Broker: CGS International
Date of Report: August 8, 2025
DBS Group: Navigating 2025 with NIM Management, Dividend Hikes, and Sector Leadership – A Comprehensive Review of Singapore and Regional Banks
DBS Group: Delivering Stability and Growth Amid NIM Compression
DBS Group (SGX: DBSM.SI) remains a standout player in the Singaporean and regional banking sector, demonstrating resilience and strategic agility in a challenging interest rate environment.
- 1H25 Core Net Profit: S\$5.72bn (-0.3% yoy / +3.1% hoh), accounting for 50.8% of CGS International and 52.2% of consensus FY25 forecasts.
- Net Interest Income (NII): Grew 1.5% yoy in 2Q25, despite a 9bp decline in net interest margins (NIM), as DBS effectively matched the growth of its average interest-bearing assets (+6.1% yoy in 1H25) with interest-bearing liabilities (+6.6% yoy in 1H25). Average loan balances grew only 1.9% yoy, highlighting the bank’s focus on diversified asset growth.
- Management Outlook: Confident in NII growth for FY25, leveraging both loan and non-loan asset expansion. Should capital deployment opportunities wane, DBS can reduce funding to mitigate higher costs from excess liquidity.
- Non-Interest Income: Commercial book non-interest income surged 10.1% yoy in 1H25, exceeding mid-to-high single-digit guidance. Wealth management fees jumped 30.3% yoy, also ahead of guidance.
- Cost Control: 1H25 cost-to-income ratio at 38.5%, below the low-40% FY25 target.
- Credit Quality: Total allowance of S\$458m (21bp credit cost), including S\$188m in general provisions. These buffers support the 17-20bp specific provisions guidance for FY25.
Capital Returns and Valuation: Attractive Yields and Upside Potential
- Capital Return Initiative: DBS remains committed to its S\$5bn programme for FY25F-27F, including a S\$3bn share buyback and annual capital return of ~S\$0.60/share in various forms.
- Dividends: FY25F sees a capital return dividend of S\$0.60/share (incremental S\$0.15/quarter). Core DPS projected to rise by S\$0.24 p.a. over FY26F-27F if ROE is maintained at 15-17% (1H25: 17%). This yields an attractive 6.2-7.1% for FY25F-27F.
- Target Price: Raised to S\$54.90 (from S\$47.90) on a lower risk-free rate assumption (2.0% vs. 3.0%).
- Re-rating Catalysts: Stronger-than-expected income growth and provisioning write-backs. Downside risks include total income decline and sharp credit deterioration.
| Financial Summary (S\$ millions) |
2023A |
2024A |
2025F |
2026F |
2027F |
| Net Interest Income |
13,642 |
14,424 |
14,642 |
14,681 |
14,768 |
| Total Non-Interest Income |
6,520 |
7,873 |
8,198 |
8,792 |
9,434 |
| Operating Revenue |
20,162 |
22,297 |
22,840 |
23,473 |
24,202 |
| Net Profit |
10,286 |
11,408 |
11,264 |
11,350 |
11,494 |
| Core EPS (S\$) |
3.99 |
4.02 |
3.97 |
4.00 |
4.05 |
| DPS (S\$) |
1.92 |
2.22 |
3.06 |
3.30 |
3.54 |
| Dividend Yield |
3.9% |
4.5% |
6.2% |
6.6% |
7.1% |
| BVPS (S\$) |
23.14 |
23.38 |
24.25 |
24.91 |
25.38 |
| ROE |
18.0% |
18.1% |
16.7% |
16.3% |
16.1% |
DBS Group Key Ratios and Drivers
- Loan Growth: 4.5% forecast for FY25, accelerating to 5.0% in FY27.
- NIM: Forecast steady at 2.1% in FY25-26, slightly tapering to 2.0% in FY27.
- Cost-to-Income Ratio: Improving to 40.0% in FY25, but expected to climb to 42.1% by FY27.
- Credit Cost: Modest at 18bp in FY25-27, reflecting strong asset quality.
- CASA Ratio: 51.8% in FY24, with subsequent years not disclosed.
Sector Comparison: Singapore, Indonesia, Malaysia, and Thailand Banks
Singapore Banks: Steady Returns and Strong Capital Positions
| Bank |
Price (S\$) |
Target Price (S\$) |
Market Cap (US\$ m) |
P/BV (x) 25F |
ROE 25F |
P/E 25F |
Div Yield 25F |
| DBS Group |
49.75 |
54.90 |
109,967 |
2.05 |
16.2% |
10.3 |
6.2% |
| OCBC |
17.09 |
17.20 |
59,840 |
1.30 |
12.6% |
9.1 |
6.1% |
| UOB |
35.81 |
38.60 |
46,312 |
1.16 |
11.5% |
7.2 |
6.9% |
Singapore banks continue to offer attractive yields and robust return on equity, with DBS leading in both size and profitability metrics.
Indonesia Banks: High Growth, Premium Valuations
| Bank |
Price (IDR) |
Target (IDR) |
Market Cap (US\$ m) |
P/BV (x) 25F |
ROE 25F |
P/E 25F |
Div Yield 25F |
| Bank Central Asia |
8,300 |
11,100 |
62,822 |
3.65 |
21.6% |
13.4 |
3.7% |
| Bank Jago |
1,890 |
2,200 |
1,609 |
2.98 |
3.0% |
23.4 |
0.0% |
| Bank Mandiri |
4,680 |
6,500 |
26,819 |
1.47 |
19.5% |
4.4 |
7.8% |
| Bank Rakyat Indonesia |
3,710 |
4,900 |
34,523 |
1.70 |
17.7% |
4.7 |
8.7% |
| Bank Tabungan Negara |
1,115 |
1,250 |
961 |
0.46 |
9.5% |
1.8 |
5.1% |
| Bank Tabungan Pensiunan Nasional Syariah |
1,375 |
1,850 |
650 |
1.02 |
14.0% |
4.1 |
2.5% |
Indonesia’s major banks display strong ROE and high dividend yields, with Bank Central Asia and Bank Mandiri standing out for both profitability and valuation.
Malaysia Banks: Value and Yield at the Forefront
| Bank |
Price (MYR) |
Target (MYR) |
Market Cap (US\$ m) |
P/BV (x) 25F |
ROE 25F |
P/E 25F |
Div Yield 25F |
| Affin Bank |
2.33 |
2.65 |
1,394 |
0.49 |
4.4% |
8.5 |
3.6% |
| Alliance Bank Malaysia |
4.60 |
5.35 |
1,879 |
0.87 |
10.3% |
5.5 |
5.5% |
| AMMB Holdings |
5.20 |
6.65 |
4,061 |
0.80 |
9.6% |
6.3 |
5.9% |
| Bank Islam Malaysia |
2.30 |
2.92 |
1,231 |
0.65 |
7.3% |
4.8 |
6.7% |
| Hong Leong Bank |
19.12 |
30.70 |
9,784 |
1.01 |
11.9% |
10.7 |
4.3% |
| Malayan Banking |
9.63 |
13.00 |
27,464 |
1.17 |
11.0% |
7.5 |
6.7% |
| Public Bank |
4.29 |
5.77 |
19,657 |
1.37 |
12.2% |
8.4 |
5.3% |
| RHB Bank |
6.26 |
7.36 |
6,446 |
0.79 |
9.3% |
5.8 |
7.0% |
Malaysia’s banking sector combines value and high yields, with Malayan Banking and Public Bank remaining investor favourites for stable returns.
Thailand Banks: Moderate Growth, Attractive Yields
| Bank |
Price (THB) |
Target (THB) |
Market Cap (US\$ m) |
P/BV (x) 25F |
ROE 25F |
P/E 25F |
Div Yield 25F |
| Bangkok Bank |
152.5 |
148.0 |
9,001 |
0.50 |
7.4% |
3.3 |
5.9% |
| Kasikornbank |
166.5 |
184.0 |
12,198 |
0.67 |
7.3% |
3.9 |
5.4% |
| Kiatnakin Phatra Bank |
57.00 |
52.00 |
1,459 |
0.74 |
7.4% |
4.5 |
5.0% |
| Krung Thai Bank |
23.50 |
25.00 |
10,156 |
0.71 |
8.0% |
3.9 |
5.5% |
| Muangthai Capital |
38.75 |
54.00 |
2,540 |
1.88 |
17.2% |
6.0 |
0.9% |
| SCB X |
128.5 |
130.0 |
13,379 |
0.87 |
8.3% |
4.5 |
7.6% |
| Srisawad Corporation |
22.70 |
20.50 |
1,166 |
1.00 |
12.1% |
4.5 |
2.2% |
| Tisco Financial Group |
99.75 |
99.00 |
2,470 |
1.81 |
14.7% |
8.0 |
6.9% |
| TMBThanachart Bank |
1.92 |
1.86 |
5,633 |
0.76 |
8.4% |
5.2 |
7.2% |
Thai banks display moderate growth and attractive dividend yields, with select names like SCB X and Tisco Financial Group offering higher yield propositions.
ESG Leadership and Controversy Management at DBS
- ESG Score: DBS achieved a B- ESG Combined Score by LSEG in 2024. Excluding environmental controversies, DBS scored A in FY23 and is among Singapore’s best-in-class.
- Responsible Financing: The bank has advanced its Responsible Financing Standard and targets S\$50bn in sustainable financing by 2024, with a commitment to zero thermal coal exposure by 2039.
- Controversies: Environmental controversies around palm oil financing and deforestation persist. DBS now requires new palm oil clients to comply with No Deforestation, No Peat, and No Exploitation (NDPE) policies. While not yet factored into valuations, prolonged misalignment could become a long-term drag.
- Positive ESG Trajectory: DBS has steadily improved ESG pillar scores since FY16, though its ESG Controversies score dipped to C in FY24 from B in FY20.
Shareholder Structure and Performance Snapshot
- Major Shareholders: Temasek (29.3%), Capital Group (2.5%), Vanguard Group (2.1%).
- Current Price: S\$49.75
- 12-Month Price Performance: 47.8% absolute, 4.4% relative to SIMSCI.
- Average Daily Turnover: S\$201.9m
- Market Cap: S\$141,164m (US\$109,967m)
- Free Float: 70.7%
Conclusion: DBS and Regional Banks – Positioning for Yield, Quality, and ESG Leadership
DBS Group’s strategic management of NIM compression, robust capital returns, and sector-leading ESG standards position it as a top pick in Singapore’s banking sector. Its attractive dividend yield, strong profitability, and commitment to sustainable finance underscore its appeal for income-focused and ESG-conscious investors alike. Meanwhile, sector peers across Singapore, Indonesia, Malaysia, and Thailand each offer unique value and growth drivers, with local market dynamics shaping their outlooks for 2025 and beyond.
