DBS & OCBC Dropped More Than 10%: Why I’m Not Buying the Dip Yet

Both DBS (SGX: D05) and OCBC (SGX: O39) have pulled back more than 10% from their recent highs.

This naturally brings up a question on many investors’ minds: Is it time to buy the dip?

The short answer is: it depends.

As I touched on in my previous post, investing decisions aren’t black-and-white.

Context is everything, and two investors can make completely opposing moves while both remaining right due to the difference in strategies and exposure.

Personally? I’m not buying back the shares I trimmed just yet.

Let’s briefly take a look at the results before I delve into my decision.

3Q2026: Resilient Underlying Core Business

By now, you’ve likely seen the media headlines: DBS posted a 5% year-on-year (YOY) drop in profits, while OCBC managed a 3% gain in earnings for the same period.

At a glance, their bottom-line trajectories look different, with OCBC turning in a stronger performance.

However, if you peer past the headline figures and examine their underlying operations, the two banks’ results actually look remarkably similar.

Both banks experienced a modest 1.5% to 1.7% YOY drag in total income. Both grew their net interest income (NII) by roughly 4% YOY via strong loan volume expansion.

And both suffered a pullback in non-interest income (Non-II) of nearly 10% from previous year, though the drivers differed:

• DBS: Core fee income grew 6%, but non-customer Markets Trading Income dropped 65% due to equity market volatility.
• OCBC: Core fee income grew 8% and customer treasury flow (+29%) hit records, but mark-to-market bond losses at Great Eastern Holdings (SGX: G07) were a huge drag for the quarter.

Consequently, DBS saw a 2% YOY dip in pre-allowance profits, while OCBC registered a comparable 3% drop.

The divergence in net profit lies in the allowances set aside for the quarter. While DBS increased that amount by 41% YOY to S$175 million, OCBC significantly reduced it by 63% YOY to S$52 million.

As you can see, various quarterly fluctuations can cloud actual underlying performance. It’s not that these data points aren’t important, but it is far better to evaluate their impact over the longer term.

9M2026: DBS Stable; OCBC Shines

Metric	DBS 9M25	DBS 9M26	YOY	OCBC 9M25	OCBC 9M26	YOY
Net Interest Income (NII)	~S$11,040M	S$11,050M	+0.1%	S$6,854M	S$6,798M	-0.8%
Non-Interest Income (Non-NII)	~S$6,500M	S$6,850M	+5.4%	S$4,144M	S$4,933M	+19.0%
Total Income	S$17,550M	S$17,900M	+2.0%	S$10,998M	S$11,731M	+6.7%
Operating Expenses	~(S$6,950M)	(S$6,980M)	+0.4%	(S$4,322M)	(S$4,602M)	+6.5%
Allowances / Credit Losses	~(S$510M)	(S$536M)	+5.1%	(S$466M)	(S$424M)	-9.0%
Share of Associates	—	—	—	S$816M	S$968M	+18.6%
Net Profit	S$8,647M	S$8,820M	+2.0%	S$5,666M	S$6,237M	+10.1%
Annualised Credit Cost	~16 bps	16 bps	0 bps	17 bps	14 bps	-3 bps
Annualised ROE	~18.0%	17.0%	-1.0 ppt	12.9%	13.5%	+0.6 ppt

From the comparison data, it’s clear that NII has hit a plateau this year. While there might be some upside from recent and potential future rate hikes, the impact is likely to be muted.

The real star of the show is Non-II growth.

DBS saw a 5.4% YOY expansion, and OCBC achieved a stellar 19% surge over the previous year, primarily due to Great Eastern Holdings’ structural consolidation and an organic step-up in New Business Embedded Value (NBEV) margins.

Coupled with an exceptional performance from Bank of Ningbo and lowered allowances, OCBC easily outpaced DBS in net profit growth.

Why Am I Not Buying This Dip?

Compressed Yield

I’m pleased with the banks’ performances, and I’m especially impressed by OCBC’s outstanding results. But this success is already heavily reflected in their stock prices.

Despite dropping by more than 10% from their peaks, DBS stock is still up about 25% this year, and OCBC is trading a staggering 44% higher year-to-date!

What matters more to me is their forward outlook weighed against the potential returns I can capture.

DBS has guided for mid-single-digit total income growth for next year, with a cost-to-income ratio in the low 40%. OCBC has guided similarly, but for the current year.

Without going into the specifics, we are likely looking at a single-digit profit growth going forward.

When you weigh that modest growth against compressed yields, these bank stocks simply aren’t as attractive as other market opportunities. That’s especially true given that even this growth isn’t guaranteed amid current macro headwinds.

When Will I Start Considering?

First of all, I don’t think I will add back OCBC—primarily because this investment is funded by my CPF-OA, which introduces a few constraints:

• The 2.5% Guaranteed Hurdle: With OCBC’s current yield sitting at roughly 3.4% (excluding special dividends), I’m simply not enticed enough to give up the risk-free 2.5% CPF-OA interest for such a narrow spread.
• The 35% Stock Limit: CPF “money is tight” within the scheme’s limits, meaning any deployment here has to aggressively fight for funding against my other CPF investments.

I’m monitoring DBS much more closely, given that its current yield is higher at around 4.6%.

Yes, that yield includes the capital return dividends, but I am comfortable factoring it in because it’s locked in through FY2027. That timeline could even extend further, given the unused portions of their allocated capital return funds for share buybacks.

Even so, my funds are limited, and DBS hasn’t quite crossed the threshold into a compelling buy for me yet, especially since I trimmed my last batch at S$70.24.

Ultimately, I will likely reconsider adding back when its yield pushes toward 5%, or when new catalysts emerge to reaccelerate its growth.

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