Introduction

DBS Group, Southeast Asia’s largest bank by assets and a leader in wealth management, commercial banking, and corporate loans, has demonstrated strong financial performance in FY24. The latest report by Maybank Research highlights the bank’s strategic priorities under its new CEO, financial metrics, and a detailed investment outlook. With a recommendation to BUY and a target price of SGD 51.37, DBS Group continues to attract investor interest.

Key Financial Highlights

DBS Group delivered robust earnings in FY24, exceeding expectations set by Maybank Investment Banking Group (MIBG) and the market. The bank’s net profit reached SGD 11,408 million, representing a 10.9% year-on-year growth. This performance was supported by a 10.6% rise in operating income to SGD 22,297 million. Key metrics include:

• Net Interest Margin (NIM): Reported at 2.15% in FY24, a modest improvement from 2.13% in FY23, driven by higher commercial book repricing.
• Return on Equity (ROE): Sustainable ROE is forecasted to average 15.8% in FY25-27E, up from 12% average in the past decade.
• Cost-to-Income Ratio (CIR): CIR averaged 39.9% in FY24, highlighting operational efficiencies driven by investments in AI and technology.
• Gross Loans: Loans grew 3.5% year-over-year in FY24, driven by non-trade corporate loans and trade loans.
• Deposits: Deposits increased by 5.0% year-over-year, supported by fixed deposit growth in 1H24 and CASA inflows in 2H24.
• Dividend Yield: FY25-27E dividends are projected to expand at a compound annual growth rate (CAGR) of 7%, delivering yields exceeding 6.5%.

Strategic Priorities Under New Leadership

The incoming CEO has outlined a clear focus on high ROE segments such as wealth management (WM), transaction banking, and commercial banking. Wealth management, which expanded 45% year-on-year in FY24 with assets under management (AUM) growing 17%, remains a key driver with an estimated ROE of ~60%. Investments in client relationship managers (RMs) and leveraging the group’s platform capabilities are expected to further accelerate growth.

Additionally, the CEO has prioritized operational efficiencies by integrating generative AI (GenAI) across routine tasks, enhancing customer interactions while improving productivity. This is expected to reduce the CIR to an average of 41.7% in upcoming years.

Geographical Expansion and Growth Opportunities

DBS Group is exploring significant client opportunities in Malaysia, particularly in the Johor-Singapore Special Economic Zone (JS-SEZ). The management has expressed interest in gaining Malaysian Ringgit (MYR) lending capabilities to enhance its footprint beyond wholesale banking. This strategic expansion is anticipated to unlock new growth synergies in the region.

Capital Returns Policy

DBS Group remains committed to delivering value to its shareholders through attractive capital returns. In addition to dividend growth, the bank has announced SGD 3 billion in share buybacks, which, if cancelled, could uplift earnings per share (EPS) by approximately 2%. The bank’s capital adequacy remains robust with a CET1 ratio of 17.0% in FY24, providing a strong buffer for future growth and shareholder returns.

Detailed Financial Metrics and Forecasts

DBS Group’s financial metrics reflect its operational strength and strategic direction:

• Operating Income: Projected to grow steadily from SGD 23,040 million in FY25 to SGD 24,962 million in FY27.
• Loan Growth: Expected to accelerate to 5.4% year-on-year in FY25, supported by strong credit pipelines.
• Net Profit: Core net profit is forecasted at SGD 11,144 million in FY25, with a gradual increase to SGD 11,694 million by FY27.
• Gross Non-Performing Loans (NPLs): Marginal increase anticipated to 1.2% by FY26 due to a high-rate environment.
• Credit Charges: Predicted to stabilize at 13 basis points in FY25 before increasing to 18 basis points by FY27.
• Net Interest Margin: Expected to decline slightly to 1.92% in FY25 as funding costs rise and interest rate cuts take effect.

Risks and Swing Factors

While DBS Group’s outlook remains positive, potential risks include increased asset quality concerns from a slower recovery in China, disruptions to digital infrastructure, and strategic uncertainties during the CEO transition. However, upside factors such as a stronger China reopening, wealth management inflows, and a larger Malaysian footprint could significantly enhance performance.