Overview of DBS Group Holdings

DBS Group Holdings, a leading pan-Asian banking group with a robust presence in Singapore and Hong Kong, continues to solidify its foothold across other key regions including India, Indonesia, Taiwan, and China. With a market capitalization of S\$128.9 billion, the group remains a significant player in the financial sector, offering a blend of traditional banking services and innovative financial solutions.

Q4 2024 Financial Performance

DBS reported a net profit of S\$3,522 million for Q4 2024, reflecting an 11% year-on-year increase. This impressive performance was driven by an uptick in net interest margin (NIM), a 41% surge in wealth management fees, and a 40% rise in markets trading income. Despite these gains, the quarterly performance saw a 17% decline compared to the previous quarter.

Key Financial Metrics

• Net interest income rose by 8.6% year-on-year, supported by a 2 basis point (bp) improvement in NIM to 2.15%.
• Fees and commissions increased by 12% year-on-year, with wealth management fees surging 41% due to brisk sales in investment and bancassurance products.
• Non-interest income grew by 15% year-on-year, buoyed by treasury customer sales and a property disposal gain.
• Total income for Q4 2024 stood at S\$5,505 million, marking a 9.9% year-on-year growth.

Operational Highlights

DBS demonstrated robust operational efficiency with a cost-to-income ratio (CIR) at 43.5% for Q4 2024. Operating expenses increased by 9% year-on-year, partly attributed to the integration of Citi Taiwan, which accounted for 3 percentage points of the increase. Staff costs rose by 8%, and the bank allocated S\$100 million towards its Corporate Social Responsibility (CSR) commitments.

Asset Quality

• Non-performing loans (NPLs) rose by 4% quarter-on-quarter, with the NPL ratio inching up to 1.1%.
• Specific provisions increased to 20 basis points, while a general allowance of S\$20 million was written back.
• The management overlay for general provisions was maintained at S\$2.4 billion.

Capital Adequacy and Returns

DBS reported a high Common Equity Tier-1 (CET-1) capital adequacy ratio of 17.0% as of December 2024, based on transitional arrangements. The fully phased-in CET-1 ratio was 15.1%. The bank achieved an impressive return on equity (ROE) of 18.0% for 2024, underscoring its strong capital position.

Capital Returns and Dividend Policy

The DBS Board approved a quarterly dividend increase of 6 Singapore cents to 60 Singapore cents for Q4 2024. Additionally, a Capital Return Dividend of 15 Singapore cents per quarter will be distributed over 2025, with similar payouts expected for 2026 and 2027. This reflects the bank’s commitment to returning excess capital to shareholders.

2025 Guidance and Strategy

Management has provided optimistic guidance for 2025, anticipating:

• Net interest income to slightly exceed 2024 levels, despite a projected slight compression in NIM to 2.10%.
• High single-digit growth in non-interest income, driven by wealth management and treasury customer sales.
• Cost-to-income ratio to remain in the low-40% range.
• Specific provisions between 17-20 basis points.

With a focus on leadership renewal under new CEO Tan Su Shan, DBS aims to emphasize humility, hunger, and agility. The bank plans to expand its high-ROE businesses, including wealth management, and leverage generative AI to optimize operating expenses.

Potential Expansion into Malaysia

DBS is exploring various options for expansion into Malaysia, including the possibility of establishing a new bank to support growth in Johor and the Johor-Singapore Special Economic Zone. However, challenges remain due to the competitive banking landscape with over 10 incumbent banks.

Earnings Revisions and Valuation

UOB Kay Hian has raised its earnings forecast for DBS in 2025 by 4%, reflecting a steadier NIM of 2.05% (previously 1.97%) and higher non-interest income. The target price for DBS has been set at S\$49.80, based on a 2.07x 2025F P/B ratio using the Gordon Growth Model. Despite the downgrade to a “HOLD” recommendation, the bank offers an attractive dividend yield of 6.6% for 2025.

Key Financial Projections