Core Viewpoint - Interest rates are beginning to decline after a period of increases, raising questions about the sustainability of bank dividends in Singapore as net interest margins are expected to compress [1][12]. Group 1: Bank Performance and Dividends - Singapore banks have experienced record profits during the rate hikes, with net interest margins increasing, leading to higher dividends for investors [1][2]. - DBS Group Holdings raised its ordinary dividend to S$0.60 per share in 3Q2025, an 11.1% year-over-year increase, supported by diverse income sources [3]. - Oversea-Chinese Banking Corporation (OCBC) reported a 60% total dividend payout ratio, despite a 9% year-over-year drop in net interest income to S$2.23 billion in 3Q2025 [6][7]. - United Overseas Bank (UOB) declared an interim dividend of S$0.85 per share for 2Q2025, down from S$0.88 the previous year, while assuring that the final dividend for 2025 would not be cut [10][11]. Group 2: Income Sources and Stability - DBS's net interest margin softened by 0.15 percentage points to 1.96% in 3Q2025, with net interest income falling by 6% year-on-year to S$3.6 billion, but total income rose 3% to S$5.9 billion due to strong fee income and wealth management activities [4]. - OCBC's non-interest income grew 15% year-on-year to S$1.57 billion, compensating for the decline in net interest income [7][8]. - UOB's net profit fell by 72% to S$443 million in 3Q2025, attributed to lower net interest margins and increased reserves, yet asset quality remained stable with a non-performing loan ratio of 1.6% [10][11]. Group 3: Future Outlook and Earnings - As interest rates fall, banks will rely more on non-interest income streams such as wealth management and fees, which are less sensitive to rate changes [12][13]. - The ability of banks to maintain dividends will depend on their capacity to generate cash and manage their balance sheets effectively, with strong capital positions being crucial in a declining rate environment [14][16]. - Current evidence suggests that Singapore banks can continue to support dividends despite the challenges posed by falling interest rates [15].