In 2026, the bank says it expects its total income to be largely unchanged y-o-y. It also expects its commercial book non-interest income to grow in the high single digits. Cost-income ratio is expected to be in the low 40s, while specific provisions are assumed to be within 17 basis points (bps) to 20 bps.
In the previous quarter, DBS guided that its 2026 net profit was expected to be “slightly below” 2025’s levels. This was absent in this quarter’s announcement.
“It’s a more nuanced guidance that we’re giving for this quarter,” explains CFO Chng Sok Hui. “Things may still pan out, but as far as we can see, it's actually turned slightly more positive than the last guidance.”
“Therefore, we have a good shot at getting close to 2025’s levels,” she adds.
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This year, the bank is estimating the Singapore overnight rate average (Sora) to come in at 1%, down from 1.25% in the last quarter. Instead of two Fed rate cuts as previously predicted, DBS is now forecasting zero rate cuts to happen.
In the 1QFY2026, DBS’s average Sora stood at 1.07%, down from 2.54% in 1QFY2025 and 1.19% in 4QFY2025. Accordingly, group net interest margin (NIM) fell to 1.89%, down from 2.12% last year and 1.93% the quarter before.
With the year-end Sora guided at 1%, the bank’s sensitivity is at $11 million per basis point pricing for Singapore dollars (SGD) and minus $4 million per basis point for US dollars (USD).
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Mitigating its declining NIM and net interest income is the bank’s non-interest income, particularly its wealth management arm.
The bank’s wealth arm is also in “growth mode”, says Shee Tse Koon, group executive and group head of consumer banking and wealth management. “We do see a huge potential… There is a rapid growth of wealth within Asia and we are also still seeing wealth flowing into Asia.”
“For that reason, Asia has become a really very credible place for wealth management. So, we’re hiring on all fronts across all three segments, [DBS] Treasures, Treasures Private Client and Private Bank.”
As at March 31, the bank’s assets under management (AUM) stood at $492 billion, up 17% y-o-y and 1% q-o-q, with net new money of $10 billion.
‘Limited exposure’ to Middle East
Ongoing conflict in the Middle East remains a source of uncertainty, though DBS maintains that its exposure is limited.
“We have very limited Middle East exposure and our new NPA (non-performing assets) formation was at the low end,” says Tan.
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NPA formation at the end of the 1QFY2026 fell to $4.72 billion, down from $4.84 billion in the 4QFY2025 and $4.86 billion in the corresponding period the year before. New NPAs stood at $127 million, a marked decline from new NPAs of $751 million in the 4QFY2025 and $159 million in 1QFY2025.
“I think we’ve been very prudent,” she adds. “Sok Hui mentioned our GP (general provision) reserves at $3.9 billion, our GP overlay at $2.4 billion. We have stress tested the Middle East conflict over and over again, stress tested all at 120, 200 fx (foreign exchange) rates down for [the] [Indian] rupee, [Indonesian] rupiah… whilst we are watchful, our GP reserves are ample to cover any unexpected scenarios ahead of us.”
Keeping a careful watch on India and Indonesia
For now, Tan says DBS is keeping a careful watch on countries such as India and Indonesia. In particular, India has been left hard hit by the shock in energy prices due to the ongoing war in Iran. A blockade at the Strait of Hormuz, which sees about 20% of the world’s oil and energy flows passing through it, has sent the price of Brent crude surging past US$120 ($154) per barrel.
“Indeed, India being a net importer of oil, we are watchful over some of the vulnerable borrowers. We have watchlisted all the ones that we think are vulnerable. It’s not much. The additional watchlist is very, very small right now because in India, our main book is to the large corporates, MNCs (multi-national corporations), and the top corporates in India who are multinationals.”
In addition, DBS is now running stress tests on the volatility of the Indian rupee and the Indonesian rupiah. “That’s why we have been fairly conservative there,” Tan says, adding that DBS has reduced its credit card and unsecured loan exposures in India, Indonesia as well as a small part of China.
At DBS’s last quarterly earnings briefing held on Feb 9, Tan told the media that she was not particularly concerned about the credit quality of the bank’s books in Indonesia. “Our books in Indonesia are pretty focused around the large quality blue chip names,” says Tan.
Back in January, MSCI had raised concerns over Indonesia’s limited market transparency. A month later, Moody’s downgraded Indonesia’s credit outlook to negative from stable, citing concerns over the country’s corporate governance. The downgrades resulted in a $101 billion rout in the Indonesian stock market.
“What you see in terms of the market volatility leads to the market, whereas we lend to the operating company generating the cash flows so that they do not affect the market,” DBS’s group head of institutional banking, Han Kwee Juan told reporters on Feb 9.
Optimistic on Greater China
In terms of growth areas, Tan says DBS is optimistic on the Greater China region which includes China, Hong Kong and Taiwan. “China’s standing out now in terms of the lack of volatility.”
While most countries have been scrambling to shore up their energy supplies due to the energy shock caused by tensions in the Middle East, China has remained particularly resilient in the face of these uncertainties. This is mainly because the country has been diversifying its energy mix to include alternatives such as hydropower, solar, wind, and nuclear energy.
“What are the growth cylinders of China? It’s science and technology. It’s EVs (electric vehicles). It’s batteries. It’s AI for logistics, AI for healthcare,” Tan says of China’s growth potential.
Even though China’s large language models may not be as valued as highly as the US ones, Tan says the country’s strong focus on research as well as talent development in fields such as robotics could help to bridge the gap.
To be sure, China’s growth prospects is not all that rosy. The country’s unemployment rate for urban youths aged 16 to 24 rose to 16.9% in March, up from 16.1% in February. On March 5, Chinese Premier Li Qiang announced that China would be setting an economic growth target of between 4.5% to 5%, down from 5% in the previous year. This marks the first time China has reduced its GDP target since 2023.
“In the meantime, we are not really in the SME (small- and medium-sized enterprises) or unsecured business [in China]. The customer confidence there is still a little bit muted but we see green shoots,” Tan says, adding that there will be a trend toward the internationalisation of the renminbi and its use as a funding currency and a currency for trade settlements.
Aside from China, DBS is bullish on Hong Kong and Taiwan. Hong Kong, Tan says, has been seeing a strong recovery in both its residential and central commercial properties. “Taiwan is obviously going gangbusters,” she adds.
According to data compiled by Bloomberg, Taiwan’s stock market overtook the United Kingdom’s in terms of market capitalisation size after it rose to US$4.14 trillion on April 15, ahead of the UK’s $4.09 trillion. A large part of that gain comes from the massive gains logged by Taiwan Semiconductor Manufacturing Co (TSMC). TSMC shares are up by nearly 30% year to date and the chip giant makes up 40% of the entire Taiwan stock market. Taiwan’s prosperity has been a boon for DBS’s wealth management business, Tan says.
“Taiwan is creating wealth. The GDP growth is so strong. The whole semiconductor industry and the spillover of the supply chain, the mid-cap SME guys are also growing their wealth. The stock market’s been great so there’s a lot of organic growth to capture.”
