CGS International May 8, 2025
DBS Group: Bolstered by Record Income in 1Q25, Hold Call Maintained
DBS Group reported robust first-quarter 2025 results, exceeding analyst expectations and demonstrating resilience despite an uncertain global economic backdrop. The bank’s performance was driven by record income figures, although profitability was partially impacted by a higher effective tax rate resulting from new international tax regulations. CGS International maintains its “Hold” recommendation on the stock, citing the impact of the minimum tax rate on expected FY25F earnings growth, but notes the attractive dividend yield could attract investors.
Strong 1Q25 Performance Highlights
DBS Group’s core net profit for the first quarter of 2025 came in at S$2.90 billion, slightly above CGS International’s estimate by 4.5% and broadly in line with Bloomberg consensus estimates at 101.4%. This resilient profit figure, despite a slight year-on-year dip (-1.8%) but a significant quarter-on-quarter increase (+14.9%), was primarily underpinned by record fee income and buoyant net interest income (NII).
Total income reached a record S$5.9 billion in 1Q25, representing a 6.3% increase year-on-year and a 7.3% increase quarter-on-quarter. This growth was notably led by exceptional performance in wealth management and loan-related fees, which rose by 35.2% year-on-year (+39.2% quarter-on-quarter) to S$724 million and by 22.7% year-on-year (+78.7% quarter-on-quarter) to S$227 million, respectively.
Net interest income (NII) for 1Q25 stood at S$3.68 billion, surpassing CGS International’s forecast of S$3.55 billion. While the net interest margin (NIM) saw a slight decline of 3 basis points quarter-on-quarter, the NII was supported by a healthy 2.5% year-on-year loan growth.
Provisions and Tax Impacts
In terms of credit quality, DBS recorded S$120 million in specific provisions (SPs) during 1Q25, translating to a low credit cost of 10 basis points. This figure is below the bank’s earlier guidance of 17-20 basis points for FY25F SPs. However, the bank also set aside S$205 million in general provisions in 1Q25 as a precautionary measure against uncertain global economic conditions, particularly those influenced by tariffs. This brought the overall credit costs for the quarter to 30 basis points.
The bank’s net profit in 1Q25 was affected by the implementation of a minimum tax rate under Pillar 2 of the Base Erosion and Profit Shifting (BEPS) 2.0 framework. This resulted in a higher effective tax rate of 15.7% for the quarter, an increase of 3.0 percentage points year-on-year and 4.1 percentage points quarter-on-quarter.
FY25F Guidance and Outlook
DBS mostly maintained its financial year 2025 guidance despite the heightened uncertainty stemming from the tariff situation between the US and its trade partners.
A key revision to the guidance is a slightly more conservative outlook for non-interest income growth from the commercial book, now expected to be in the mid-to-high single digits for FY25F, compared to the previous high-single-digit projection.
Despite the US Federal Reserve now being expected to implement three interest rate cuts (up from two previously anticipated), DBS’s NII guidance remains unchanged, forecasting slight year-on-year growth in FY25F. The bank indicated it can deploy funding into non-loan assets to generate incremental NII, offsetting potential pressure from rate cuts.
Other guidance points that remain unchanged include:
Cost-to-income ratio (CIR) targeted at the low-40% range.
Specific provisions (SPs) expected to normalise at 17-20 basis points for the full year.
Recommendation and Investment Appeal
CGS International reiterates its “Hold” call on DBS Group with an unchanged GGM-based target price of S$43.10. The rationale for maintaining the Hold rating is the anticipated lack of significant earnings growth in FY25F, primarily attributed to the impact of the minimum tax rate under BEPS 2.0.
However, the report highlights the bank’s attractive dividend yield as a potential draw for investors. DBS announced a dividend per share (DPS) of 75 Scts for 1Q25, comprising a core dividend of 60 Scts and a special dividend of 15 Scts. This is notably higher than its previously committed capital return DPS of 15 Scts per quarter for FY25. Based on CGS International’s estimates, this implies a total DPS of approximately S$3.06 for FY25F, translating to an appealing estimated yield of around 7.2%.
Risks to Outlook
Upside risks identified in the report include:
Continued strong fee income growth throughout the remainder of FY25F.
Improved market trading income resulting from increased volatility.
Benign credit quality concerns leading to lower-than-guided specific provisions.
Downside risks include:
More drastic-than-expected interest rate cuts by the US Federal Reserve.
Downward revision to the bank’s FY25F guidance.
Retraction of the bank’s capital management initiatives (e.g., special dividends).
Detailed Financials and Key Metrics
Here is a summary of DBS Group’s key quarterly statistics and financial forecasts:
Figure 1: DBS – Key Quarterly Statistics
Income statement (S$m) 1Q25 1Q25F +/- 1Q24 yoy % chg 4Q24 qoq % chg FY25F % of
Net interest income 3,681 3,550 3.7% 3,505 5.0% 3,728 -1.3% 14,642 25.1%
Non-interest income 2,224 2,050 8.5% 2,052 8.4% 1,777 25.2% 8,198 27.1%
Net fee and commission income 1,275 1,050 21.4% 1,043 22.2% 968 31.7% 4,560 28.0%
Wealth management 724 580 24.8% 536 35.1% 520 39.2% 2,401 30.2%
Total income 5,905 5,600 5.4% 5,557 6.3% 5,505 7.3% 22,840 25.9%
Operating expenses 2,214 2,184 1.4% 2,079 6.5% 2,395 -7.6% 9,141 24.2%
Pre-provision operating profit 3,691 3,411 8.2% 3,478 6.1% 3,110 18.7% 13,699 26.9%
Loan loss provision 325 220 47.7% 135 140.7% 209 55.5% 803 40.5%
Profit before tax 3,437 3,261 5.4% 3,388 1.4% 2,966 15.9% 13,134 26.2%
Tax 540 489 10.4% 432 25.0% 344 57.0% 1,970 27.4%
Core net profit 2,897 2,772 4.5% 2,961 -2.2% 2,622 10.5% 11,264 25.7%
Overall stats/drivers
NIM (%) 2.12% 2.10% 2 bps 2.14% -2 bps 2.15% -3 bps 2.10% 2 bps
Loan growth 2.5% 3.0% -0.5% 1.9% 0.6% pts 2.1% 0.4% pts 4.5% -2.1%
Cost-to-income ratio 37.5% 39.0% -1.5% 37.4% 0.1% pts 42.7% -5.2% pts 40.0% -2.5%
Credit costs (bps) 30 21 9 bps 13 17 bps 19 11 bps 18 12 bps
Key Financial Forecasts
(S$m) Dec-24A Dec-25F Dec-26F Dec-27F
Net Profit 11,408 11,264 11,350 11,494
Core EPS (S$) 4.02 3.97 4.00 4.05
Core EPS Growth (%) 10.41% (1.26%) 0.76% 1.27%
FD Core P/E (x) 10.63 10.78 10.70 10.57
Recurring ROE (%) 17.0% 16.7% 16.3% 16.1%
P/BV (x) 1.80 1.76 1.72 1.68
DPS (S$) 2.54 3.06 3.30 3.54
Dividend Yield (%) 6.02% 7.16% 7.72% 8.28%
Balance Sheet Summary (S$m)
Dec-24A Dec-25F Dec-26F Dec-27F
Total Gross Loans 517,099 536,951 559,661 584,353
Total Gross Int. Earning Assets 703,691 727,275 753,791 782,366
Total Assets 827,219 865,054 904,032 944,298
Total Liabilities 758,386 793,747 830,847 869,773
Shareholders’ Equity 68,786 71,260 73,138 74,478
Total Equity 68,833 71,307 73,185 74,525
Key Ratios
Dec-24A Dec-25F Dec-26F Dec-27F
Total Income Growth (%) 10.6% 2.4% 2.8% 3.1%
Operating Profit Growth (%) 11.9% 3.2% 0.9% 1.4%
Pretax Profit Growth (%) 12.2% 1.9% 0.8% 1.3%
Net Interest To Total Income (%) 64.7% 64.1% 62.5% 61.0%
Cost Of Funds (%) 2.49% 2.08% 2.02% 1.97%
Return On Interest Earning Assets (%) 4.60% 4.11% 4.02% 3.93%
Net Interest Spread (%) 2.11% 2.04% 2.00% 1.96%
Net Interest Margin (Avg Deposits) (%) 2.63% 2.54% 2.43% 2.33%
Net Interest Margin (Avg RWA) (%) 4.00% 4.08% 3.93% 3.76%
Provisions to Pre Prov. Operating Profit (%) 4.68% 5.86% 6.08% 6.28%
Interest Return On Average Assets (%) 1.84% 1.73% 1.66% 1.60%
Effective Tax Rate (%) 12.4% 15.0% 15.0% 15.0%
Net Dividend Payout Ratio (%) 55.8% 77.8% 83.3% 88.2%
Return On Average Assets (%) 1.44% 1.32% 1.27% 1.23%
Key Drivers
Dec-24A Dec-25F Dec-26F Dec-27F
NIM (%) 2.1% 2.1% 2.1% 2.0%
Cost-to-income ratio (%) 40.4% 40.0% 41.1% 42.1%
Loan growth (%) 3.5% 4.5% 4.8% 5.0%
Deposit growth (%) 5.0% 5.0% 5.0% 5.0%
Loans-to-deposits ratio (%) 76.7% 76.3% 76.2% 76.2%
CASA ratio (%) 51.8% N/A N/A N/A
Credit cost (bp) 14.5 18.0 18.0 18.0
Sector Comparison (Data as at 7 May 25)
Company Bbg Ticker Recom. Price (local) Tgt Price (local) Mkt Cap (US$ m) Up/downside P/BV (x) CY25F P/BV (x) CY26F P/BV (x) CY27F Recurr. ROE (%) CY25F Recurr. ROE (%) CY26F Recurr. ROE (%) CY27F P/PPOPS (x) CY25F P/PPOPS (x) CY26F P/PPOPS (x) CY27F Div Yield (%) CY25F Div Yield (%) CY26F Div Yield (%) CY27F 3-year EPS CAGR (%)
Singapore
DBS Group DBS SP Hold 42.76 43.10 94,254 0.8% 1.76 1.72 1.68 16.4% 16.3% 16.1% 8.9 8.8 8.7 7.2% 7.7% 8.3%
OCBC OCBC SP Hold 16.27 17.20 56,811 2.5% 1.24 1.18 1.12 12.6% 12.8% 12.5% 8.6 8.3 8.0 6.5% 6.6% 5.8%
United Overseas Bank UOB SP Add 34.49 38.60 44,730 5.7% 1.12 1.05 0.99 11.5% 12.6% 12.6% 6.9 6.5 6.2 7.2% 6.1% 6.4%
Singapore average 2.6% 1.40 1.35 1.29 13.7% 14.0% 13.9% 8.3 8.0 7.7 7.0% 7.0% 7.1%
Indonesia
Bank Central Asia BBCA IJ Add 9,075 12,350 68,011 6.3% 3.97 3.64 3.35 21.7% 21.4% 21.3% 14.8 13.6 12.5 3.4% 3.7% 4.0%
Bank Jago ARTO IJ Add 1,915 3,000 1,614 na 3.02 2.85 na 4.2% 7.3% na 25.3 14.7 na 0.2% 0.5% na
Bank Mandiri BMRI IJ Add 4,950 6,500 28,087 7.9% 1.50 1.38 1.26 19.2% 19.5% 19.9% 4.7 4.2 3.8 7.4% 8.1% 9.1%
Bank Rakyat Indonesia BBRI IJ Add 3,910 4,900 36,026 5.8% 1.79 1.70 1.62 17.7% 19.4% 20.5% 4.9 4.6 4.2 8.2% 9.5% 10.5%
Bank Tabungan Negara BBTN IJ Add 1,055 1,250 900.1 7.7% 0.43 0.40 0.37 9.5% 9.6% 9.8% 1.7 1.6 1.4 5.4% 5.8% 6.4%
Bank Tabungan Pensiunan Nasional Syariah BTPS IJ Add 1,240 1,500 580.7 17.9% 0.92 0.85 0.78 13.3% 14.4% 14.8% 3.6 3.2 3.0 2.8% 6.9% 8.1%
Indonesia average na 2.24 2.08 na 18.8% 19.5% na 7.1 6.5 na 5.5% 6.2% na
Malaysia
Affin Bank Berhad ABANK MK Reduce 2.62 2.76 1,569 7.2% 0.53 0.52 0.50 4.4% 4.6% 5.0% 8.1 7.3 6.7 3.3% 3.5% 3.9%
Alliance Bank Malaysia Berhad ABMB MK Hold 4.46 5.27 1,631 8.5% 0.84 0.80 0.76 10.2% 10.4% 10.1% 5.5 5.1 5.0 5.9% 6.3% 6.5%
AMMB Holdings AMM MK Add 5.30 6.39 4,138 8.1% 0.81 0.76 0.72 9.7% 10.0% 10.0% 6.3 5.6 5.4 4.7% 5.1% 5.4%
Bank Islam Malaysia Bhd BIMB MK Add 2.45 3.13 1,312 8.6% 0.69 0.66 0.63 7.9% 8.1% 8.3% 5.2 4.9 4.6 6.7% 7.2% 7.7%
Hong Leong Bank HLBK MK Add 20.00 31.40 10,244 8.3% 1.05 0.98 0.91 11.3% 11.4% 11.4% 11.3 10.7 9.9 4.2% 4.5% 4.9%
Malayan Banking Bhd MAY MK Add 10.00 12.80 28,544 6.8% 1.11 1.05 0.98 10.7% 10.2% 10.0% 7.9 7.2 6.9 6.4% 6.7% 7.0%
Public Bank Bhd PBK MK Add 4.47 5.81 20,501 6.6% 1.38 1.31 1.24 12.3% 12.2% 12.3% 8.7 8.1 7.7 5.1% 5.5% 5.8%
RHB Bank Bhd RHBBANK MK Add 6.75 7.25 6,953 8.5% 0.86 0.81 0.77 9.6% 10.3% 10.5% 6.2 5.6 5.2 6.6% 7.4% 7.9%
Malaysia average 7.4% 1.07 1.01 0.95 10.6% 10.5% 10.5% 8.0 7.3 7.0 5.6% 6.0% 6.3%
Thailand
Bangkok Bank BBL TB Add 143.0 170.0 8,380 3.6% 0.47 0.45 0.43 7.4% 7.3% 7.6% 3.1 3.1 3.0 6.2% 6.4% 6.9%
Kasikornbank KBANK TB Add 164.5 184.0 11,966 6.0% 0.67 0.64 0.61 7.4% 8.3% 8.8% 3.9 3.7 3.5 5.5% 6.4% 7.0%
Kiatnakin Phatra Bank KKP TB Hold 47.50 52.00 1,207 9.0% 0.61 0.59 0.56 7.4% 7.8% 8.8% 3.8 3.7 3.4 6.0% 6.5% 7.6%
Krung Thai Bank KTB TB Add 22.80 25.00 9,783 2.5% 0.69 0.66 0.63 8.0% 8.7% 9.0% 3.8 3.6 3.5 5.6% 6.3% 6.9%
Muangthai Capital MTC TB Add 43.75 54.00 2,847 22.1% 2.13 1.80 1.53 17.2% 17.9% 17.7% 6.8 5.8 5.1 0.8% 0.9% 1.1%
SCB X SCB TB Add 120.0 130.0 12,405 4.5% 0.81 0.80 0.78 8.3% 8.5% 9.3% 4.2 4.1 4.0 8.2% 8.4% 9.4%
Srisawad Corporation SAWAD TB Hold 28.75 34.00 1,333 5.3% 1.25 1.13 1.01 13.2% 13.6% 14.7% 5.3 4.9 4.3 3.5% 3.5% 3.5%
Tisco Financial Group TISCO TB Hold 98.00 99.00 2,409 0.3% 1.78 1.74 1.70 14.7% 14.6% 14.4% 7.8 7.4 7.4 7.0% 7.0% 7.1%
TMBThanachart Bank TTB TB Hold 1.89 1.86 5,611 2.2% 0.75 0.73 0.71 8.4% 8.0% 8.3% 5.2 5.1 5.0 7.3% 7.1% 7.5%
Thailand average 4.7% 0.71 0.68 0.66 8.1% 8.5% 9.0% 4.1 3.9 3.8 6.2% 6.6% 7.2%
Note: 3-year EPS CAGR (%) data was present in the table header but no data was provided for any company.
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Other Significant Financial Interests:
As of May 7, 2025, CGS International has a proprietary position in the securities of DBS Group.
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Recommendation Framework
Stock Ratings Definition:
Add: Total return expected to exceed 10% over the next 12 months.
Hold: Total return expected to be between 0% and positive 10% over the next 12 months.
Reduce: Total return expected to fall below 0% over the next 12 months. Total expected return = (Target Price – Current Price) / Current Price + Forward Net Dividend Yield. Investment horizon is 12 months.
Sector Ratings Definition:
Overweight: Stocks in the sector have a positive absolute recommendation on a market cap-weighted basis.
Neutral: Stocks in the sector have a neutral absolute recommendation on a market cap-weighted basis.
Underweight: Stocks in the sector have a negative absolute recommendation on a market cap-weighted basis.
Country Ratings Definition:
Overweight: Investors should be positioned with an above-market weight in this country relative to benchmark.
Neutral: Investors should be positioned with a neutral weight in this country relative to benchmark.
Underweight: Investors should be positioned with a below-market weight in this country relative to benchmark.
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Distribution of Stock Ratings and Investment Banking Clients (for quarter ended 31 March 2025, based on 551 companies under coverage)
Add: 71.0% (1.3% Investment Banking clients)
Hold: 20.9% (0.7% Investment Banking clients)
Reduce: 8.2% (0.4% Investment Banking clients)
