OCBC, UOB to maintain strong capital buffers through 2026: Moody’s

CET1 ratio and return on assets will decline, however.

OCBC and UOB are expected to maintain their solid fundamentals through 2026, according to Moody’s Ratings.

UOB is expected to maintain a strong capital buffer. This is despite its common equity tier 1 (CET1) ratio expected to decrease from 15.4% in end-2025 to 14% by 2026, as well as expected decline in return on assets to 1%.

Its strengths are its funding and liquidity. The bank will primarily rely on deposit-led funding and minimally on market funds.

Problem loans will remain at the 1.5% to 2.5% range, it added.

Separately, OCBC’s problem loans are expected to remain below 2% of gross loans.

Similar to UOB, Moody’s expects OCBC’s CET1 ratio to decrease to 14% by 2026. Both banks’ CET1 ratio decline is due to higher capital distributions.

OCBC’s return on assets will decline to 1.1%, below the 1.25% in 2024, on the back of net interest margin (NIM) compression.

“OCBC's NIM will decrease faster compared to the other two large Singaporean banks, because its net interest income is more sensitive to changes in interest rates,” the ratings agency said.

Amidst a shrinking NIM, Moody’s expect OCBC's non-net interest income to remain robust, including from its insurance subsidiary Great Eastern Holdings.

Just like UOB, OCBC is expected to rely on deposit-led funding with low dependence on market funds.

OCBC is also expected to maintain a high buffer of liquid assets, at about 30% of total assets.