‘Pricey’ DBS can still be worth buying 

[SINGAPORE] DBS Group’s share price rallied strongly in 2025 – up nearly 29 per cent. The bank’s share price performance contributed to the almost 23 per cent rise in the benchmark Straits Times Index (STI) last year.

In comparison, the Dow Jones Index in the US rose by 13 per cent last year.

The share price of Singapore’s largest listed group by market capitalisation has risen further in the year to date albeit it retreated after the group posted its full-year results for 2025 on the morning of Feb 9. DBS’ Q4 2025 net profit fell 10 per cent year on year, and missed the consensus forecast in a Bloomberg survey of six analysts.

Should investors buy shares in South-east Asia’s largest bank when its share price is high? Possibly.

Local market proxy

One, DBS may be a good proxy for investors who seek exposure to Singapore equities.

The city state’s stocks can be attractive to investors who want to diversify from US investments, whether due to eroding confidence in the US dollar or longer-term concerns over the superpower’s economic fundamentals.  

For one thing, the Singapore dollar is a strong currency, which could strengthen against many currencies given the Republic’s fiscal strength and political stability.

Also, the efforts to revitalise the local equities market, such as allocating funds to asset managers under the S$5 billion Equity Market Development Programme, can help catalyse growing investor interest from institutional and retail investors in the local bourse. 

Add to that, the local share market might draw more investor interest as its stronger performance translates to more people making money from investing in Singapore-listed equities. 

Investors wanting to raise capital allocation to Singapore stocks, including new family offices that are established here, could plump for DBS given its size, track record, trading liquidity, financial strength and growth prospects.

Strength of Singapore banks

Two, Singapore banks may be a relatively safe place for investors to park their money.

After all, stock prices of US technology giants could face a sharp correction should investors worry over whether artificial intelligence’s (AI) growth will spur explosive profit rises at tech giants.

Sure, when interest rates are not rising, net interest margins of banks will not expand. And slower global economic growth because of rising trade protectionism can hurt loan growth of banks.

Still, South-east Asia could offer relatively strong economic growth prospects, and Singapore is well- positioned as a wealth management hub. These drivers can support rising profitability of local banks.

In recent years, DBS has generally outperformed its peers OCBC and UOB on various metrics including return on equity (ROE). For 2025, DBS’ ROE exceeded 16 per cent. If DBS continues to consistently achieve higher ROE than its peers, it can generate superior total shareholder returns, which is a combination of change in stock price and dividends paid, compared with OCBC and UOB over the long run.

Decent dividends

Three, DBS’ track record in paying dividends that grow over time is solid. The group’s board of directors acts proactively to reward shareholders when the bank does well.

In each of the first three quarters of 2025, the bank paid an interim dividend of S$0.60 per share as well as a capital-return dividend of S$0.15 per share. DBS’ board of directors recommended a final dividend of S$0.66 per share for 2025 and a capital-return dividend of S$0.15 per share for Q4 2025.

Setting aside the capital-return dividend, assuming the bank pays dividend per share of S$0.66 per quarter or S$2.64 per annum, the dividend yield is 4 per cent even if the share price rises to hit S$66. 

In short, DBS offers an attractive dividend yield compared with the typical net yield from buying a home here, the cut-off yield on Singapore six-month treasury bills and interest earned from Singapore dollar fixed deposits.

Furthermore, investors who expect DBS to continue increasing its ordinary dividends regularly may be vindicated.

Leading position

Four, DBS’ size, robust financial performance and strong share price combine to give it a powerful competitive edge.

The bank is well-placed to invest more in technology and AI. Such investments could in turn yield huge benefits in areas ranging from risk management to customer service. 

For one thing, leading in digitalisation matters as individual and corporate customers increasingly rely on robust digital tools for financial transactions.

The bank is also well-positioned as an employer of choice. It should be able to draw top young talent and invest in them as well as retain existing strong performers and attract seasoned professionals.

In its history, DBS has made acquisitions to bulk up and achieve strategic objectives. Backed by a strong share price, DBS is well-armed to make acquisitions, whether to strengthen its geographic reach or grow its penetration in wealth management or other areas.

Resilience to shocks

Five, Singapore’s banking system and local banks including DBS could be relatively resilient if and when the next global financial crisis occurs.

After years of abundant liquidity and rising leverage, the global financial system may be vulnerable to a sharp adjustment. And it could be hard getting a coordinated global response to a major financial crisis given strained US-China ties and weak multilateral institutions. 

Nonetheless, Singapore might be able to leverage relationships which it has assiduously cultivated with major powers and regional partners to help it mitigate global crises. 

In addition, Singapore has a well-regulated financial system as well as a top-notch central bank and integrated financial regulator in the Monetary Authority of Singapore. 

DBS has a well-diversified loan portfolio, a strong liquidity position, resilient asset quality and prudent allowance reserves.

As at end-2025, the reported common equity tier-1 ratio was 17 per cent based on transitional arrangements, while the pro-forma ratio on a fully phased-in basis was 15 per cent. The leverage ratio was at 6.2 per cent, over twice the regulatory minimum of 3 per cent.

Certainly, Singapore banks including DBS are not immune to nasty shocks arising from global rebalancing in the financial system. Still, with their strong capital positions and an effective regulator, local banks should be fairly resilient amid global financial upheavals.

DBS’ leadership transition from Piyush Gupta to Tan Su Shan, with the latter becoming chief executive office in late March 2025, has appeared to be a smooth one. Under Tan’s leadership, DBS’ share price continues to power ahead. 

Investors may regret not buying DBS’ shares much earlier. Still, there are good reasons driving DBS’ strong share price performance. Ultimately, a high share price should not deter investors from buying DBS shares. 

The writer owns shares in DBS