DBS Group Holdings' share price hit a new record of $55.55 after it reported better-than-expected 3QFY2025 earnings. A new commitment to increase its already generous dividend payout for the coming FY2026 sent the bank's market cap above $157 billion.
In the coming year, DBS plans to increase its quarterly ordinary dividend payout by 6 cents to 66 cents, which means an additional 24 cents for FY2026. In addition, there's 15 cents per share to be paid in capital return dividend, which has been committed up to FY2027, which works out to 81 cents per quarter.
"We will get it approved at the AGM in March 2026, and then it will actually flow through," says CFO Chng Sok Hui at the bank's results briefing.
Based on DBS’s current full-year dividend of $3, comprising 60 cents ordinary dividend and 15 cents capital return per quarter, the dividend yield works out at 5.4%.
“We’ve always said that we had $8 billion of excess stock of capital to return. We remain committed to returning that," says CEO Tan Su Shan at the same briefing.
Of this $8 billion, $3 billion has been allocated to share buybacks and thus far, 12% of that amount spent.
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"Our philosophy is to buy when the market is bad," says Tan.
Year to date, DBS's share price is up by more than a quarter, helping to lift the Straits Times Index to a record level.
The remaining $5 billion is to be paid back to shareholders in the form of capital returns and dividends.
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"We've got many different things in our toolbox to pay our shareholders back. You've got your normal dividend, you've got the step-up dividend, capital returns dividend, and the share buyback and based on that, we intend to keep to that $8 billion commitment,” says Tan.
Earlier in the day, the bank reported earnings of $2.95 billion for its 3QFY2025, a slight dip of 2% y-o-y, but up 5% q-o-q. This showing beat expectations of $2.786 billion.
As expected, the bank is starting to feel the impact of lower rates, but was able to offset this industry-wide trend with hedging and strong deposit growth.
In 3QFY2025, its commercial book net interest income was down by 6% y-o-y.
Total income was up 3% y-o-y in the same period to a record $5.9 billion, led by fee income and treasury customer sales. The growth was helped by market trading income, which surged by 33%.
For this quarter, DBS plans to pay a total 3QFY2025 dividend of 75 cents per share, comprising 60 cents in ordinary dividend and 15 cents in the form of capital return dividend.
“We delivered a strong set of results for the third quarter with record pre-tax profit and ROE above 17%," says CEO Tan.
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"Total income reached a new high as we sustained the strong momentum in wealth management and deposit growth while mitigating external rate pressures through proactive balance sheet hedging.
"As we enter the coming year, we will continue to navigate the pressures of declining interest rates with nimble balance sheet management and our ability to capture structural opportunities across wealth management and institutional banking," she adds.
Tan expects total income to be around 2025 levels despite rate headwinds but net interest income is seen to be slightly below 2025.
This guidance is based on Sora held at current levels, three Fed rate cuts and also a Singdollar that is appreciating further.
Tan maintains that the full-year impact of lower rates will be mitigated by deposit growth.
DBS expects its commercial book non-interest income growth to be high-single digits and to achieve mid-teens growth in wealth management
