CGSI likes DBS’s stronger wealth management fees among others, while Macquarie hails ‘resilient’ balance sheet
Following the bank’s analyst briefing, CGS International (CGSI) and Macquarie Equity Research have upgraded their calls to “add” and “neutral” from “hold” and “underperform” respectively.
“We turn more constructive on DBS… due to its resilient NII (net interest income) and stronger growth in its wealth management fees,” write CGSI’s Tay Wee Kuang and Lim Siew Khee. During the quarter, group NII fell by 5% y-o-y to $3.49 billion, although deposit growth and hedging mitigated rate headwinds. Group net interest margin (NIM) stood at 1.89%, down from 1.93% in the previous quarter and 2.12% in the quarter the year before.
Tay and Lim are also positive on the bank’s stronger wealth management fees, which stood at a new high of $907 million, 25.3% higher y-o-y and 40.6% up q-o-q. The analysts like that the bank’s efforts to grow their wealth management franchise is “bearing fruit”. “For its wealth management fee, DBS noted that its offerings across the wealth continuum from Treasures, Treasures Private Client, to Private Wealth segregation has supported growth that the bank has observed for both investments in insurance segments.”
DBS’s wealth management segments also saw growth from the bank’s onshore and offshore clients, which is due to “growing wealth accumulation across its operating geographies (i.e. Singapore, Indonesia, Taiwan, Hong Kong and mainland China), and Singapore and Hong Kong’s position as a wealth management hub, according to management”.
In addition to their upgrade, the CGSI analysts have raised their target price to $63.80 from $60, the highest among the houses so far. Their Gordon Growth Model (GGM)-based target price is now based on DBS’s return on tangible equity (ROTE) instead of a long-term ROE assumption, as it “better reflects DBS’s profitability on its assets”. They have also increased their FY2026 - FY2028 earnings per share (EPS) forecasts by 1.1%, 1.2% and 1.3% respectively, to factor in stronger wealth management fee growth that will lead to overall earnings growth for the bank with potential upside on better deposits growth.
Macquarie’s Jayden Vantarakis has also increased his target price to $52.38 from $48.56 previously as the bank’s results came slightly ahead of his expectations. “The key message at the 1QFY2026 results was resilience,” he says. “DBS is comfortable with its strong balance sheet and existing credit provision buffers in place.”
See also: CGSI’s William Tng boldly raises Venture Corporation target to $21.78
In his report, the analyst liked the bank’s strong fee income driven by wealth fees, “resilient” asset quality, an improved outlook for NII thanks to more hedging taken on during the quarter, as well as well-controlled operating expenses (opex).
While DBS is guiding for revenues to remain flat in FY2026 and slightly lower earnings, Vantarakis sees “slight upside”. The analyst has raised his EPS estimates for FY2026 - FY2028 by 3% - 6% driven by a better NII outlook. He expects DBS’s bottom line to remain steady in FY2026 before seeing “modest growth” in FY2027 and FY2028.
To him, points of note include DBS’s belief that artificial intelligence (AI) could still help with productivity, outweighing any potential cyber-security risks posed by Anthropic’s Claude Mythos model. Vantarakis also highlighted DBS’s unchanged capital return plan. The bank paid a capital return dividend of 15 cents per share for the first quarter, similar to the 15 cents paid per quarter through FY2025.
“The bank has utilised [around] $400 million of its $3 billion buyback, noting there are still 1.5 years through the end of FY2027 commitment. Management was unable to commit to moving the unused capital return plan to dividends at this point,” says the analyst.
OCBC remains Vantarakis’ top pick. He has an “outperform” call on the bank.
Dividend yield remains ‘attractive’, says OCBC, while surplus capital could be returned via dividends, says Morningstar
OCBC Investment Research’s Carmen Lee has maintained her “hold” call but with a higher fair value estimate of $60.93 from $59.43 after the bank’s “strong start” to the year.
For more stories about where money flows, click here for Capital Section
The analyst notes that the bank’s wealth business should benefit from the expected inflow of funds into Singapore on the back of the ongoing geopolitical tensions, flight to safety trend and strong Singapore dollar (SGD).
“Together with market expectations of no rate cuts by the US Federal Reserve (US Fed) this year, it should help to mitigate an otherwise challenging situation for banks,” Lee writes.
In her view, DBS’s current dividend yield of 5.7% remains “attractive” and is a “strong price support”. Her higher fair value estimate is based on a book multiple of 2.4 times.
Morningstar Research’s Kathy Chan, who has taken over coverage of the bank, has also raised her fair value estimate to $58 from $50 while keeping her “three-star” rating.
The increase reflects a higher net profit estimate of 4% - 8% for FY2028 - FY2030. Chan’s estimate factors in a higher mid-cycle NIM and long-term cost savings as DBS’s technology and AI investments pay off.
While the bank’s share price appear to be “fairly valued”, Chan’s FY2026 dividend per share estimate of $3.30 implies an attractive dividend yield of 5.6%.
With $2.6 billion left on its buyback programme and slower buybacks from its strong share price performance, Chan believes surplus capital could be returned via dividends by the end of FY2027, if DBS’s share price remains elevated.
The analyst has also maintained her narrow moat rating for the bank as she continues to see a “funding-cost-based advantage underpinned by its large, low-cost, and sticky deposit base in Singapore”.
“We expect this to support midcycle return on equity of 18%, above the cost of equity,” she says. Key factors include management’s higher loan growth guidance of mid- single digits for FY2026, up from last quarter’s estimate of low- single digits. Loan growth is expected to come from sectors such as technology, media, and telecom, the semiconductor supply chain and Singapore real estate.
“DBS expects deposit growth to continue to outpace loan growth in the high single digits, and the excess funding will be redeployed into high-quality liquid assets, which should help support net interest income, albeit with a slight NIM dilutive effect,” says Chan.
Other factors include a steady non-performing loan (NPL) ratio of 1% and low annualised credit cost of 17 basis points. “The bank benefited from the derisking of unsecured consumer and SME (small- and medium-sized enterprise) portfolios in select markets last year and will not prioritise growth in these portfolios given the macrouncertainties this year.”
Finally, the gradual recovery of the Hong Kong property sector is also a plus, as management shared that they have seen more repayments from the sector during the quarter.
Citi Research’s Tan Yong Hong has maintained his “buy” call with an unchanged target price of $63.60 as DBS’s results largely came within expectations. This includes the brokerage’s prediction of DBS’s outperformance thanks to non-interest income and provisions, which should “address market concerns” since 4QFY2025.
Another key investor concern was addressed with DBS’s maintaining its guided NII despite the Singapore overnight rate average (SORA) coming in 25 basis points lower than its previous quarter’s guidance. The maintained NII estimate was mainly thanks to strong deposits growth and hedging opportunities.
With this, Tan remains positive on DBS; he continues to deem the bank as his top pick among the three local names.
As at the mid-day break, shares in DBS are trading 31 cents higher or 0.53% up at $58.81.
