Broker Name: Maybank Research Pte Ltd
Date of Report: August 7, 2025
DBS Group: Scale Champion Poised for Sustainable Growth, Dividend Upside, and AI Leadership
Introduction: DBS Group’s Strategic Edge in Southeast Asia Banking
DBS Group, Southeast Asia’s largest bank by assets, has delivered robust results for 2Q25, outperforming market expectations with growth across all major business lines. Maybank Research Pte Ltd has upgraded DBS to a BUY with a revised target price of SGD56.15, reflecting both its operational excellence and promising outlook for capital returns, technology, and market share.
Key Highlights: Strong Execution and Resilience
- 2Q25 core-earnings outperformed expectations
- Above-market growth in net interest income (NII), fees, and treasury income
- Wealth management and private banking assets under management (AUM) continue to expand
- AI and digital assets initiatives driving competitive advantage
- Operational assumptions for FY25-27E earnings raised by 5-11%
- Clear capital return strategy with increased dividend visibility
Financial Snapshot and Performance Metrics
| Key Metrics |
FY23A |
FY24A |
FY25E |
FY26E |
FY27E |
| Operating income (SGDm) |
20,162 |
22,297 |
23,239 |
23,486 |
24,996 |
| Pre-provision profit (SGDm) |
12,089 |
13,402 |
14,014 |
13,803 |
14,829 |
| Core net profit (SGDm) |
10,286 |
11,408 |
11,331 |
11,058 |
11,903 |
| Core EPS (SGD) |
3.6 |
4.0 |
4.0 |
3.9 |
4.2 |
| Net DPS (SGD) |
1.9 |
2.2 |
3.1 |
3.3 |
3.6 |
| Net dividend yield (%) |
6.3 |
5.1 |
6.2 |
6.7 |
7.2 |
| Book value (SGD) |
21.88 |
24.17 |
25.08 |
25.63 |
26.22 |
| ROAE (%) |
18.0 |
18.1 |
16.7 |
15.8 |
16.7 |
| ROAA (%) |
1.4 |
1.5 |
1.3 |
1.3 |
1.3 |
2Q25 Results: Growth Engines and Operational Leverage
- Net Interest Income: Up 1.5% YoY to SGD3,648m, supported by active balance sheet hedging and strong deposit growth. NIM fell less than peers due to effective interest rate hedges and a 2-3 year book duration.
- Non-Interest Income: Rose 10.4% YoY to SGD2,084m, driven by wealth management and trading income. Wealth management AUM hit a record SGD442m.
- Treasury Income: Surged 42% YoY, reflecting market volatility resilience.
- Asset Quality: Gross NPL ratio improved to 1.0%, with limited stress and strong provision coverage.
- Deposits: Increased 4.2% YoY to SGD573,965m, with CASA ratio at 52% due to strong retail inflows.
- Loan Growth: Net loans expanded 1.9% YoY, with growth in Singapore corporate, TMT, and renewable energy sectors.
Technology Leadership: AI and Digital Assets Driving Competitive Advantages
- AI Deployment: Enhanced predictive models capture larger money flows and track maturing investments, aiding deposit and AUM growth above peer trends.
- Digital Assets: Early investments position DBS as a leading player in CBDC and asset tokens. P&L impact from digital assets has increased threefold year-to-date vs. FY24.
- Resilience: Technology adoption is expected to drive ongoing revenue opportunities and cost savings.
Capital Returns: Enhanced Dividend Visibility and Clarity
- DBS management indicates capacity to raise base dividends by at least SGD0.06 per quarter in 4Q25 and 4Q26.
- Ongoing capital returns program maintained through FY27E, providing yield clarity and shareholder value.
- Multi-stage Dividend Discount Model rolled forward to FY26E with a lower cost of equity (COE 9.3%, cut by 50bps for reduced market risk, 3% terminal growth), resulting in increased target price to SGD56.15.
Operational Assumptions and Key Changes
| Assumption |
2025E Old |
2025E New |
% Change |
2026E Old |
2026E New |
% Change |
2027E Old |
2027E New |
% Change |
| Net Interest Income (SGDm) |
14,607 |
14,829 |
+2% |
14,368 |
14,834 |
+3% |
15,359 |
15,853 |
+3% |
| Non-interest income (SGDm) |
8,058 |
8,410 |
+4% |
8,529 |
8,652 |
+1% |
9,174 |
9,142 |
0% |
| Total Income (SGDm) |
22,665 |
23,239 |
+3% |
22,896 |
23,486 |
+3% |
24,533 |
24,996 |
+2% |
| Core-Net Profit (SGDm) |
10,843 |
11,331 |
+5% |
9,996 |
11,058 |
+11% |
10,962 |
11,903 |
+9% |
| NIM (%) |
1.89 |
1.92 |
+3bps |
1.79 |
1.85 |
+6bps |
1.86 |
1.92 |
+6bps |
Value Proposition: DBS Group’s Market Position and Strategic Direction
- Dominant Bank: Over 50% market share of SGD CASA deposits, strong USD funding via Hong Kong operations.
- Commercial Banking Focus: Refocused on commercial banking after mixed results from universal bank transformation pre-GFC.
- Regional Expansion: Growing footprint in South Asia, notably India and Indonesia.
- Technology Adoption: Early mover in automation and digitalization, unlocking new revenue streams and efficiencies.
- Loan and Deposit Mix: Balanced between low-cost CASA and other sources, providing resilience and flexibility.
Financial Metrics and Swing Factors
- NIM Outlook: Net interest margins expected to fall by 8bps YoY in 2025E and 2bps in 2024 due to policy rate declines.
- Asset Quality Risks: US trade war could marginally increase NPLs to 1.2% by 2025E; credit charges forecast to rise to 20bps in 2025E, peaking at 22bps in 2026E.
- Structural ROE: Core-ROE forecast to average 15.9% in 2025-27E, structurally higher than the past decade.
- CET-1 Ratio: Maintained at healthy levels, reinforcing capital adequacy and resilience.
Upside Factors:
- Stronger China re-opening could stimulate loan demand and fee income.
- AI-driven efficiencies may reduce costs and boost revenues.
- Expansion in Malaysia presents potential synergies.
Downside Factors:
- Escalation in US trade war or tariffs poses macro risks.
- Slower recovery in China and SME pressure may impact asset quality.
- Large M&A in regional markets could introduce integration and execution challenges.
Detailed Assumptions for 2025-2027
- Loan Growth: Expected at 3-5% annually, with both consumer and corporate segments contributing.
- Deposit Growth: Forecast at 4% annually, with CASA deposits set to grow 4-21% depending on market conditions.
- Net Interest Margin: Projected at 1.92% (2025E), 1.85% (2026E), and 1.92% (2027E).
- Cost-to-Income Ratio: Stable at 39.7%-41.2% range.
- Dividend Payout: Rising to 62-72% of core profits.
- Asset Quality: Gross NPL ratio forecast at 1.2-1.3%, with provision coverage between 117-129%.
- Capital Adequacy: CET1 ratio expected to remain robust at 15.3-17.6%.
Historical Recommendations and Target Price Trajectory
- Consistent BUY ratings since 2022, with the target price steadily climbing from SGD38.3 (Aug 2022) to SGD56.2 (Aug 2025).
- Reflects confidence in DBS’s growth, execution, and capital management strategies.
Conclusion: DBS Group’s Investment Case – Scale, Execution, and Innovation
DBS stands out as Southeast Asia’s banking scale champion, leveraging technology, operational excellence, and robust capital management to deliver sustained growth and resilient returns. With clear dividend visibility, ongoing digital transformation, and a strong balance sheet, DBS offers investors an attractive risk-reward proposition amidst ongoing market volatility and macroeconomic uncertainty.
Contact Information
Maybank Research Pte Ltd, Singapore
50 North Canal Road, Singapore 059304
Tel: (65) 6336 9090
For further research coverage and inquiries, refer to the full list of research contacts at Maybank Research offices across Malaysia, Singapore, London, Hong Kong, Indonesia, India, Philippines, Thailand, and Vietnam.
