DBS Group Holdings: Accumulate with Target Price of S$76.00 as Deposit Gains Lift NIM While Trading Fees Fall November 14, 2026
Brief Overview
DBS Group Holdings reported third-quarter 2026 earnings of S$2.8 billion, slightly below Phillip Securities Research estimates, with nine-month 2026 results reaching 71% of the full-year forecast. The shortfall was driven by lower-than-expected markets trading and wealth management fees, as weaker Asian equity markets and a late-September rise in rates dampened trading volumes. Clients also slowed purchases of equity-structured products. Encouragingly, net interest income rose 4% year-on-year as loan growth, led by non-trade corporate lending, and hedging offset lower SORA. The exit net interest margin rose to 1.90% after SORA turned upward in September, and management indicated that Net Interest Income (NII) has passed its trough. The third-quarter dividend per share rose 8% year-on-year to 81 cents, comprising 66 cents ordinary and 15 cents capital return.
Investment Positives
Record net new money builds the foundation for wealth fee growth
DBS achieved a record in wealth assets under management, reaching S$544 billion on the back of S$15 billion of net new money in the third quarter of 2026. Wealth management fees for the first nine months of 2026 rose 24% year-on-year to a record S$2.69 billion. A significant contributor to this growth is discretionary mandates, which generate a recurring fee on assets rather than per-trade commissions; these mandates have grown to S$59 billion of wealth AUM. Importantly, new money is invested gradually, meaning fees lag inflows. With only 59% of AUM currently invested, there remains substantial room for additional fee income as clients deploy their cash holdings.
Deposit share gains protect the net interest margin
DBS adopted a deliberate strategy of maintaining high deposit rates earlier in the year while competitors cut theirs. This approach enabled the bank to win deposit market share before conditions tightened. Deposits rose 10% year-on-year to S$650 billion, led by current and savings accounts, which funded 11% loan growth across non-trade corporate, government land sales, technology media and telecommunications, and financial institution lending. The exit NIM of 1.90% held firm through October. Notably, DBS’s sensitivity to US dollar interest rates has improved: NII sensitivity fell to minus S$2 million per basis point, down from minus S$4 million previously. This means US rate increases now cost DBS significantly less.
Treasury customer sales also contributed positively, rising 15% year-on-year on higher sales to wealth and institutional clients.
Investment Challenges
Markets trading income depends heavily on Asian markets
Markets trading income fell sharply, declining 65% year-on-year to S$152 million. The drop was caused by weaker Asian asset prices, dislocated equity volatility, a late-September rate rise, and lower trading volumes. Unlike US peers, DBS does not have a prime brokerage business that could benefit from heavy equity trading activity. Additionally, wealth fees per dollar of invested AUM dipped as sales of equity-structured products slowed. Management has guided for FY27e non-interest income growth of low double digits if markets hold steady, but only high single digits if markets weaken further.
Capital headroom is narrowing
The bank’s fully phased-in Common Equity Tier 1 ratio stands at 14.1%, down from 15.1% in the third quarter of 2025 after MAS cut the operational risk multiplier, and as risk-weighted assets grew with loans. While this remains above the target range of 12.5% to 13.5% — and management considers any level above 14% “very comfortable” — the buffer is shrinking. Full removal of the multiplier would add approximately 0.2 percentage points. Excess capital above 13% stands at roughly S$5 billion. Of the S$3 billion share buyback programme, only S$0.4 billion has been utilised. Management expects ordinary dividend per share growth to track earnings at approximately 5% per year.
Outlook
NII is expected to return to growth in FY27e. Management anticipates NII growth close to 5%, assuming two additional rate hikes and SORA averaging approximately 1.6%. Each basis point rise in SORA adds roughly S$10 million to NII. Deposit growth should moderate to mid-single digits, though higher Treasury bill yields could draw some deposits away. FY26e guidance remains broadly unchanged, with the exit NIM of 1.90% expected to hold in the fourth quarter of 2026.
Artificial intelligence is helping to slow cost growth. Expense growth fell to 2–3% this year from approximately 8% previously, as AI tools raised staff productivity. DBS guides FY27e expenses to grow at mid-single digits, in line with total income, keeping the cost-to-income ratio in the low-40% range. The bank is reinvesting savings into wealth management, financial institution group, and payments, and continues to hire wealth relationship managers. AI tools enable each relationship manager to cover more clients, allowing wealth fees to grow faster than headcount.
On capital returns, the 15 cents quarterly capital return is committed to the end of 2027. If the remaining S$2.6 billion of the buyback is not utilised, the board will consider extending the capital return beyond 2027. The S$2.6 billion equates to approximately 91 cents per share, or six additional quarters of the 15 cents capital return. Phillip Securities Research estimates dividends per share of S$3.30 for FY26e and S$3.54 for FY27e.
Recommendation & Target Price
Phillip Securities Research maintains an ACCUMULATE recommendation on DBS Group Holdings with a lower target price of S$76.00, reduced from the previous S$85.00. The reduction reflects a 4% cut to FY26e earnings estimates, driven by lower NII and trading income forecasts. The valuation assumes a 3.04x FY26e price-to-book value and a 17.5% return on equity estimate, derived from a Gordon Growth Model.
DBS remains our top pick among the three Singapore local banks. It holds the highest ROE (FY26e ROE: DBS 17.5%, OCBC 14.3%, UOB 10.7%), and its NIM is rising unlike UOB’s (exit NIM: DBS 1.90%, UOB 1.64%). The bank’s strategy of holding deposit rates higher has won deposit share for two consecutive quarters, record net new money is building the base for wealth fees, and the estimated FY26e yield of 4.6% exceeds UOB’s 4.2%, with the 15 cents capital return committed through end-2027.
Frequently Asked Questions
Q: What is the current recommendation and target price for DBS?
A: Phillip Securities Research maintains an ACCUMULATE recommendation with a target price of S$76.00, lowered from S$85.00, reflecting a 4% reduction in FY26e earnings estimates due to lower NII and trading income.
Q: Why did DBS's third-quarter earnings come in below expectations?
A: Earnings of S$2.8 billion were slightly below estimates primarily because of lower-than-expected markets trading and wealth management fees. Weaker Asian equity markets, a late-September rise in rates, dampened trading volumes, and slower client purchases of equity-structured products all contributed.
Q: How is DBS growing its wealth management business?
A: Wealth AUM reached a record S$544 billion on S$15 billion of net new money in the third quarter. Nine-month wealth management fees rose 24% year-on-year to a record S$2.69 billion. Discretionary mandates have grown to S$59 billion, and with only 59% of AUM currently invested, there is room for further fee income as clients deploy cash.
Q: What drove the improvement in DBS's net interest margin?
A: DBS maintained high deposit rates earlier in the year while peers cut theirs, winning deposit market share. Deposits rose 10% year-on-year to S$650 billion, and the exit NIM rose to 1.90% after SORA turned up in September. NII sensitivity to US rates also improved, falling to minus S$2 million per basis point.
Q: Why did markets trading income decline so sharply?
A: Markets trading income fell 65% year-on-year to S$152 million due to weaker Asian asset prices, dislocated equity volatility, a late-September rate rise, and lower volumes. DBS lacks a prime brokerage business, unlike US peers, which limits its ability to earn from heavy equity trading.
Q: What is the outlook for NII in FY27e?
A: Management expects NII growth close to 5% in FY27e, assuming two more rate hikes and SORA averaging approximately 1.6%. Each basis point rise in SORA adds roughly S$10 million to NII.
Q: How is AI contributing to DBS's cost management?
A: AI tools have reduced expense growth to 2–3% this year from approximately 8% previously by raising staff productivity. The bank guides FY27e expenses to grow at mid-single digits, keeping the cost-to-income ratio in the low-40% range. AI enables each wealth relationship manager to cover more clients.
Q: What is the outlook for DBS's capital returns to shareholders?
A: The 15 cents quarterly capital return is committed through end-2027. If the remaining S$2.6 billion of the S$3 billion buyback is not used, the board will consider extending the capital return beyond 2027. Estimated dividends per share are S$3.30 for FY26e and S$3.54 for FY27e.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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About the author
Glenn Thum
Glenn covers the Banking and Finance sector. He has had 3 years of experience as a Credit Analyst in a Bank, where he prepared credit proposals by conducting consistent critical analysis on the business, market, country and financial information. Glenn graduated with a Bachelor of Business Management from the University of Queensland with a double major in International Business and Human Resources.
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