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Straits Times
6 days ago
- Business
- Straits Times
DBS: A purpose-driven and innovation-led bank for Asia
Much like how Singapore has always punched above its weight, DBS today stands toe-to-toe with its global peers, anchored by its ambition to be the Best Bank for a Better World DBS CEO Tan Su Shan at the Euromoney Awards for Excellence 2025 where the bank won the 'World's Best Bank' accolade for the third time since 2019. DBS was also the inaugural winner as 'World's Best Bank for Customer Experience' and was lauded 'World's Best Bank for Corporate Responsibility' for the second time. IN 1968, as Singapore was just finding its feet as an independent republic, a bank was established to finance the future of a young nation. The Development Bank of Singapore as it was then known, DBS was tasked with nation-building, underwriting the industrialisation of a city that dared to dream. Nearly six decades on, DBS has not only become Southeast Asia's largest bank by assets but has also been recognised as the World's Best Bank multiple times by leading global publications. Yet, its identity remains deeply interwoven with Singapore's own journey. 'These developmental roots speak to our culture of purpose in nation-building and helping our clients on their growth paths,' says DBS CEO Tan Su Shan. From shaping skylines to seeding industries, DBS in its early years played a central role in Singapore's rise. Its involvement in strategic industrial projects laid the groundwork for Singapore's future in many sectors, including high-tech industries. It also helped develop pivotal real estate projects, including the Raffles City Convention Centre, then the largest commercial property development in Singapore. These projects not only transformed the cityscape but also sparked economic activity that propelled the country forward. Hon Sui Sen (left), Howe Yoon Chong (2nd from left) and S Dhanabalan (right) topping off the 50-storey DBS Building in 1974. All three served as DBS Chairmen. As Singapore developed, DBS evolved from a state-led development institution into a full-fledged commercial bank. It played a crucial role in establishing Singapore's financial infrastructure with pioneering innovations. The bank launched Autosave, Singapore's first interest-bearing current account, in 1980 and introduced PayLah! in 2014, driving digital payment adoption well ahead of the national PayNow system. In addition, DBS helped catalyse the development of Singapore's fledgling capital market, leading the stock market listings of iconic brands like Singapore Airlines and SingTel. The bank enabled participation of retail investors in new listings via ATMs – a global first. As a pioneer of real estate investment trusts (REITs), DBS launched CapitaMall Trust, Singapore's first REIT, and subsequently helped establish Singapore as Asia's largest REIT hub outside Japan. In wealth management, DBS worked closely with the Monetary Authority of Singapore (MAS) to promote Singapore as a wealth hub, launching AI-driven platforms and championing sustainable investing. The integration of POSB into the DBS family further embedded the bank into the everyday lives of Singaporeans. 'The notion of being 'neighbours first, bankers second' further entrenched our role in society,' says Tan. 'We became more deeply embedded in the lives of Singaporeans – even right from birth with many parents opening their baby's first bank account with POSB.' Today, Singapore is positioning itself for its next phase of development beyond SG60 with a focus on technology and innovation, building a sustainable and green future, and fostering a more inclusive society. DBS is aligning itself to meet those national priorities. 'As a leader in digital banking and a strong champion of helping companies transition to net-zero, we will continue to reimagine banking to support the nation's ambitions,' says Tan. DBS is also growing its footprint in what it calls 'connectivity markets' such as the Middle East, Australia and the West, following the expansion of its long-term Asian clients into new geographies. 'While we remain an Asia-focused bank, our aim is to follow our clients as they grow,' says Tan. Banking with purpose While many companies speak of values and vision, DBS has built its strategy and operations around a simple yet powerful purpose: to be the Best Bank for a Better World. 'Being purpose-driven is part of our DNA,' says Tan. 'From the time of DBS' and POSB's founding as the Development Bank of Singapore and 'People's Bank' respectively, we have believed in good citizenship.' 'Core to this is our belief that as a bank, we can do well by doing good – that is, to make a positive impact by enriching lives, transforming businesses and serving the communities we operate in,' Tan adds. That ethos is embedded in the bank's core values as captured in the mnemonic PRIDE! (Purpose-driven, Relationship-led, Innovative, Decisive, Everything Fun!) These are not just slogans on posters but criteria in performance reviews and daily decisions. 'Being purpose-driven is the reason DBS – through POSB – banks underserved segments such as migrant workers in Singapore,' Tan notes. 'It also underlines our efforts over the years to democratise financial planning for Singaporeans, support small businesses, and bolster digital and financial literacy efforts.' In 2014, DBS established the DBS Foundation to expand its impact beyond banking. Over the past decade, it has committed S$130 million to causes that drive social good and environmental sustainability. Now, that commitment is scaling up. 'In the coming decade, we are upsizing our commitment to S$1 billion to foster inclusion and provide essential needs to Asia's vulnerable,' Tan reveals. DBS aims to be the Best Bank for a Better World, anchored by its belief in doing well by doing good which includes creating impact beyond banking. PHOTO: DBS Innovating for the future of banking Through the past decade, DBS has become globally synonymous with digital transformation. The lender's reinvention from a traditional bank into a tech-enabled one has drawn global accolades and positioned it at the cutting edge of the future of finance. 'Our culture of innovation is anchored on our entrepreneurial mindset and agile ways of working,' says Tan. 'We have organised ourselves around customer journeys, where cross-functional teams are empowered to experiment and deliver at speed.' Although it is already at the forefront of innovation, DBS continues to break new tech frontiers. Artificial intelligence, generative AI, and decentralised finance are not future ambitions but are already being industrialised across the bank's operations. DBS Token Services, a blockchain-powered platform for institutional clients, is one example of smart contract automation and tokenised asset services. 'We're doubling down on industrialising the use of AI and Gen AI to amplify productivity and reduce toil for employees, while driving more hyperpersonalised and contextual solutions for our customers,' Tan explains. DBS sees innovation not just as a competitive advantage but as a means to improve lives. 'Ultimately, we are leveraging technology to make banking simpler, smarter and more inclusive,' says Tan. Anchored in Asia, adapting for growth Unlike its regional peers, DBS has a unique footprint across Asia's three key growth engines: Southeast Asia, South Asia and North Asia. The bank's six core markets – Singapore, Hong Kong, China, Taiwan, India and Indonesia – provide resilience and opportunity. 'Our diversified geographic footprint has been a source of strength,' says Tan. Adaptability, underpinned by a robust regional network, is also vital in today's volatile global economy. DBS has been working with its clients to reconfigure supply chains, explore alternative trade routes, and manage liquidity across jurisdictions. The lender also sees Asia's long-term fundamentals as unshaken. Trade outside the US – what DBS calls 'TOTUS' – accounts for nearly 90 per cent of global trade and around 85 per cent of GDP. Asia is leading the charge. 'Asia accounts for more than half of the world's middle-class households and manufacturing value add,' Tan notes. 'In 2024, the region contributed almost 60 per cent of global growth and accounted for more than half of global trade.' Intra-Asian integration, rising affluence and accelerating digital adoption continue to power the region. For DBS, this is fertile ground to deepen its presence, innovate locally and connect markets. Flying the Singapore flag high From its roots as a domestic development bank, DBS today operates on a truly global stage. The lender has been named the World's Best Bank eight times since 2018 by various international publications and has maintained its title as Asia's Safest Bank for 16 consecutive years. In 2024, its return on equity of 18 per cent placed it seventh among global peers – a position most banks from markets the size of Singapore's can only dream of. (From left) DBS Chairman Peter Seah, Senior Minister Lee Hsien Loong and former CEO Piyush Gupta celebrating the bank's 50th anniversary in 2018. PHOTO: DBS Tan credits a mix of structural strengths and the bank's own transformation drive for these accolades. 'DBS has been a beneficiary of Singapore's status as a key global financial centre,' she says. 'We have also leveraged structural megatrends such as the region's rising middle class, burgeoning wealth creation, cross-border flows and infrastructure build-up.' As DBS continues to grow across the region and beyond, it remains anchored in the ethos that built it: putting customers first, embracing change, and doing what is right. 'We are honoured to have flown the Singapore flag high on the world stage all these years,' says Tan. 'Going forward, we stand by an unwavering belief that by being at the forefront of change, and guided by purpose, we can create a future that is not just successful but also sustainable and impactful.'
Straits Times
12-08-2025
- Business
- Straits Times
DBS shares hit $50 record after 1% rise in Q2 profit; some analysts think stock could hit $57
Sign up now: Get ST's newsletters delivered to your inbox At least four analysts have upgraded their target prices on DBS, with Goldman Sachs valuing the stock at $57.20, although some were less bullish. SINGAPORE – Shares of Singapore's biggest bank crossed $50 for the first time after it announced its results for the second quarter of 2025 last week, prompting a flurry of target price upgrades by analysts who cover the stock. DBS Bank on Aug 7 reported a 1 per cent rise in second-quarter net profit to $2.82 billion for the three months to June 30, exceeding analyst forecasts, due to strong wealth fees and trading income. An interim dividend of 60 cents and a capital return dividend of 15 cents per share were declared, totalling about $2.13 billion. DBS chief executive Tan Su Shan said at a results briefing that the bank was able to offset lower interest rates and tariff headwinds with strong balance sheet management and deposit growth. At least four analysts have since upgraded their target prices on DBS, with Goldman Sachs valuing the stock at $57.20, the highest on the street. Some were less bullish though, with J.P. Morgan and Morningstar warning that the bank will need much stronger catalysts to justify valuations beyond their current level. The stock hit an all-time high of $50.98 on Aug 8 before closing at $50.74, up 6.7 per cent through the week. In contrast, rival bank UOB's shares closed lower after it posted on Aug 7 second-quarter net profit of $1.34 billion, down 6 per cent year on year on declining interest rates. Top stories Swipe. Select. Stay informed. Business Singapore raises 2025 economic growth forecast but warns of uncertainty from US tariffs Business StarHub buys rest of MyRepublic's broadband business in $105m deal; comes after Simba buys M1 Singapore Telco price undercutting expected to subside after sale of M1 to Simba: Analysts World After tariff truce extended, a Trump-Xi summit in China? Opinion For Singapore, the AI revolution is coming just in time Asia Death of student in Sabah raises hurdle for Malaysian PM Anwar as he faces tough state polls soon Opinion Sumiko at 61: Hearing loss is linked to dementia risk. Here's what you risk by ignoring it Business S'pore start-up among 5 global picks for Japan construction group Kajima's mentorship and funding UOB declared an interim dividend of 85 cents a share for the half-year, down from 88 cents a year ago. Shareholders will also receive the second tranche of a special dividend of 50 cents per share – part of a capital distribution package announced in February. The lender also adjusted its earnings outlook to prepare investors for a more volatile year. At its results briefing, UOB chief executive Wee Ee Cheong linked the bank's trimmed outlook to muted growth in its Asean markets from tariff impacts. While the first-order effects are seen as manageable, he warned of second-order risks to consumer spending and investment. Shares of UOB closed on Aug 8 at $35.70, down by more than 1 per cent through the week. Yangzijiang, SGX report strong earnings Yangzijiang Shipbuilding led the Straits Times Index (STI) last week after posting a record net profit of 4.2 billion yuan (S$752.6 million) for the six months to June 30, up 36.7 per cent from a year earlier. This was despite a 1.3 per cent dip in first-half revenue to 12.9 billion yuan, the company said on Aug 7. Yangzijiang said the shipbuilding industry is expected to face headwinds moving forward, with global shipbuilding contracting in the first half of 2025 amid concerns over US tariffs and proposed US port fees. Despite this, clearer tariff developments and improved sentiment in the second half should continue to spur new orders, it said. SGX shares closed the week flat at $16.02 despite strong results and a firmer outlook, with over 30 companies in the IPO pipeline having already hired advisers. PHOTO: BT FILE Yangzijiang also secured US$537.2 million (S$690.7 million) in contracts for 14 vessels, 85 per cent of them container ships, in the first half, and has a US$23.2 billion outstanding order book stretching to 2029 and beyond. Shares of the shipbuilder closed on Aug 8 at $2.87 each, up by more than 13 per cent through the week. The other STI company to report strong results last week was the Singapore Exchange (SGX). For the 12 months to June 30, net profit rose 8.4 per cent year on year to $648 million on increased trading volumes across commodities, equities and currencies. The bourse operator also posted its highest revenue since 2000, at $1.3 billion – an 11.7 per cent increase from financial year 2024. At its results briefing, SGX officials noted that prospects for the exchange have also improved. Listing momentum has picked up, for one thing, and more than 30 companies in the initial public offering pipeline have already hired advisers, SGX head of global sales and origination Pol de Win said. He added that more are still contemplating going public on the SGX mainboard as well as Catalist. This is before some $1.1 billion in state funds allocated to three fund managers for investing in local stocks is deployed later in 2025. Despite the strong results and firmer outlook, SGX shares closed the week flat at $16.02. Sembcorp, Genting show weaker report cards Sembcorp Industries was among the laggards on the STI last week. The company's shares fell 13.9 per cent to close at $6.72 on Aug 8, despite posting a net profit of $536 million for the half-year ended June 30. While this was down 1 per cent from the same period a year ago, the company still declared a higher interim dividend of nine cents a share, compared with six cents before. Ms Carmen Lee, head of OCBC Investment Research, told The Straits Times the steep decline in Sembcorp's share price could be due to the fall in the company's revenue, down 8 per cent year on year to $2.9 billion and coming in short of market expectations. Shares of Genting Singapore rose 2 per cent through the week to close on Aug 8 at 74.5 cents. This was despite the resort and casino operator reporting a 34 per cent drop in profit for the first half of the year to $234.7 million on Aug 7. Revenue fell by 10 per cent to $1.2 billion. According to Genting, the decline was driven by weaker gaming and room revenues as well as higher operating costs and the temporary closure of the SEA Aquarium in May and June to facilitate the opening of the Singapore Oceanarium. Other market movers Singapore Airlines dropped 4.4 per cent after going ex-dividend on Aug 8. It will be paying a final dividend of 30 cents on Aug 27, and closed the week at $6.53. The carrier's share price had already taken a hit in July after it reported a 59 per cent year-on-year slide in earnings to $186 million for the first quarter of its financial year ended June 30. This was mainly due to its share of associate Air India's losses in the wake of the fatal crash of Flight 171 in Ahmedabad on June 12, which led to a drop in bookings and significantly lower airfares. Shares of student accommodation operator Wee Hur hit an all-time high of 74 cents on Aug 6, following news that Australia will raise its cap on foreign students by 9 per cent to 295,000 in 2026 and prioritise applicants from South-east Asia. Wee Hur has eight facilities for purpose-built student accommodation in Australia. Its shares ended the week at 69 cents. Singapore Post rose 2 per cent to close at 50.5 cents last week. The company on Aug 7 sold 10 Housing Board shophouses for $55.5 million. SingPost said in an Aug 8 bourse filing that a preferred bid had been identified for the properties from a company owned by Mr Teo Kiang Ang, founder and non-executive chairman of gas utilities provider Union Gas. Mr Teo is also chairman and founder of taxi service provider Trans-Cab. The move is part of SingPost's plan to divest its non-core assets while retaining its current post office services. What to look out for this week City Developments and ComfortDelGro will announce their first-half results on Aug 13 while CapitaLand Investment reports on Aug 14. Shares of construction company Koh Brothers and real estate agency Apac Realty could see some trading activity after both companies announced strong first-half results after the market closed on Aug 8. PC Partner could also see some trading interest. The electronics distributor on Aug 9 announced it had received in-principle approval from SGX to convert its secondary listing in Singapore to a primary one, after which it will delist from the Hong Kong stock exchange.
Business Times
10-08-2025
- Business
- Business Times
Singapore banks' interest margins narrow in Q2, but DBS edges ahead
[SINGAPORE] Singapore's three local banks suffered compressed net interest margins (NIMs) in the second quarter of FY2025, as falling benchmark rates weighed on lending yields across the region. The squeeze on margins – largely driven by declines in the Singapore Overnight Rate Average (Sora) and the Hong Kong Interbank Offered Rate (Hibor) – is expected to remain a key pressure point in the second half of the year. In Q2, the three-month compounded Sora fell by 50 basis points (bps), while the one-month Hibor declined by nearly 200 bps to its lowest level since 2022. This resulted in all three lenders reporting year-on-year declines in NIMs. Despite the common headwind, DBS posted a 1 per cent year-on-year increase in net profit to S$2.82 billion, beating consensus estimates. OCBC and UOB reported net profit declines of 7 per cent and 6 per cent, respectively. DBS' stronger showing was helped by interest rate hedges and growth in trading and fee income, analysts said, with the lender able to take advantage of interest rate volatility during the quarter. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up While DBS' commercial book NIM fell to 2.55 per cent from 2.83 per cent in the year-ago period, hedging gains helped limit the decline in net interest income, noted Morningstar senior equity analyst Michael Makdad. Commercial book net interest income fell 4 per cent to S$3.63 billion. Wealth management fees rose 25 per cent from a year ago to S$649 million, while markets trading income more than doubled to hit a 13-quarter high of S$418 million. DBS maintained its 2025 guidance, including expectations of mid- to high-single-digit growth in non-interest income and a cost-to-income ratio in the low-40 per cent range. Chief executive Tan Su Shan also reaffirmed the lender's target for 2025 group net interest income to come in slightly above 2024 levels, supported by continued volume growth. DBS declared an ordinary dividend of S$0.60 per share, along with a capital return dividend of S$0.15 per share. Maybank Securities Singapore head of research Thilan Wickramasinghe noted that South-east Asia's largest lender remains ahead on execution and scale. He said: 'The group generated above market trend growth across all pillars. We believe this is sustainable in the medium term given the self-reinforcing effects of scale and strong management execution.' OCBC slashes NIM guidance OCBC reported a 7 per cent year-on-year decline in Q2 net profit to S$1.82 billion , slightly above expectations. Net interest income fell 6 per cent to S$2.28 billion, as NIM dropped 28 bps to 1.92 per cent from a year earlier. The bank lowered its full-year NIM guidance to between 1.9 and 1.95 per cent, from around 2 per cent previously. Group chief financial officer Goh Chin Yee attributed the margin pressure to a sharper drop in loan yields compared with funding costs, particularly for floating-rate loans in Singapore and Hong Kong. Fee income rose 24 per cent in the quarter, led by wealth management, but this was offset by lower insurance income. Non-interest income rose 5 per cent overall to S$1.26 billion. OCBC declared an interim dividend of S$0.41 per share, in line with its 50 per cent payout policy, down from S$0.44 per share a year ago. The bank maintained guidance for mid-single-digit loan growth and a cost-to-income ratio in the mid-40s. Its NIM for end-June stood at 1.88 per cent, with management expecting an 'upward inflection' in H2 as recent deposit rate cuts filter through . Wickramasinghe said OCBC's results were broadly in line with consensus, though there is likely to be reduced visibility on capital return plans amid the ongoing CEO transition . UOB trims guidance UOB's Q2 net profit fell 6 per cent year on year to S$1.34 billion , missing consensus estimates. NIM declined to 1.91 per cent, from 2.05 per cent a year earlier. Net interest income fell 3 per cent to S$2.34 billion, while non-interest income rose 5 per cent to S$1.13 billion. The bank lowered its full-year guidance for NIM to a range of 1.85 to 1.9 per cent, from around 2 per cent previously. Loan growth is now expected to be in the low single digits, and fee income growth in the high single digits – both below earlier projections. Chief financial officer Leong Yung Chee said the revised assumptions reflect expectations of further US rate cuts, delayed impact from recent deposit rate adjustments , and a stabilisation of Sora and Hibor later in the year. Makdad said UOB's regional footprint may have weighed on expectations. The guidance downgrade 'reflects UOB's above-peer exposure to slower-growing South-east Asian economies such as Thailand, as well as its focus on lending to smaller businesses, which are often less equipped than large corporates to navigate tariff-related disruptions', he said. UOB declared an interim dividend of S$0.85 per share, slightly down from S$0.88 last year, and will pay a second tranche of its S$0.50 per share special dividend. The bank's capital return plan – totalling S$3 billion over three years – remains on track. S$50 high-water mark DBS shares rose 6.7 per cent over the past five trading days to close at S$50.74 on Aug 8, crossing the S$50 mark, as investors cheered its results. OCBC slipped 0.2 per cent to S$16.79 over the same period, while UOB declined 1 per cent to S$35.70. DBS' performance prompted several analysts to raise their target prices. Maybank's Wickramasinghe upgraded DBS from a 'hold' to a 'buy', and lifted his target price from S$45.26 to S$56.15. Citi raised its target from S$48.85 to S$56.50, while Goldman Sachs maintained its 'buy' rating and increased its 12-month target from S$54.50 to S$57.20. Morningstar's Makdad, however, kept his fair value estimate for DBS at S$48. He noted that while DBS continues to generate stronger returns – including a return on equity of around 17 per cent versus 13 per cent for OCBC and UOB – this strength is already priced in. Makdad estimated that DBS is trading at close to two times its forward book value, compared with 1.26 times and 1.15 times for OCBC and UOB, respectively. 'While DBS' performance merits a premium, we see relatively greater value in its peers at current levels,' he said.
Straits Times
08-08-2025
- Business
- Straits Times
Extraordinary climb for DBS with flurry of upgrades after share price hit $50
Sign up now: Get ST's newsletters delivered to your inbox The catalyst for the surge came on Aug 7 when DBS reported a 1 per cent rise in second-quarter net profit to $2.82 billion. SINGAPORE – DBS shares continued their bull run on Aug 8 to close at a record high on the back of a flurry of analyst upgrades sparked by the bank's stellar latest earnings. The stock, which crossed $50 for the first time ever on Aug 7, hit $50.98 in morning trade before closing at $50.74, up 2 per cent. That puts the shares 15 per cent ahead since Jan 1, with a striking 50 per cent gain in the past 12 months. The catalyst for the surge came on Aug 7 when DBS Bank reported a 1 per cent rise in second-quarter net profit to $2.82 billion, beating the $2.77 billion average estimate compiled by LSEG. Total income rose 5 per cent to $5.73 billion. DBS chief executive Tan Su Shan said the strong results were delivered amid a challenging environment but she still sees opportunities ahead. 'Our proactive management of the balance sheet puts us in a good position to navigate the interest rate cycle, while strong capital and liquidity ensure we are well placed to support customers,' Ms Tan noted. The board declared an ordinary dividend of 60 cents a share for the quarter and a capital return dividend of 15 cents a share. US investment bank Goldman Sachs noted that the results demonstrated 'steady performance across operation lines despite lower rates and a highly volatile market environment in the second quarter, which showcases the bank's strong franchise and effective management'. Top stories Swipe. Select. Stay informed. Singapore PM Wong calls on S'poreans to band together for nation to remain exceptional in National Day message Opinion Singapore must look ahead, prepare to ride next wave of change Singapore Four foreign leaders to attend NDP 2025 at the Padang Singapore NDP 2025: No ticket, no problem – here are some spots to soak up National Day vibes Singapore Non-invasive depression treatment TMS has helped engineer get his life back Business Singapore's digital banks trim deposit rates, mirroring moves by incumbent players Singapore Chief Justice allows founder of site that ran fake KKH story to be called to the Bar Singapore Chief Justice names law graduate who wanted anonymity after being denied Bar admission Another key focus for analysts was DBS' capability to sustain the 24 cents annual step-up in core dividend per share (DPS) for 2025 and 2026 despite lower interest rates. Goldman Sachs is keeping its buy call on DBS, and has revised the 12-month target price from $54.50 to $57.20. Citi also likes the DBS management's commitment to returning $8 billion of excess capital. The plan involves returning capital through a $3 billion share buyback and $5 billion through additional DPS or the equivalent from 2025 to 2027. Citi is raising its target price from $48.85 to $56.50 despite DBS trading at a significantly higher price-to-book multiple compared with rivals OCBC and UOB. The optimism is underpinned by the bank's earnings resilience, cost efficiency, high return on equity (ROE) of 17 per cent and dividend growth. ROE measures how efficient the bank is at generating profit from money investors have put into the business. HSBC Global Investment Research, which has raised the target price from $51 to $55, also noted the bank's resilient earnings, return of excess capital and dividend yield. However, it is keeping its 'hold' rating, adding: 'While we recognise DBS' multiple areas of strength such as in wealth and capital return, we think a lot of the positives are already priced in.' JP Morgan's equity analysts are holding a 'neutral' rating on DBS, and a target price of $48 by June 2026. It said DBS has been rewarding shareholders with steadily higher dividends, bonus shares and buybacks, which supports its valuation. However, without stronger earnings growth, it will be hard for the stock to re-rate much further. DBS is also expected to earn about $10.8 billion over the next three years, even as net interest margins (NIM) slip with lower rates. Wealth management will keep driving non-interest income, and asset quality remains solid. NIM is likely to fall by 12 basis points in 2025 and six in 2026, with dividends flattening from 2028 to 2030, JP Morgan said. The American investment bank also noted that DBS has achieved one of the strongest ROE improvements in the past decade, helped by higher interest rates, strong digital capabilities and better efficiency. Its digital strengths are boosting loan share, wealth management and underwriting. Potential risks include a rise in bad loans or problems in trade-related exposures which could weigh on the stock price. Mr Thilan Wickramasinghe, head of research at Maybank Securities, has upgraded his call on DBS from a hold to a buy and raised the target price from $45.26 to $56.15. 'We believe DBS' scale, strong execution and safe-haven beneficiary status gives it a significant advantage over regional peers. Upgrade to buy,' he said, noting the above-market growth DBS is able to generate across its core divisions. 'We believe this is sustainable in the medium term, given the self-reinforcing effects of scale and strong management execution,' Mr Wickramasinghe added. Morningstar senior equity analyst Michael Makdad is keeping his $48 fair value estimate for DBS. 'DBS continues to deliver higher returns than peers – ROE has been around 17 per cent versus 13 per cent for OCBC and UOB – and has proved more resilient to the mid-2025 (interest) rate drop. However, we believe this strength is already priced in,' Mr Makdad said. He estimates that the market values DBS at nearly twice its book value on a forward-looking basis, compared with closer to 1 for OCBC and UOB. 'While DBS' performance merits a premium, we see relatively greater value in its peers at current levels,' Mr Makdad added.
Business Times
07-08-2025
- Business
- Business Times
DBS looks to volume growth to mitigate falling interest rates; stock soars to record high, hits S$50 mark
[SINGAPORE] Shares of DBS soared to a record high on Thursday (Aug 7) – briefly hitting a milestone S$50 mark – as South-east Asia's biggest lender beat expectations for its second-quarter results amid challenging times ahead for the banks. The counter eased to close at S$49.75, up 1.8 per cent for the day, after some 6.5 million shares changed hands. Shares of DBS have climbed 13.8 per cent in the year to date. In the quarters ahead, the bank expects falling interest rates to put a dent in its net interest margin (NIM). But chief executive Tan Su Shan believes deposits volume growth will continue to support net interest income for 2025. Speaking at the lender's second-quarter results briefing on Thursday, Tan flagged changes in interest rates and foreign exchange (forex) as the biggest risks to performance; she said, however, that this could be mitigated by volume growth. 'Don't focus on NIMs, because the NIM will go down with the markets, but the net interest income can go up with volumes, and that's how you mitigate that, and also how you hedge your net interest income risk nimbly.' Tan expects the bank's ability to manage balance sheets, grow deposits and capture market share will help tide it through uncertainty and hit its 2025 target of having group net interest income slightly above 2024 levels. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Meanwhile, DBS continues to boost structural growth in wealth management, global transaction services, digitalisation, financial institutions. Q2 earnings beat expectations DBS on Thursday posted a year-on-year rise of 1 per cent in net profit to S$2.82 billion for Q2, beating the S$2.79 billion consensus forecast in a Bloomberg survey of six analysts. Commercial book net interest income fell 4 per cent to S$3.63 billion; NIM fell 28 basis points (bps) year on year to 2.55 per cent due to US Federal Reserve rate cuts, as well as lower Singapore Overnight Rate Average (Sora) and Hong Kong Interbank Offered Rate (Hibor). This was mitigated by balance sheet hedging and partly offset by strong deposit growth. Tan said that because forex rates drive interest rate volatility, there is a need for the bank to be nimble with interest rate swaps and forex hedging. Deposits in Q2 rose 7 per cent on year in constant-currency terms to S$574 billion, from increases in both fixed deposits and current and savings accounts. Having seen sustained momentum in July, Tan expects deposits growth will continue for the rest of the year. The growth in deposits exceeded loan growth, and the surplus was deployed into liquid assets, which was accretive to net interest income and return on equity, though it modestly reduced NIM. Return on equity for Q2 stood at 16.7 per cent, down from 18.2 per cent a year earlier. Meanwhile, Q2 loans rose 4 per cent in constant-currency terms to S$433 billion, led by non-trade corporate loans from broad-based growth across industries. Tan said the lender has seen structural growth in its loans; it has been increasing market share by deepening its industry expertise, and winning lead manager roles. She still sees opportunities for strong growth in non-trade corporate loans in segments including tech, as well as in logistics and transportation. Commercial book net fee and commission income was up 11 per cent at S$1.17 billion, largely due to higher wealth management fees, while investment banking fees were higher from increased debt and equity capital market activity. Tan said the lender's fee income was 'quite pleasing', given that growth was across the board in wealth fees, loan fees and treasury sales fees. Commercial book other non-interest income increased 9 per cent to S$522 million, driven by strong treasury customer sales to wealth management and corporate customers. Markets trading income, meanwhile, more than doubled to S$418 million from higher contributions across a range of activities, benefiting from lower funding costs and a more conducive trading environment. The bank's non-performing loans ratio fell to 1 per cent, from 1.1 per cent the same period a year earlier, as new non-performing asset formation stayed low and was more than offset by higher repayments and write-offs. DBS declared an ordinary dividend of S$0.60 per share and a capital return dividend of S$0.15 per share for the period. This brings the quarter's total dividend payout to S$0.75 per share, compared with the S$0.54 in the year-ago period. DBS kept its 2025 guidance. It expects commercial book non-interest income growth to be mid- to high-single digits, supported by a double-digit growth in wealth management; cost-income ratio to be in the low-40 per cent range; and specific provisions will normalise to 17 to 20 bps in the second half. Overall, it is guiding for net profit to be below 2024 levels mainly due to global minimum tax of 15 per cent.
