My 2-Layer Analysis of the Q3 Bank Earnings

The Q3 2025 bank earnings for our "Main Dish" holdings—DBS, OCBC, and UOB—are out. This is a time when the news is full of noise: "earnings beats," "analyst misses," and short-term price targets.

As investors, we're not playing that game. We are part-owners, and this is our quarterly health check. We're not looking for a reason to sell; we're looking for confirmation of the long-term health of our golden geese. 

A common critique of simple financial blogs is that they are "a waste of time for anyone financially savvy." My goal is to be both accessible and insightful. So, here is my 2-Layer analysis—the simple check-up, and the "under the hood" deep dive that gives me true peace of mind. 

Layer 1: The Simple Health Check

This first layer looks at the simple, high-level metrics. These are the symptoms of a healthy (or unhealthy) business. They are perfect for a quick, 5-minute check to see if our dividends are safe. 
  1. The Dividends Test (Payout Ratio)
    • What it is:  The percentage of profit the bank pays out as dividends.
    • What I look for: A stable 50-60% ratio with dividends maintained or increased. This proves our dividends are secure.
    • Q3 Result: All clear. The banks' dividends are all very well-covered by their profits.
  2. The Profit Engine Test (NIM vs. NoII): 
    • What it is: We check the "traditional" profit from lending (Net Interest Margin) against the "modern" profit from fees (Non-Interest Income). 
    • What I look for: As interest rates fall, we expected NIM to dip. We wanted to see strong fee income from wealth management to pick up the slack.
    • Q3 Result: All clear. The "wealth management hedge" worked especially for DBS and OCBC. Fee income was strong, proving the banks are diversified. 
  3. The "Stupid Risk" Test (NPL Ratio): 
    •  What it is: The percentage of loans that have gone bad (Non-Performing Loans).
    • What I look for: A low and stable number.
    • Q3 Result: All clear. NPLs remain near record lows. The banks are not taking on bad risks.

For a simple, passive investor like myself, the analysis could stop here. We have confirmed our dividends are safe and we can rest easy while our banks work hard to generate dividends for us.  

 Layer 2: The Deeper Dive

This layer looks at the balance sheet to understand the "why." These are the causes of the good results we see on headlines.
  1. Why the Dividend is Safe: The CET1 Ratio 
    • What it is: The Common Equity Tier 1 (CET1) Ratio is the bank's ultimate "fortress" metric. It's the core, loss-absorbing capital buffer that shows how much of a crisis it can withstand.
    • Q3 Analysis: All three banks are reporting CET1 ratios in the 14.5% - 17% range. This is world-class. This massive buffer is the reason the payout ratio is so secure. It's the source of our peace of mind and gives management the confidence to keep returning capital to shareholders. 
  2. Why Profit is Stable: The Loan-to-Deposit (LDR) Ratio 
    • What it is: This ratio shows if the bank is funding its loans with stable customer deposits or with risky, borrowed money.
    • Q3 Analysis: Our banks are around the 80-90% LDR range. This means they are funded almost entirely by "sticky" customer deposits—the cheapest, most reliable funding source. This stable, low-cost "moat" is the reason their NIMs held up so well, even as interest rates fell. 
  3. Why They're Diversified: Fee Income as a % of Total Income 
    • What it is: This shows how much of the bank's total revenue comes from services (fees) versus just lending.
    • Q3 Analysis: At DBS and OCBC, this number is very high (in the 30-40%+ range). This is the proof that they are no longer simple lenders. They are high-quality, capital-light wealth managers. This is the reason the business is so resilient and not just a play on interest rates. 

Conclusions: No Surprises, Stay The Course

My analysis, at both the simple and the deep-dive level, confirms the "boring" headline story: the earnings were stable and in line with expectations.

But now we know why. The dividends remain safe because the CET1 ratios are high. The profits are stable because the LDRs are low and the fee income is high.

The conclusion for me is to simply stay the course and keep buying shares to grow my dividends. All Huat!

Disclaimer: This blog post is for entertainment purposes only and does not constitute financial advice. Please do your own due diligence. 

Comments

Post a Comment

Popular posts from this blog

2025 Portfolio Review and Why I Don't Limit The Number Of Stocks Owned

2025 is in the books with only 2 and a half trading days left.  2025 is the year I initiated my dividend portfolio and embarked on this hopefully decades-long journey with dividend investing. My portfolio was steady and already printed cash like it was supposed to. In 2025 my  Net Assets  increased by 45%, of which around two thirds can be attributed to personal savings and one third can be attributed to investment returns (capital gains + dividends). Here is a breakdown of the number of dividends I can expect to receive by month next year: Jan: None Feb (3): Kimly, SGX, Suntec Mar (6): Keppel DC REIT, AIMS APAC REIT, PLife, CICT, MIT, MLT Apr (1): DBS May (7): DBS, OCBC, UOB, CLI, CDG, SGX, Suntec Jun (3): AIMS APAC REIT, MIT, MLT Jul (1): Kimly Aug (6): DBS, OCBC, UOB, CICT, CDG, Suntec Sep (5): Keppel DC REIT, AIMS APAC REIT, MIT, MLT, PLife Oct (1): SGX Nov (3): DBS, SGX, Suntec, Dec (3): AIMS APAC REIT, MIT, MLT I currently hold 15 individual counters, giving me...
Read more

Decoding DBS's FY2025 Earnings Call

Image
 This article was written with reference to DBS Media Briefing Transcript and Analyst Call Transcript for FY2025, which can be found at https://www.dbs.com/investors/financials/quarterly-financials During the DBS Full Year 2025 earnings call, CEO Tan Su Shan described the year using two specific words: A "Perfect Storm." She is entirely correct about the macro environment that our Singapore banks had to operate in. Benchmark interest rates (SORA and HIBOR) crashed by almost 2 percentage points. The Singapore Dollar remained brutally strong, hurting the translation of foreign earnings. Finally, the new 15% global minimum tax kicked in, slapping the bank with an additional SGD 400 million in tax expenses. DBS headline net profit fell 3% to SGD 11 billion. But if  you look at the actual operating engine, pre-tax profit rose to a record high of $13.1 billion . Total income grew 3% to a record $22.9 billion .  Deep Deep Deposits When interest rates drop, the textbook resp...
Read more

Decoding UOB’s FY2025 Earnings Call

Image
Writing this with reference to the Earnings Call Transcript posted here: https://finance.yahoo.com/quote/UOVEY/earnings/UOVEY-H2-2025-earnings_call-415512.html UOB just released its Full Year 2025 results, reporting a net profit of SGD 4.7 billion . Operating profit saw a slight 4% dip to SGD 7.7 billion . Here is my breakdown of the latest earnings call, and why UOB remains a core position in my portfolio Falling Rates But Rising Fee Income The market priced in severe NIM compression this year, but UOB's margins have proven stickier than anticipated. While full-year NIM settled at 1.89% , the downward trajectory has slowed. In fact, Q4 NIM ticked up to 1.84% (from 1.82% in Q3) , and management noted that as of end-January 2026, the exit NIM remains stable at 1.82% . This resilience is a direct result of active funding cost management . UOB successfully drove double-digit CASA (Current Account Savings Account) growth in its wholesale banking division . This influx of cheap deposit...
Read more