Credit Update: Checking in on the AUD / USD bonds (4.6+ – 5+% yields) from DBS, OCBC, and UOB.

DBS: Record wealth fees and stabilising net interest income support earnings generation

For the first quarter ending 31 March 2026 (1Q2026), DBS reported decent earnings: total income rose 1% YoY to S$5.9b, representing a new record. Net interest income (NII) declined 5% YoY to S$3.5b due to net interest margin (NIM) softening to 1.89% (1Q2025: 2.12%). However, this decline was more than compensated by a 14% YoY increase in non-interest income; in particular, wealth management remains the bright spot for DBS, surging 25% YoY to S$907m, continuing the 20+% Y/Y growth seen in the last four consecutive quarters. Operating expenses perked up slightly by 4% YoY, mainly due to an increase in staff costs, but this increase is more than offset by higher income, with its cost-to-income ratio declining 5bps to 39% compared to 4Q2025. The bank remains solidly profitable, with net profits inching up 1% YoY to S$2.9b.

 
Looking ahead, we expect DBS to continue posting resilient earnings. Our view is anchored by two main factors: 1) the compression in the bank’s NIM has possibly peaked, as a result of the shift in interest rate expectations due to the Middle East conflict, which would act as a tailwind for DBS’s NII business and 2) the continued momentum in its wealth management and institutional segments. We also note that DBS has minimal business exposure to the Middle East and the proactive approach undertaken by management in de-risking certain selective unsecured consumer and small-to-medium-sized enterprises (SMEs) portfolios.

 
Overall, the bank continues to maintain a strong investment-grade credit profile, being rated AA- (S&P), Aa1 (Moody’s), and AA- (Fitch). Looking at the balance sheet, we still think DBS has a solid portfolio of assets, as seen in its 1.0% non-performing loan (NPL) ratio, which has remained constant across the last four quarters. Since spiking to 36 bps (due to a one-off downgrade of a single, previously watch-listed real estate exposure in Hong Kong), we are heartened to see its loan-loss provision reverting to 15 bps, in line with its average quarterly provision. Solvency and liquidity buffers remain robust with a fully phased-in CET1 ratio of 14.8%, which exceeds both regulatory requirement of 9.2%, and management’s explicit target of 13% to 15%. We also point out the bank’s healthy net stable funding ratio (NSFR) of 117% and liquidity coverage ratio (LCR) of 151%, both comfortably above the regulatory requirement of 100%. DBS’s leverage ratio remains low at 5.9%. These healthy leverage and coverage metrics provide a solid buffer against short-term shocks and long-term funding disruptions. Overall, we expect DBS to maintain its strong credit profile.

 
While DBS has several outstanding issues, two stand out in our view. The DBSSP 3.989% 28Aug2028 Corp (USD) offers a fair yield-to-worst of 4.30% over a short 2.26-year tenor. For investors seeking a higher pickup in yield spread, the DBSSP 5.065% 13Feb2031 Corp (AUD) delivers a yield-to-worst of 5.19% across 4.73 years to maturity, representing a decent 60+bps pickup over comparable Australian sovereigns. Both offer a way to lock in high-quality income from a household name.

Table 1: About DBS’s bonds 

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds positions in all of the abovementioned securities, 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.