Is This the Best Bank Stock to Own?
DBS Group has delivered another record-breaking financial year in 2024, exceeding market expectations across key financial metrics such as net profit, return on equity (ROE), and net interest income (NII). The bank’s robust balance sheet, disciplined cost structure, and strategic growth plans continue to make it a compelling investment, despite varying analyst recommendations.
Other key financial institutions, including OCBC, UOB, and regional banks in Indonesia, Malaysia, and Thailand, are positioned for moderate to strong growth, each with distinct strategic priorities.
1. DBS Group: Financial and Strategic Highlights
2024 Performance Overview
- Net Profit: Reached SGD 11.4 billion, up 10.9%-11% YoY across various reports.
- Return on Equity (ROE): Strong at 18.0%, among the highest in developed market banks.
- Total Income: Grew 10% YoY to SGD 22.3 billion.
- Net Interest Margin (NIM): 2.15% in FY24, expected to decline slightly in 2025.
- Dividend Yield: Estimated at 6.5%-6.8%, with a new capital return dividend of 15 cents per quarter.
- Loan Growth: 3.5% YoY, with expected acceleration to 4.9%-5.4% in FY25.
- Non-Interest Income: Grew 15% YoY, driven by 41% surge in wealth management fees.
Strategic Growth Priorities
- Wealth Management (WM): Expanded 45% YoY, with 17% growth in AUM; remains a high ROE (~60%) segment.
- Technology Investments: Generative AI (GenAI) is being integrated to enhance customer engagement and reduce costs.
- Geographical Expansion: Looking into Malaysia’s Johor-Singapore Special Economic Zone (JS-SEZ) and possible MYR lending.
- Capital Returns: SGD 3 billion share buyback program; possible EPS uplift of 2%.
- Operational Efficiency: Cost-to-Income Ratio (CIR) at 39.9%-43.5%, benefiting from AI integration.
2. Market Sentiment & Broker Ratings for DBS
| Broker |
Rating |
Target Price (SGD) |
Key Justifications |
| Maybank Research |
BUY |
51.37 |
Strong ROE (15.8%), wealth management expansion, Malaysia growth |
| UOB Kay Hian |
HOLD |
49.80 |
Dividend yield (6.6%-7.1%), Malaysia expansion, leadership transition |
| Lim & Tan Securities |
ACCUMULATE |
Not disclosed |
Capital return policy, high dividends, strong NIM |
| CGS International |
HOLD |
43.00 |
Stable growth but concerns over digital disruptions and asset quality |
Investor Implications
- Positive Factors: High ROE, stable dividends, expansion in Malaysia, growth in wealth management, and capital returns.
- Risks: Slight NIM decline expected (from 2.15% to 2.05% by 2025), higher provisions (specific allowances at 20bp), and uncertainty with the new CEO Tan Su Shan.
3. Peer Comparison: OCBC & UOB
OCBC Bank
- Target Price: SGD 17.70 (5% upside)
- ROE: 14.3% (CY24), declining to 12.8% (CY26)
- Dividend Yield: 4.9% steady
- Outlook: Moderate growth, strong cost efficiency, stable P/B ratio.
UOB
- Target Price: SGD 39.50 (5.5% upside)
- ROE: 13.4% (CY24), improving to 13.0%-12.8% (CY25-26)
- Dividend Yield: 4.9%
- Outlook: Steady regional expansion, digital transformation.
Comparison with DBS
| Bank |
Target Price Upside |
ROE |
Dividend Yield |
| DBS |
Up to 17% (SGD 51.37) |
18.0% (CY24), 15.8% (FY25-27E) |
6.5%-6.8% |
| OCBC |
5% (SGD 17.70) |
14.3%-12.8% (CY24-26F) |
4.9% |
| UOB |
5.5% (SGD 39.50) |
13.4%-12.8% (CY24-26F) |
4.9% |
4. Regional Bank Analysis
Indonesia
| Bank |
Target Price Upside |
ROE |
Dividend Yield |
| Bank Mandiri (BMRI) |
7.5% |
20.7%-20.9% (CY24-26F) |
7.1%-8.5% |
| Bank Rakyat Indonesia (BBRI) |
1.3% |
18.8%-19.4% (CY24-26F) |
8.1%-9.3% |
Malaysia
| Bank |
Target Price Upside |
ROE |
Dividend Yield |
| Malayan Banking (MAY) |
7.6% |
10.5% |
5.9%-6.4% |
| Public Bank (PBK) |
6.1% |
11.9% |
4.5% |
Thailand
| Bank |
Target Price Upside |
ROE |
Dividend Yield |
| Bangkok Bank (BBL) |
7.5% |
8.1%-8.3% |
4.9% |
| SCB X (SCB) |
3.3% |
8.8%-9.4% |
8.9% |
5. Market & Macroeconomic Trends
- Singapore Market: FSSTI Index at 3,861.4, up 0.8% for the day.
- Gold: USD 2,869.0, +9.3% YTD.
- Oil: USD 71.0, up 0.6%.
- Crude Palm Oil: USD 4,504.0, up 2.3%.
- China PMI: Dropped to 50.1, indicating slow manufacturing recovery.
- US Treasury Yields: 10-year forecast at 4.38%, Fed expected to cut rates twice in 2025.
6. Dividend Announcements
| Company |
Dividend Announced |
| DBS Group |
60 cents Q4 dividend (+15 cents capital return) |
| Nam Lee Pressed Metal |
1.5 cents final, 0.5 cents special |
| Parkway Life REIT |
2.38 cents final |
| CapitaLand Ascendas REIT |
7.681 cents final |
| SGX |
9 cents interim |
7. Investment Outlook: DBS Remains a Strong Play
- Bull Case: Target price of SGD 51.37 (Maybank) implies a 17% upside.
- Bear Case: CGS International’s SGD 43.00 target reflects limited growth potential in the near term.
- Dividend Yield (6.5%-7.1%) makes DBS an attractive income stock.
- Malaysia expansion & AI-driven efficiencies could unlock further gains.
Final Investment Stance:
✅ Strong long-term BUY for income-focused investors.
✅ Short-term HOLD for cautious investors awaiting CEO transition clarity.
✅ Slight NIM contraction (2.15% to 2.05%) not a major concern given strong capital returns.
Thank you
