DBS shares vault past S$46 in intraday trading on strong results, capital return dividend plan

SHARES of DBS rose to a historic level after it announced an additional dividend payout for FY2025 on top of its regular dividends, alongside yet another record full-year net profit.

The counter climbed as much as 4.1 per cent or S$1.82 to reach an intraday and all-time high of S$46.50 shortly after market opened on Monday (Feb 10).

It later eased to trade at S$45.60 as at 3.51 pm, up 2.1 per cent or S$0.92, and was the top-traded counter by value with 6.8 million securities worth S$311.3 million transacted.

On Monday, DBS proposed a final dividend of S$0.60 per share for its fourth quarter of 2024, bringing the full-year dividend payout to S$2.22 per share, up 27 per cent on year. The final dividend will be payable on or around Apr 16.

It also announced a capital return dividend of S$0.15 per share to be paid out each quarter over financial year 2025, with expectations to pay out a similar amount of capital in the next two years.

“The board committed to managing down the stock of excess capital over the coming three years,” DBS said in a statement.

This came on the back of strong Q4 results, where net profit rose 11 per cent year on year to S$2.52 billion from S$2.27 billion.

Excluding one-off items – a S$100 million corporate social responsibility commitment to DBS Foundation and other charitable causes – Q4 net profit would have been up 10 per cent at S$2.62 billion.

That brought the bank’s full-year net profit to a new record high of S$11.29 billion, up 12 per cent from the year-ago period.

At a briefing for the lender’s fourth-quarter results on Monday, DBS deputy CEO and CEO designate Tan Su Shan noted that the bank has about S$8 billion in excess capital.

Having committed S$3 billion to a share buyback programme at the bank’s third-quarter results announcement, Tan noted this leaves around S$5 billion in excess capital to distribute.

Assuming the lender pays out a capital return dividend of 15 Singapore cents a share per quarter per year for three years, this will roughly translate to around S$5 billion.

“But we’ve decided to give ourselves some flexibility (for the next two years),” Tan said.

She noted that the lender has already come up with multiple ways to return capital to shareholders, including its normal dividends, special dividends, capital return dividends, share buybacks and bonus issues.

“So we’ll give ourselves some flexibility for the next two years and see what’s optimal depending on the market situation.” 

This also marks the first time the bank’s share price has breached the S$46 mark, after crossing the S$45 mark on Jan 8.

Shares of DBS’ peers rose to record highs as well, with UOB reaching S$38.06 as at 9.14 am, and OCBC hitting S$17.65 as at 9.03 am. As at 3.51 pm, both counters had eased, with UOB up 0.9 per cent or S$0.35 at S$37.73, and OCBC gaining 0.8 per cent or S$0.13 to trade at S$17.46.

Morningstar senior equity analyst Michael Makdad noted that DBS’ loan demand in the fourth quarter was slightly stronger than anticipated.

Other trends remained robust as well, including strong fee income growth driven by wealth management, good cost control, as well as credit costs within 20 basis points of loans.

“The capital return dividend means that DBS will pay more in dividends in 2025 than we (had) forecasted,” said Makdad.

But he cautioned that it remains unclear when the buyback announced last quarter will be completed and, as a result, it remains to be seen whether total shareholder return will be larger than anticipated.