DBS Group Holdings Ltd, Singapore’s largest bank, has demonstrated resilience in a challenging operating environment by maintaining its dividend policy despite facing earnings pressures.
Financial Performance and Dividend Policy
DBS reported adjusted earnings of S$2.4 billion for 4Q25, representing a slight shortfall against analyst estimates with full year FY25 earnings at 95% of full-year forecasts. Despite the earnings decline, the bank significantly increased its quarterly dividend per share by 35% year-on-year to 81 cents, comprising 66 cents ordinary dividend and 15 cents capital return dividend. The total FY25 dividend per share reached S$3.06, marking a substantial 38% increase from the previous year.
Mixed Operational Results
The bank faced headwinds in its core lending business, with net interest income declining 4% year-on-year despite achieving loan and deposit growth. This decline was attributed to net interest margins compressing by 22 basis points to 1.93%. However, these challenges were partially offset by strong performance in fee-generating businesses, particularly wealth management, which surged 24% year-on-year and drove overall fee income growth of 14%.
Key Positives: Strategic Pivot Toward Fee Income
The bank’s strategic pivot toward fee income generation has proven effective in cushioning the impact of declining net interest income. Wealth management fees led this transformation, supported by assets under management rising to S$488 billion, representing 15% year-on-year growth. This growth was driven by net new money inflows of S$12 billion in 4Q25, demonstrating strong demand for investment products as depositors shift from fixed deposits to wealth products. Additionally, investment banking fees surged 45% year-on-year, benefiting from increased debt and equity capital market activity, which indicates a revival in capital market sentiment and further diversifies DBS’s earnings drivers beyond pure interest rate sensitivity.
Research Recommendation and Outlook
Phillip Securities Research has upgraded DBS to Accumulate from Neutral, raising the target price to S$60.00 from the previous S$58.00. The upgrade reflects expectations that non-interest income will serve as the main growth driver, with heightened market volatility benefiting trading income and continued wealth management growth. The research firm prefers DBS among Singapore banks due to its continued capital return plans until FY27, fixed dividend per share policy, and high dividend payout ratio, offering greater stability compared to peers following floating payout ratios.
Frequently Asked Questions
Q: What was DBS’s dividend policy for FY25?
A: DBS raised its 4Q25 dividend per share by 35% year-on-year to 81 cents, comprising 66 cents ordinary dividend and 15 cents capital return dividend, bringing total FY25 dividend per share to S$3.06, up 38% year-on-year.
Q: How did DBS’s net interest income perform?
A: Net interest income fell 4% year-on-year despite loan and deposit growth, as net interest margins declined 22 basis points year-on-year to 1.93%.
Q: Which business segments showed strong growth?
A: Wealth management fees surged 24% year-on-year, driving 14% growth in fee income. Investment banking fees also increased 45% year-on-year from increased debt and equity capital market activity.
Q: What is Phillip Securities Research’s recommendation and target price?
A: Phillip Securities Research upgraded DBS to Accumulate from Neutral with a higher target price of S$60.00, up from the previous S$58.00.
Q: How did assets under management perform?
A: Assets under management rose to S$488 billion, representing 15% year-on-year growth, driven by net new money inflows of S$12 billion for 4Q25.
Q: What is DBS’s guidance for FY26?
A: DBS maintained its FY26 guidance for net interest income to be slightly below 2025 levels, non-interest income growth in the high single digits, credit costs to normalize at 17-20 basis points, and profit after tax and minority interests below 2025 levels due to the lower interest rate environment.
Q: What makes DBS attractive compared to other Singapore banks?
A: Phillip Securities Research prefers DBS due to its continued capital return plans until FY27, fixed dividend per share policy, and high dividend payout ratio, which offer greater stability compared to peers that follow floating payout ratios tied to earnings performance.
Q: What are the expected dividend yields?
A: The expected dividend yields are 5.7% for FY26e and 6.1% for FY27e, supported by DBS’s capital return dividend policy and step-up policy maintained until 3Q26.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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