One such example is the Equity Market Development Programme (EQDP), which is an “important source” of fresh funds. Since its inception, the EQDP has placed $3.95 billion with nine asset managers across two tranches.
They add that the Global Investor Programme (GIP), which they estimate will lead to an average $4 billion in flows per annum in Singapore dollar (SGD) assets over the next five years, should also accentuate the flows into EQDP seeded funds as well as other SGD assets. Weakness in the US dollar (USD) has also helped flows into Singapore.
With these factors in mind, Modi and Tan now expect to see a multi-year period of “significant improvement” in value creation across all three banks and SGX.
DBS to reach $70, may become ‘unjustifiably expensive’
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With DBS and SGX trading close to all-time high P/E multiples, the analysts are recommending investors to remain with the trades as the larger trend has yet to peak or be fully priced in.
In their view, DBS is likely to reach $70 by December 2026. They add that the counter is likely to re-rate to a point where the stock becomes “unjustifiably expensive”.
“The bank is one of the few Asian financial stocks that should be part of global portfolios, in the same way that HDFC Bank, Public Bank, CMB, BCA and CBA have been, to varying degrees, over the last 20 years,” they say.
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They also note that DBS has committed to paying 66 cents per quarter in cash by 4QFY2025 and 72 cents by 4QFY2026, which amounts to 82% of its earnings per share (EPS) for FY2027. The dividend guidance is a “significant commitment that only best-in-class banks can make and deliver”.
The way they see it, DBS is “on track” to generate 207 basis points of common equity tier 1 (CET_1) per annum in FY2025 to FY2027 implying a return on equity (ROE) of 16.1% and risk-weighted assets (RWA) of 4%. The CET-1 could mean more distributions since the stock of CET-1 is high at 15.2% as at September.
Yet, the missing piece is the bank’s “relatively limited” buybacks year-to-date, which the analysts expect to be caught up over the next two years.
As such, the analysts estimate that DBS’s total return will be almost 7.2% and 7.5% in FY2026 and FY2027 in SGD terms and would add a further 50 basis points (bps) to 100 bps in USD terms.
In FY2026 to FY2027, Modi and Tan are also forecasting wealth management (WM) fee growth of 13% and 9% respectively, on top of a “firm” 29% in FY2025 and a compound annual growth rate (CAGR) of 13% in the last five years.
Upgrades for OCBC and UOB
Modi and Tan have also upgraded Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) to “overweight” and “neutral” respectively.
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The upgrades are based more on industry trends as DBS appears “costly” when looked at via a price-to-book (P/B) and ROE lens without factoring in the quality of its franchise and longevity of payout and buybacks.
However, UOB is going through asset quality issues, which may linger, they note. As such, OCBC, which has built a multi-brand financial conglomerate, may offer a relatively better risk/return trade-off for investors looking to increase their positions in Singapore. OCBC’s brands include Wing Hang, Bank of Singapore, Great Eastern Holdings and the Bank of Ningbo.
“We expect the group to generate a 1.13% return on assets (ROA) with 11 times leverage in FY2025, with ROE lagging DBS but better than UOB,” they say. “This track record suggests OCBC is more likely to use excess capital to buy rather than to increase its payout significantly.”
They add that the consensus is for OCBC to move closer to a 60% payout, which they concor with. Once the payout officially increases, Modi and Tan expects the stock to do well before and after the move. Including the consistent wealth management delivery, the analysts believe the bank should see a re-rating.
The bank is also a bright spot given the asset quality risks at UOB and high valuations DBS, which have led investors to look for a growth at a reasonable price (GARP) alternative within the Singapore financials sector.
Meanwhile, the analysts’ upgrade for UOB is almost entirely due to valuations. The bank has lagged its peers on organic and inorganic wealth management fees as well as on USD-denominated payment and deposits. UOB has 26% versus DBS and OCBC’s 38% and 34% as of 1H2025.
“These factors, amongst others, likely led the bank to take too much risk in areas linked to property in Asia and US over the last decade in a bid to generate better returns. Accordingly, we are now witnessing an increase in credit risks,” they write.
To this end, shares in UOB are likely to be “volatile in a wide range” over the next six months as its above-average non-performing loans (NPL) is not likely settled yet.
Yet with an FY2026 P/E of 10.4 times and P/B of 1.13 times with an ROE of 11.6% in FY2026 to FY2027, it is tough to expect the stock “actively to underperform”.
That said, the analysts remain watchful of higher-than-anticipated NPL formation and another year of credit costs from 40 bps to 50 bps, which may lead to negative revisions.
SGX upgraded to ‘overweight’
Modi and Tan have also upgraded Singapore Exchange (SGX) to “overweight”, as the bourse will be a direct beneficiary of the government’s efforts to revive the equity market and increase wealth allocation to Singapore assets.
“Higher IPOs (initial public offerings), regulatory shifts and launch of crypto perpetuals are some examples of initiatives. These should lead to volume strength ($1.6 billion/$1.7 billion/$1.8 billion ADV or average daily value in FY2026 - FY2028) and earnings (8% three-year CAGR),” they write.
SGX has gained by 30% year to date so far, outperforming the 13% registered by the MSCI Singapore Financials Index on 11% EPS revisions. The analysts see a further 6% to 7% upside to the consensus’ EPS estimates.
“Despite guidance of steadily increasing DPS (dividends per share), we see scope for further upside, as the payout is sub-70% on current guidance,” they add. In addition to their upgrade, the analysts have given SGX a higher target price of $18.50.
