the pickup over sovereign benchmarks is relatively small, particularly for the USD issues, bonds from all three banks remain suitable for investors seeking high-quality exposure to established Asian banking franchises. Investors should also consider the foreign-exchange risk associated with USD- and AUD-denominated issues.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds NIL positions and the analyst who produced this report holds NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report — including all investment theses, ratings, price targets and conclusions — has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.