OCBC Investment Research analyst Carmen Lee has raised her target price on DBS Group Holdings to $50 after the bank reported record earnings of $11.4 billion for the FY2024 ended Dec 31, 2024, 11% higher y-o-y. The bank’s net profit for the 4QFY2024 grew by 10% y-o-y but fell by 13% q-o-q to $2.62 billion. DBS’s return on equity (ROE) remained high at 18%.
Fee income for the year crossed the $4 billion mark for the first time while wealth management income grew by 45% y-o-y to $2.2 billion in FY2024. Assets under management (AUM) surged by 17% y-o-y to $426 billion as at the end of the year.
The bank’s 4QFY2024 performance was “healthy” with total income up by 10% y-o-y. Loan growth was led by non-trade corporate loans and lower deposit costs from rate cuts and current account savings account (CASA) inflows.
Shares in DBS already surpassed Lee’s previous target price of $43.60 since December 2024 with some days closing above the $44 mark. The analyst has retained her “buy” call as DBS’s FY2024 results came within her expectations, although it came in slightly short of market expectations.
In addition to the bank’s stellar results, investors had reason to cheer for the bank announced a higher final dividend of 60 cents in the 4QFY2024, higher than 54 cents previously, bringing DBS’s total dividend for the full year to $2.22.
DBS also announced that it will start a capital return programme of 15 cents per share per quarter to be paid out in FY2025. It also committed to pay out a similar amount of the capital in the subsequent two years although incoming CEO Tan Su Shan said, at the results briefing, that the bank wanted flexibility in ways to give back to its shareholders.
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As such, Lee expects that DBS will pay a total dividend of $3 in FY2025, representing an estimated dividend yield of 6% to 7%, which is higher than most Singapore income-yielding assets, she notes. The total yearly dividend assumes that the bank’s quarterly dividend remains steady at 60 cents as well as its capital return of 15 cents per share per quarter.
To this end, the analyst believes DBS will enjoy “strong [share] price support” thanks to its strong dividend yield along with its $3 billion share buyback programme.
“Management is guiding for net interest income to be slightly above FY2024 levels based on two rate cuts in 2H2025,” she writes. “More cross-selling and higher value products will also boost wealth management income. Cost income ratio is guided to be in the low-40% range. It is guiding for pre-tax profit to be around FY2024 levels, but net profit to be below FY2024 levels due to global minimum tax of 15%.”
She adds that DBS should do well amid a “more resilient” Asia in spite of the challenging external environment with more tariffs and likely policy changes from other major economies.
Lee’s new target price still gives DBS an attractive dividend yield estimate of 6%.
As at 4.59pm, shares in DBS are trading 66 cents higher or 1.48% up at $45.34.
