KUALA LUMPUR, Jan 23 (Bernama) -- Bursa Malaysia’s benchmark index recouped earlier losses to settle higher, maintaining a more than six-year high, buoyed by continued buying interest in technology stocks, while the strengthening of the ringgit against the US dollar further lifted investor sentiment. At 2.27 pm today, the local currency strengthened to 3.9992 versus the greenback, its strongest level in more than seven years. It was last seen at this level on June 18, 2018, at 3.9960/9990. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 2.85 points or 0.17 per cent to 1,719.99 from yesterday’s close of 1,717.14. The index surpassed its previous peak of 1,719.00 recorded on Feb 26, 2019. The barometer index opened 1.30 points lower at 1,715.84 and moved between an intraday low of 1,711.89 in early trade and a high of 1,723.41 in late afternoon before slipping slightly toward the close. However, market breadth was negative with decl...
Singapore’s banking sector may still look attractive for income-seeking investors, but shrinking interest margins and rich valuations are set to cap upside in 2026, according to RHB Securities.
After delivering double-digit total returns in 2025, Singapore banks are entering a more challenging phase where dividend strength remains, but growth momentum fades.
The Big Picture
RHB expects more modest returns for Singapore banks in 2026, despite a supportive macro backdrop.
What supports the sector
Stable macroeconomic environment
Strong wealth management inflows
Sound asset quality
High dividend yields
What holds it back
Net interest margin (NIM) compression
Elevated sector valuations
Limited room for valuation re-rating without higher ROEs
“In the absence of a meaningful rise in ROEs, headroom for further valuation expansion may be limited.”
Dividend Yields Still Attractive (FY26F)
Despite margin pressure, dividends remain a key draw:
DBS: 6.1%
OCBC Bank: 5.4%
UOB: 5.4%
These yields are being tested by falling interest rates, with markets pricing in two US Fed cuts totaling 50bps.
Margins Under Pressure, Not Collapsing
NIMs are expected to trend lower, but not fall sharply
3M SORA OIS is forecast to rise slightly to 1.25% in 2026, helping cushion the impact of Fed rate cuts
This insulation supports continued demand for yield-bearing assets
Wealth Management: The Key Offset
Wealth management remains the sector’s main growth engine:
AUM growth (3Q25 YoY)
DBS: +18%
OCBC: +18%
UOB: +8%
High investment-to-AUM ratios (40–56%) expected to persist
Singapore continues to benefit as a safe, politically stable capital hub
Earnings Outlook: Uneven Growth
RHB projects sector PATMI growth of ~4% in 2026, rebounding from a 6% decline in 2025.
UOB: ~18% YoY earnings growth, driven by normalising credit costs
DBS & OCBC: Relatively flat earnings expected
This suggests UOB will be the main earnings growth driver, while peers lean more on dividends than profit expansion.
Macro Still Supportive
Singapore GDP growth: ~3% in 2026
Inflation: edging toward ~1.5%
SGD: likely to strengthen further under MAS’ mild appreciation bias
Continued inflows expected via the Equity Growth Development Plan (EQDP)
Investment Takeaway
Singapore banks are shifting from a re-rating story to an income story.
Dividends remain compelling
Margins and valuations limit upside
Stock selection matters, with UOB offering stronger earnings leverage
For investors, 2026 is less about chasing growth and more about harvesting yield with disciplined expectations.
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