In separate reports released Nov 7, RHB analysts raised their target price for DBS to $59 from $57.10 and lowered their target price for UOB to $36.10 from $38.80.
RHB was no doubt charmed by DBS’s FY2026 outlook, which came alongside a commitment to continue with its 15-cent per quarter capital return dividend per share (DPS) until end-2027; RHB analysts had not factored this into their forecasts beyond the current FY2025.
DBS previously committed to a total capital return of $8 billion, of which $3 billion has been allocated for share buybacks over two to three years. To date, DBS has used up almost 12% for the share buyback programme. The balance of $5 billion will be distributed via dividends.
DBS declared a total payout of 75 cents per share for 3QFY2025 ended Sept 30, comprising an ordinary dividend of 60 cents and a capital return dividend of 15 cents.
The bank also said a 6-cent step-up dividend is likely to be proposed in 4QFY2025 and will be implemented in FY2026. This effectively means that FY2026 dividends will comprise a normal dividend of 60 cents per quarter; a capital return dividend of 15 cents per quarter till end-2027; and a step-up dividend of 6 cents per quarter.
This translates to a total of 81 cents per quarter in FY2026, or full-year DPS growth of 6% and FY2026 yield of 6%.
However, DBS said it was too early to commit to the 24-cent step-up in absolute annual ordinary DPS beyond FY2026.
RHB also points to how DBS’s 3QFY2025 results beat estimates on robust non-interest income (non-II) performance.
DBS posted earnings of $2.95 billion for 3QFY2025, up 5% q-o-q but down 2% y-o-y.
Net interest margin (NIM) pressure was the main dampener, leading to net interest income (NII) declining 2%q-o-q and 1% y-o-y. Otherwise, DBS posted a solid set of results, notes RHB.
DBS’s non-II rose 13% q-o-q and 9% y-o-y, with wealth management fees up 23% q-o-q and 31% y-o-y on improved investor sentiment. Treasury customer sales reached a new high while markets trading income was higher amid a more conducive trading environment, according to management.
UOB’s weaker earnings
Meanwhile, RHB analysts have trimmed their target price on UOB’s earnings miss.
UOB reported 3QFY2025 net profit of $443 million, down 67% q-o-q and down 72% y-o-y. This brings 9MFY2025 earnings to $3.3 billion, down 28% y-o-y and at just 58% of both RHB’s and consensus’ estimates.
See also: DBS to raise dividends to 81 cents per quarter; UOB commits to 50% payout
UOB’s credit costs jumped to 134 basis points (bps) in 3QFY2025 due to a $615 million pre-emptive general provision (GP) as it accelerated the build-up of its GP coverage, and higher specific provisions (SP) due to mark-downs in the valuation of commercial real estate collaterals.
UOB’s FY2026 outlook suggests a modest backdrop ahead, says RHB, amid low-single-digit loans growth, some NIM squeeze due to two US Federal Funds Rate cuts in 2026 and high single- to double-digit fee growth.
That said, FY2026 earnings “should see a decent rebound”, says RHB, as UOB is comfortable with the provision buffers built up and guided for total credit cost of 25 to 30 bps in FY2026.
“It thinks its commercial real estate collateral valuations have been sufficiently marked down, and noted improving liquidity for these assets,” notes RHB.
UOB guided for FY2025 ordinary dividend payout of 50%. Going forward, it is retaining its 50% ordinary dividend payout and remains committed to its $2 billion share buyback programme, which is 24% completed.
RHB notes that UOB has no plans for any further excess capital returns. This, along with the earnings miss and lower DPS trajectory due to weaker earnings, is keeping RHB “neutral” on the bank’s stock for now.
DBS closed 56 cents lower, or 1.01% down, at $54.98 on Nov 7, while UOB closed 4 cents lower, or 0.12% down, at $33.86.
