DBS shares reached an all-time high of $54.80 on Oct 7.
This is the second time RHB has hiked its target price for DBS this year; the brokerage had a $51.20 target price on DBS on Feb 10, which it trimmed to $47 on April 21 before raising to $52.80 on Aug 8.
RHB expects DBS to declare a 3QFY2025 interim dividend per share (DPS) of 60 cents and a capital return DPS of 15 cents, which would bring total 9M2025 DPS to $2.25, above $1.62 per share paid out in 9M2024.
“Management had said in a previous briefing that the 24 cents step-up in annual DPS should be sustainable for 2026, and we have reflected this in our FY2026 and FY2027 DPS,” says RHB.
However, RHB has yet to factor in the capital return DPS of 60 cents in its forecast, as it awaits management’s reaffirmation that the earlier mentioned $5 billion excess capital to be distributed as dividends over a three-year period is set to continue.
DBS group CEO Tan Su Shan succeeded Piyush Gupta in March.
Should the capital return DPS go ahead, DBS’s FY2026 DPS would be an “attractive” 6.1%. “Dividend yield spreads over risk-free rates remain attractive, with room to compress.”
Weaker 2H2025 earnings
DBS is likely to release its 3QFY2025 results in early November. RHB thinks 3QFY2025 net interest income (NII) trends could be similar to 2QFY2025, with deposit growth outpacing loans year to date.
Meanwhile, the three-month compounded Singapore Overnight Rate Average (Sora) is down 60 basis points (bps) q-o-q and could pressure net interest margin (NIM), cushioned by hedges DBS had put in place, deposit repricing and a rebound in the Hong Kong Interbank Offered Rate (Hibor).
That said, despite pressure on NIM and loan growth, 9M2025 NII could still chalk up positive growth, on overall asset growth from continued deposit inflows, similar to 1HFY2025.
On non-interest income, wealth fees may stay healthy on improved investor sentiment, albeit partly offset by softer loan-related fees, notes RHB.
“While we think asset quality should generally stay intact, impairment charges could rise sequentially due to a low base in 2QFY2025. On the whole, we continue to expect a softer 2HFY2025 versus 1HFY2025 due to seasonality and the US tariff policy,” they add.
As at 1.31pm, shares in DBS are trading 8 cents higher, or 0.15% up, at $53.99.
