Lim & Tan Securities
7 August 2025

DBS Outperforms Peers: In-Depth Analysis of Singapore’s Top Banks, Market Trends, and Dividend Leaders

Market Overview: Robust Gains Across Key Indices

• FSSTI closed at 4,227.7, up 0.5% for the day, 1.3% month-to-date, and 11.6% year-to-date.
• Other major indices also posted positive moves: Dow Jones at 44,193.1 (+0.2% YTD 3.9%), S&P 500 at 6,345.1 (+0.7% YTD 7.9%), and NASDAQ at 21,169.4 (+1.2% YTD 9.6%).
• Commodities saw mixed performances with Gold stable at 3,368.1 (+28.3% YTD) and Crude Oil at 64.4 (-10.3% YTD).
• Baltic Dry Index surged 92.7% YTD, signaling robust shipping demand.
• Key interest rates: 3-Month SGD SORA at 1.8, SG 10-Year Bond Yield at 2.0%, and US 10-Year Bond Yield at 4.2%.

Top Stock Pick: DBS Group Delivers Robust Results

DBS Group Holdings (\$48.85, up 0.60) delivered a net profit of SGD 2.82 billion for Q2 2025, up 1% year-on-year and surpassing market expectations despite macroeconomic headwinds including declining SORA and Hibor rates, currency volatility, and the 15% global minimum tax.

• Total income rose 5% to SGD 5.73 billion, driven by strong deposit growth and proactive balance sheet hedging.
• Fee income and treasury customer sales reached their second-highest quarterly levels, while markets trading performance was the best in four years.
• Cost-income ratio held steady at 40%. Profit before tax rose 5% to SGD 3.39 billion.
• For H1 2025, total income and profit before tax hit record highs of SGD 11.6 billion and SGD 6.83 billion, respectively.
• Net profit for the half was SGD 5.72 billion, largely unchanged due to higher tax expenses. Return on equity (ROE) was an impressive 17.0%; return on tangible equity was 18.8%.
• Asset quality remained resilient: non-performing loan (NPL) ratio at 1.0%, specific allowances at 15 basis points for Q2 and 12 basis points for H1.

Key Segment Highlights:

• Commercial book net interest income was 1% lower at SGD 7.34 billion due to a 19bps fall in net interest margin to 2.61%, offset by balance sheet growth.
• Loans grew by 3% (SGD 12 billion), deposits by 5% (SGD 29 billion) in constant currency terms.
• Net fee income surged 17% to a record SGD 2.44 billion, led by a 30% rise in wealth management fees (SGD 1.37 billion).
• Loan-related fees and investment banking fees also hit record highs.
• Markets trading income leapt 80% to SGD 781 million, aided by a favorable trading environment.
• Expenses increased 5% to SGD 4.48 billion, cost-income ratio stable at 39%.

Dividends:

• Ordinary dividend of SGD 0.60 per share and a Capital Return dividend of SGD 0.15 per share for Q2.
• First-half dividend totals: SGD 1.20 per share (ordinary) and SGD 0.30 per share (capital return).

CEO Tan Su Shan: “We delivered a strong set of results for the first half despite the challenging environment. Our ability to manage the balance sheet nimbly, grow deposits and capture market opportunities helped offset the external pressures. Net interest income, fee income and treasury customer sales reached record levels, while markets trading performance was the strongest in four years.”

• DBS remains the “Top Alpha Pick” in the banking sector, outperforming peers with a normalized yield of 5–6% (including capital return), trading at 12x Forward PE and 2x price to book. Consensus target price: \$50.

UOB: Steady Results Amid Headwinds

UOB (\$36.45, up 8 cents) reported an operating profit of SGD 4.0 billion for H1 2025, up 3% YoY, underpinned by double-digit fee income growth. However, net profit fell 3% to SGD 2.8 billion due to pre-emptive general allowances for macroeconomic uncertainty.

• Declared interim dividend of SGD 0.85 per share (50% payout ratio), plus a special dividend of SGD 0.50 per share as part of its capital distribution package.
• Net interest income was stable YoY, with loan growth offsetting margin compression.
• Net fee income up 11%, driven by strength in wealth management, loan-related, and credit card segments.
• Other non-interest income grew 1%, aided by treasury flows, but offset by softer trading and liquidity management.
• Cost-to-income ratio improved to 43.5% from 44.4%.
• NPL ratio steady at 1.6%; credit costs at 34bps due to higher allowances.

Wholesale Banking:

• Profit before tax declined 12%, impacted by lower rates and increased competition.
• Investment banking delivered record fees; customer-related treasury income saw double-digit growth.
• Transaction banking remained a key contributor, making up nearly half of wholesale banking income.
• Trade loans up 12% YoY; cross-border income stable at 26% of total, underpinned by regional connectivity.

Retail Banking:

• Profit before tax rose 11% to SGD 1.1 billion, with growth in CASA, wealth, and card business offsetting income pressure from lower rates and competition.
• Retail deposits surpassed SGD 200 billion for the first time.
• Wealth management income up 15%; net new high net worth AUM inflows at SGD 3 billion in Q2 2025.
• Credit card income up 5%, supported by double-digit billings growth.

Balance Sheet:

• NPL ratio at 1.6%; NPA coverage at 88% (209% with collateral); performing loan coverage at 0.8%.
• CET1 Capital Adequacy Ratio at 15.3%; average liquidity coverage ratio at 141%, net stable funding ratio at 118%.

CEO Wee Ee Cheong: “The Group delivered a steady set of results driven by our core businesses, including robust fee growth. Asset quality was resilient, and our balance sheet remained strong, underpinned by healthy capital and liquidity.”

• UOB trades at 10.3x forward PE and 1.2x PB, dividend yield 4.7% (5.3% with special dividends), consensus target price S\$38.27 (5% upside).
• Q2 net profit of \$1.34 billion, below analyst estimates, down 6% YoY. Lower rates expected to remain a headwind. Rating downgraded to HOLD.

Sector Comparison: DBS Maintains Edge Over OCBC and UOB

• Among Singapore’s three major banks, DBS was the only one to beat expectations, thanks to proactive balance sheet management.
• OCBC and UOB both missed consensus due to weaker-than-expected net interest income.
• DBS’s superior yield and capital return continues to make it the top sector pick, while OCBC and UOB are now rated as HOLD.

Dividend Leaders and Value Picks

Key Shareholder & Insider Activity

• Significant acquisitions included Addvalue Tech, Sanli Environmental Eng, Indofood Agri Resources, Singapore Shipping Corp, Old Chang Kee, Asian Pay TV Trust, and Chasen Holdings.
• Major disposals: Sanli Environment, iFast Corp, Hoe Leong Corp, Comfort Delgro.
• Notable share buybacks: HK Land, Medinex, Global Investment Limited, Olam, Keppel Ltd, OCBC, Zheneng Jinjiang Holding, FNN, Unusual, Raffles Medical, SIA Engineering, OUE Ltd, DBS, ST Engineering, The Hour Glass.

Institutional and Retail Fund Flows

Week of 28 July 2025:

• Institutional investors net sold S\$494.6 million after a net buy of S\$335.4 million the week prior.
• Retail investors net bought S\$380.8 million, a reversal from a net sell of S\$159.6 million the previous week.

Top Institutional Net Buys: iFast Corporation, Yangzijiang Shipbuilding, City Developments, Frasers Centrepoint Trust, Venture Corporation, Yangzijiang Financial, Jardine Cycle & Carriage, Haw Par, UOL, Mapletree Pan Asia Commercial Trust.

Top Institutional Net Sells: DBS, SIA, OCBC, UOB, Singtel, Keppel, ST Engineering, SingPost, ComfortDelGro, CapitaLand Integrated Commercial Trust.

Top Retail Net Buys: SIA, DBS, OCBC, UOB, Singtel, SingPost, ComfortDelGro, Genting Singapore, Mapletree Logistics Trust, Seatrium.

Top Retail Net Sells: iFast Corporation, Keppel, Venture Corporation, City Developments, Yangzijiang Financial, Keppel REIT, Yangzijiang Shipbuilding, UOL, SGX, Haw Par.

Upcoming Dividends and Special Distributions

SGX Watch-List: Companies Under Scrutiny

32 companies are currently under the SGX Watch-List, including new additions such as Addvalue Technologies, Renaissance United, Telechoice, Tiong Seng Holdings, Global Invacom Group, Green Build Technology, Keong Hong, and Camsing Healthcare.

Macro Insights: US, China, and Tech Focus

• US core goods inflation is rising in tariff-exposed sectors, though vehicle price declines are offsetting this. Further inflation in goods is expected as tariff-related price hikes filter through.
• Core services inflation is trending down, with a slowing labor market expected to limit broader inflation pressures. US strategists expect two Fed cuts this year and recommend a long duration stance.
• Risk assets face negative convexity. The market expects no recession, but labor softening or inflation reacceleration could hit earnings and valuations. Defensive asset allocation is recommended over 12 months.
• In China and Hong Kong, the AI revolution initiated by ChatGPT has led to explosive development and investment, but industry leaders warn that most current AI applications may fade within the next decade. Developers are urged to innovate beyond chatbots to drive the next phase of AI growth.

Conclusion: Positioning for Opportunity in a Shifting Landscape

DBS’s outperformance amidst challenging macro conditions highlights the importance of proactive balance sheet management and diversified income streams. UOB and OCBC face near-term headwinds from lower net interest margins, but attractive dividend yields and strong capital positions provide downside support. Investors should monitor sector rotation, dividend leaders, and upcoming ex-dividend dates to optimize portfolio returns as Singapore’s financial markets continue to evolve.