At the most basic level, the dividend per share for DBS this year is expected to be $3.24, based on the 81 cents distributed in 1QFY2026, comprising an ordinary dividend of 66 cents and a capital return of 15 cents.
A second input is the cost of equity, or the return an investor expects for the risk of owning the stock. The third is dividend growth.
The cost of equity depends on three factors: the risk-free rate, the stock’s beta, and the equity risk premium (the market rate of return minus the risk-free rate). In Singapore, the risk-free rate is currently around 2.2%.
On this point, Thilan Wickramasinghe, head of research at Maybank Securities Singapore, argues that Singapore’s market warrants a much lower cost of equity in today’s fragmented multi-polar world than it did in the previous era of global stability.
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“I think the markets are shrinking the cost of equity for Singapore. If you look at long-run rates of 10-15 years, Singapore was an irrelevant market. Therefore, the risk premium discovery for Singapore was not very accurate. In a world where it was unipolar, rules-based, where supply chains were devised to be perfect, you didn’t need a place like Singapore,” he says on the sidelines of Maybank’s recent Invest Asean conference.
Investors would have headed for more exciting places, where positive factors could drive valuations higher and where the cost of equity was lower, such as Korea, China or the US.
“In this current world, we are reverting to the mean. Except for the last 70 years, the default setting is conflict. Then, the artificial compression of the cost of equity for some of these growth markets has to come off because they cannot operate in the same space and the same way ever again. But a market like Singapore, where you have policy certainty and fiscal certainty, is very rare. Plus, it’s happening at a time when there are multiple growth engines domestically also revving up,” says Wickramasinghe.
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He adds that in the year to April, non-domestic deposits are 60% higher than all the non-domestic deposits that came into Singapore in 2021. “That stability is something the world is paying a premium for.”
Wickramasinghe uses a 3% growth rate for the banks. “If I look at SGX (Singapore Exchange), or most Singapore-only corporates, terminal growth is 1%, but I have 3% for the Singapore banks, because they have more Asean and are plugged into North Asia.”
When asked if a Singapore stock can make three figures, Wickramasinghe says "three figures is a bit of a stretch"
How DBS gets to $100
Using a cost of equity of 9.3%, the average used by market watchers and analysts, a dividend of $3.24 and a growth rate of 3% values DBS at $55. However, if DBS’s cost of equity drops to nearer 6%, its valuation rises to $108.
Similarly, the justified valuation multiple for P/B uses the ratio of ROE less growth to cost of equity less growth. Although DBS’s ROE in 1Q2026 was 16.2%, DBS’s management is looking at an average of 17% over the cycle.
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A high ROE provides a buffer for a high growth assumption. This is why analysts are comfortable raising the terminal growth rate for DBS compared to other corporates, since DBS is able to maintain ROEs well above its cost of equity.
Terminal growth refers to how much dividends are able to grow, and ROE is the company’s profitability to sustain such growth. Based on an ROE of 17%, a cost of equity of 6%, and a growth rate of 3%, DBS’s valuation works out at around $113.
When asked whether any Singapore stock can hit three figures, that is $100 and higher, Wickramasinghe adds. “I think it is a long way to go. Three figures is a bit of a stretch, but if you look at the bull market in the early 2000s, the banks traded close to three times book.”
What the analysts say
Jaydan Vantarakis, banking analyst at Macquarie, has upgraded his outlook and recommendations for the local banks. He is expecting a 4% y-o-y growth in pre-provision operating profit (PPOP) and net profit, with non-interest income materially higher y-o-y.
“We are 3%-4% ahead of Visible Alpha consensus, led primarily by fee income (6% ahead). The macro backdrop has improved relative to end-1Q2026, and there is scope for credit charges to be at the lower end of guidance, though we do not expect writebacks yet,” Vantarakis writes in his report.
On July 3, Bloomberg Intelligence said: “Banks in Singapore, from DBS to HSBC and Standard Chartered, are poised for healthy lending through 2H2026 after total loans rose 10.5% y-o-y in May, beating estimates, according to Monetary Authority of Singapore data. The potential for new business opportunities as supply chains shift has been the primary driver, helping offset a likely moderation in consumer borrowing.”
Vantarakis’ preference is for UOB, followed by OCBC and then DBS. He has also revised his growth upwards in his valuation models to 2.5%-3% from 1%.
Citigroup Research released a report on July 6, lifting the banks’ target prices on net interest income upgrades from higher loan growth and net interest margin forecasts. This was partly triggered by news of loan growth for May.
Citi has buys on DBS and OCBC, and is neutral on UOB. “We expect earnings growth of 10% in FY2027 and FY2028 on loan growth recovery, which should support better NIMs and non-wealth non-interest income.”
In 2024 and 2025, banks reported mainly flat earnings as asset growth and wealth-related income were offset by falling rates, Citi adds. “With system loans growing ahead of deposits, higher loan-to-deposit ratios could support Sora, especially if the Casa ratio falls,” Citi says. It prefers DBS for dividend visibility and as an Asia wealth proxy. It sees OCBC positioning for growth and ROE catch-up while watching UOB on wealth and loans growth.
Citi has a target price of $73.50 for DBS, based on a price-to-book forecast in FY2027 of 2.85 times, sustainable ROE of 18.3% and terminal growth rates of 5.5%.
OCBC’s target price of $28.40 (up from $24.50) is based on a price-to-book of 1.9 times with a sustainable ROE of 13.1% and long-term growth rates of 6.5%.
For UOB, Citi has a price target of $41.50 based on a price-to-book of 1.3 times with sustainable ROE of 12.2% and long-term growth rates of 6.2%.
UOB is CLSA’s preferred pick among the banks. “The stock has lagged peers due to asset quality concerns and weaker wealth momentum. Asset quality pressures appear contained, with an improving macro backdrop supportive of further credit normalisation, while management is stepping up efforts to strengthen its wealth proposition, including a faster rollout of products in 2H2026. UOB’s CET1 is already robust and could strengthen further through potential divestments, creating scope for additional capital returns. With Singapore peers trading at demanding valuations, we see room for UOB’s valuation discount to narrow as management delivers on its strategic priorities.”
Wickramasinghe likes OCBC in particular. “I think OCBC is just getting its running shoes on. The CEO is ex-DBS, so he understands the ingredients that are required to grow a bank. He’s also very numbers-focused. OCBC has a franchise where they’ve got insurance, asset management and a private bank. One thing that Helen did well was to start the integration process with One OCBC before she left,” he adds.
He believes that the new CEO, Tan Teck Long, has the ability and the levers to bring the whole organisation together. The AI avatars may look like a gimmick, but they are not, says Wickramasinghe, referring to Wendy and Wayne, the AI-native financial adviser avatars launched by OCBC Bank through its new OCBC WoW (Whole-of-Wealth) mobile app.
“What you’re trying to do is to widen that wealth continuum to a broader market segment as possible without actually driving up your costs. AI can do that. Having those avatars to handle some of the mundane wealth stuff actually brings about efficiency,” Wickramasinghe says. “AI has grown up, so OCBC can scale those technologies. Plus, they’ve got a strong capital position, and they have seen what has worked, what the street rewards, which is returning capital and delivering ROE.”
How does the retired bank CEO see the banks’ valuations? “I think they can be 40% higher, but the risk is the price-to-book levels.”
The higher valuations would be supported by lower cost of equity and higher dividend growth in the Gordon Growth model and sustained higher ROEs, lower cost of equity and higher terminal growth in the justified valuation multiple of P/B. However, based on their current multiples, price-to-book ratios look somewhat rich.
As of March 31, DBS’s book value was $24.38, OCBC’s was $13.82, and UOB’s was $28.79.
