Broker: UOB Kay Hian
Date of Report: Friday, 8 August 2025

DBS Group 2Q25 Results: Dividend Hike, Robust Fee Growth, and Digital Future Shape Outlook

Overview: DBS Delivers Strong 2Q25 Earnings with Further Dividend Upside

DBS Group Holdings, the leading pan-Asian banking group with a significant presence in Singapore and Hong Kong, has reported a solid set of results for the second quarter of 2025. The bank demonstrated resilience in the face of a moderating interest rate environment, leveraging strong performances in wealth management and treasury customer sales to deliver a modest year-on-year profit increase. With a fresh hike in dividends, robust asset quality, and forward-looking digital strategies, DBS continues to position itself as a regional financial powerhouse.

Key Highlights at a Glance

• Net Profit: S\$2,824 million (+1% YoY, -3% QoQ)
• Quarterly Dividend: Raised to 60 S cents, plus 15 S cents capital return (unchanged QoQ)
• Target Price: S\$52.80 (Upside of +6.1%)
• Hold Rating: Maintained
• Market Cap: S\$141.2 billion
• Major Shareholder: Temasek Holdings (29.1%)

Financial Performance: Steady Growth Despite Margin Compression

DBS achieved a net profit of S\$2,824 million in 2Q25, representing a 1% year-on-year increase and outperforming internal forecasts. This performance was underpinned by the following drivers:

• Wealth Management Fees: Surged by 25% YoY, fueled by strong demand for investment products and bancassurance. Net new money reached S\$9 billion in 2Q25, with management confident of sustaining an annual run rate of S\$20 billion.
• Treasury Customer Sales: Rose 16% YoY to S\$653 million, supporting a 9% YoY increase in overall non-interest income to S\$917 million.
• Investment Banking Fees: Exceptional 63% YoY increase.

Net interest income grew by 1.5% YoY as loan growth of 4% YoY was partly offset by a 9 basis point YoY and 7 basis point QoQ decline in net interest margin (NIM) to 2.05%. The margin compression was driven by lower SORA and HIBOR rates, partially cushioned by balance sheet hedging and healthy deposit growth.

Cost Efficiency Remains Strong

Operating expenses rose 5% YoY to S\$2,270 million, mainly due to higher staff costs (+7% YoY from salary increments and bonus accruals). The cost-to-income ratio remained healthy at 39.6%, up slightly from 37.5% in the previous quarter.

Asset Quality and Provisions: Stability Amidst Uncertainty

• NPL Ratio: Improved to 1.0%, down 0.1ppt QoQ, with manageable new NPL formation and higher write-offs.
• Management Overlay: Maintained at a robust S\$2.6 billion for general provisions. A slight write-back of S\$17 million was recorded in the quarter.
• Loan-Loss Coverage: Unchanged at 137%.

Dividend Policy: Shareholder Rewards Set to Increase

DBS’s board declared a quarterly dividend of 60 S cents and a capital return dividend of 15 S cents for 2Q25, maintaining the same payout as 1Q25. Management has stress-tested the impact of raising the quarterly dividend by another 6 S cents to 66 S cents, expressing comfort with a potential dip in CET-1 CAR below 14%, still within its preferred 12.5%–13.5% range.

Guidance and Strategic Outlook for 2025

• Net Interest Income: Expected to be slightly above 2024 levels, with NIM compression balanced by loan growth. Management anticipates two interest rate cuts in 2H25.
• Non-Interest Income: Targeted mid-to-high single-digit growth, driven by double-digit gains in wealth management fees.
• Cost-to-Income Ratio (CIR): Expected in the low-40% range.
• Specific Provisions: Guidance unchanged at 17–20 basis points.
• Pre-tax Profit: Projected to remain flat versus 2024, but net profit will be lower due to the global minimum tax rate of 15%, with a negative impact of S\$400 million.

Balance Sheet Hedging and Interest Rate Sensitivities

DBS’s balance sheet is strategically positioned with net floating rate assets of S\$90 billion (SGD book) and net floating liabilities of S\$40 billion (USD book). The bank benefits from lower USD interest rates and has moderated the NIM decline through hedging and deposit growth. The exit NIM was 1.98% in June and 1.95% in July, with full-year 2025 NIM expected below the 2.05% recorded in 2Q25.

Loan Growth and Sectoral Insights

• Singapore: Loan demand is robust among large corporates, driven by government land sales, the technology sector (notably data centers), logistics, transportation, and renewable energy infrastructure.
• Hong Kong and Mainland China: Loan demand remains muted.

Digital Ambitions: Ready for the Stablecoin Revolution

DBS has developed deep expertise in digital assets since 2021, including issuance, listing, trading, custody, and payments/settlement. The bank is closely monitoring regulatory developments and plans to broaden its digital asset offerings once the regulatory framework is finalized.

Earnings Revision and Valuation

• Earnings Forecast: Raised by 2% for 2025, reflecting strong 2Q25 results and lower expected credit costs in 2H25 due to easing trade tensions. Forecasts for 2026 and 2027 remain largely unchanged.
• Valuation: Target price of S\$52.80, based on 2.14x 2026F P/B, using the Gordon Growth Model (ROE: 15.9%, COE: 8.5%, growth: 2.0%).
• Recommendation: Hold maintained.

Key Financial Tables

Fee Income – Segmental Breakdown (S\$ million)

Allowance for Credit Losses (S\$ million)

Summary: Investment View and Strategic Takeaways

• DBS’s 2Q25 results underscore its strong fee income growth, resilient asset quality, and robust capital position.
• Dividend prospects remain attractive, with management comfortable stepping up payouts further.
• Strategic investments in digital assets and proactive balance sheet management position the bank for long-term competitiveness.
• Guidance for 2025 is cautious but optimistic, balancing expected NIM pressures with continued growth in non-interest income segments.
• The Hold rating is maintained, with a fair value target of S\$52.80 and a projected dividend yield above 6%.