DBS (SGX:D05) missed both our and the street’s expectations with 4Q25 net profit of S$2.36b, down 10% y-o-y. This was largely due to lower interest income and higher tax expenses.
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Asset quality remained sound.
Despite the below market performance, DBS’s overall asset quality remained sound. While the group has downgraded a previously watchlisted real estate exposure (with the main one being a company in Hong Kong), its NPL ratio stayed stable at 1.0%.
For FY25, specific allowances amounted to S$854m or 19 bps of loans. Allowance coverage stood at 130% (total allowance reserves as a % of non-performing assets) and 197% (total allowance reserves as a % of unsecured non-performing assets).
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Commitment to share buyback and dividend payout.
While the group has not conducted any share buybacks exercises recently, the last one being in May 2025 at an average price of S$46.18, management remains committed to this programme. Together with the results, it declared a total dividend per share of 81 Singapore cents for 4Q25, up from 75 Singapore cents in 3Q25. This brought full year FY25 DBS's dividends payout to S$3.06 per share versus S$2.22 in the previous year.
The group is committed to continue its capital return dividend of 15 Singapore cents per quarter for FY26 and FY27. At the 4Q25 dividend 66 Singapore cents and rolling forward into FY26, this works out to a total dividend of S$3.24 or an attractive dividend yield of 5.5% at current DBS's share price level.
Market conditions remain challenging, but its strong balance sheet should position it well.
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Above is an excerpt from a report by OCBC Group Research. Clients of OCBC Securities may be the first to access the full PDF report @ https://www.iocbc.com/.
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