Established in 1968 and headquartered in Singapore, DBS Group Holdings is an investment holding company. It operates through its subsidiary, DBS Bank, which is engaged in commercial banking and financial services, principally in Asia, serving 18.2 million customers globally as of FY23. These customers include both institutional and consumer banking clients.

DBS segments comprise Institutional Banking, contributing 46% of total income as of FY23, Consumer Banking/Wealth Management 45%, Treasury Markets 4%, and Others 5%. It is the largest bank in Singapore and Southeast Asia, with over 280 branches throughout the region and employing 40,119 people.

Geographically, Singapore emerged as a key contributor with 66% of total income, followed by Hong Kong at 16%. South and Southeast Asia contributed7%, the Rest of Greater China 6%, and the remainder was contributed by others.

Resilient financial performance

Net Interest Income achieved a robust CAGR of 8.7% over the last five years, increasing from SGD8.9bn in FY18 to SGD13.6bn in FY23. This growth was driven by an increase in total income from the commercial book, a 9% rebound in net income from higher fees related to cards and wealth management, and a surge in treasury customer sales. Additionally, the group's net interest margin expanded by 30 bps from 1.85% in FY18 to 2.15% in FY23. During this period, net income performed even better, growing at a CAGR of 12.5% from SGD5.6bn in FY18 to SGD 10.0bn in FY23.

Furthermore, DBS experienced a steady growth in loans, which grew at CAGR of 3.8%, increasing from SGD345.0bn in FY18 to SGD416.2bn in FY23. The company also achieved a robust deposit growth with a CAGR of 6.3%. In terms of asset quality, its NPLs improved from 1.5% in FY18 to 1.1% in FY23, underscoring its commitment to maintain healthy balance sheet.

Comparing with regional peers, Sumitomo Mitsui, achieved a five-year NII CAGR of 8.3%, while Mitsubishi UFJ grew at a CAGR of 2.5% over the same period.In terms of asset quality, Sumitomo Mitsui’s NPLs increased slightly from 1.0% in FY18 to 1.04% in FY24, while Mitsubishi UFJ’s improved from 1.24% in FY18 to 1.04% in FY24.

Maximizing shareholder value

DBS’s strong performance has enabled the company to consistently pay dividends over the last five years. Recently, in third quarter 2024, DBS announced an interim dividend of SDG0.54 per share, implying an annualised dividend yield of 5.25% and a payout ratio of 58%. Additionally, analysts project a dividend of SDG2.65 per share in FY26, implying an impressive dividend yield of 6.0% on current prices.

Furthermore, DBS has launched a SGD3bn share buyback program, reflecting its strong commitment to shareholders. These initiatives is expected to boost the company’s EPS and enhances ROE.

Positive guidance

As the company looks ahead to FY25, management is confidently projecting NII to remain consistent with 2024 levels. While it anticipates a slight decline in the group NIM, this will be balanced by robust loan growth. Furthermore, non-interest income from the commercial book is expected to experience high single-digit growth, fueled by an increase in wealth management fees and treasury customer sales. DBS expects net profit to see a slight dip due to the introduction of a 15% minimum global tax. Overall, DBS is positioned for steady progress and continued success.

Strong share price gains

Despite market volatility, the stock has posted a robust 50% return over the last 12 months. It is currently trading at a P/B multiple of 1.89x, which is higher than its five-year average and the global average of 1.4x. At the current level, DBS is trading higher than its regional peers, Sumitomo Mitsui at 1.01x and Mitsubishi UFJ at 1.12x.

Analysts estimates an average dividend yields of over 5.5% for the next three years. Out of the 18 analysts covering the stock, six have a “Buy” rating and three have given an “Outperform” rating, with an average target price of SGD45.86, translating to an upside potential of 5%.

DBS has a strong market presence in Southeast Asia and boasts an impressive operational track record. With a diversified portfolio in terms of products and regions served, along with an impressive dividend yield, the company is well-positioned for both medium and long term. However, market risks—particularly those arising from interest rate changes and foreign exchange fluctuations—could impact operational performance. Additionally, economic downturns may negatively affect the loan growth, especially given the geographical spread of DBS's operations.