DBS shares drop 1.9% after Q4 profit falls 10%, missing forecast; bank sees dip in 2026 earnings

SINGAPORE - DBS Group, Singapore’s largest bank by assets, missed analysts’ expectations with a 10 per cent year-on-year fall in fourth-quarter net profit as sharply lower interest rates and a stronger Singapore dollar hit loan margins.

Earnings for the three months ended December were $2.26 billion, down from $2.52 billion a year ago, as stronger fee income and treasury customer sales were more than offset by rate headwinds, higher tax expenses and the absence of non-recurring gains recorded a year ago.

Excluding $100 million set aside as part of the bank’s corporate social responsibility commitment, net profit would have been $2.36 billion.

The net profit figure missed the $2.59 billion forecast by analysts in a Bloomberg poll.

DBS shares fell $1.11 or 1.9 per cent to $58.19, with 11.4 million shares traded. The stock is down 2.7 per cent since hitting a record closing high of $59.79 on Jan 29.

Rival OCBC Bank was up 0.7 per cent to $21.38, while UOB rose 0.5 per cent to $38.70.

Looking ahead, DBS expects 2026 net profit to be slightly below 2025 levels, but total income to be around 2025 levels despite rate headwinds.

Group net interest income is expected to be slightly below 2025 levels, as the bank assumes Singapore Overnight Rate Average of 1.25 per cent, two US Federal Reserve rate cuts and a strong Singapore dollar.

But the bank further expects full-year impact of lower rates to be mitigated by deposit growth and to continue to capture hedging opportunities.

DBS chief executive Tan Su Shan said: “While rate pressures and geopolitical tensions are expected to persist, the quality of our franchise and strong balance sheet provide a solid foundation for the year ahead.”

On its fourth-quarter results, DBS said group net interest income declined 4 per cent to $3.59 billion as net interest margin narrowed 22 basis points to 1.93 per cent due to lower interest rates and a stronger Singdollar.

Net interest margin refers to the difference between what banks earn on interest-earning assets, such as loans, and what they pay on interest-bearing liabilities, such as deposits, and it can be squeezed when interest rates fall.

Commercial book net interest income in the quarter fell 6 per cent to $3.59 billion due to lower net interest margins.

Commercial book net fee income grew 14 per cent to $1.1 billion, led by stronger wealth management. Investment banking and loan-related fees were also higher.

Commercial book other non-interest income was $486 million. A 13 per cent increase in treasury customer sales was offset by lower other income, which had included non-recurring gains a year ago.

Markets trading income was down 3 per cent at $154 million.

Speaking at a results briefing on the same day, Ms Tan said that 2025 was a “perfect storm in the macros” in terms of the effects from Singapore and Hong Kong rates going down, a strong Singdollar and tax rates going up.

The bank mitigated against these headwinds with nimble balance sheet management, increasing fixed-rate assets to $210 billion and strong deposit growth, she said.

DBS also saw a recovery in investment banking with the initial public offering market revival in 2025, with Hong Kong and Singapore doing remarkably well, she said.

She credited the strong performance to artificial intelligence and machine learning, which have helped the bank draw new customers, be more customer-centric and automate its nudges to customers.

Ms Tan said that the fourth quarter is a seasonally softer period for banks, and noted that DBS is off to a strong start in 2026, after a strong performance in January.

Asset quality remains sound and general provisions remain sufficient, she added.

Looking ahead, Ms Tan noted that the year would be volatile, with January already marked by heightened geopolitical tensions involving Venezuela and Greenland, as well as events such as elections in Japan and Thailand.

“The good thing about volatility is you get some risk, but you also have opportunities. When markets are very volatile, you can trade, you can be nimble. You can also lock in, hopefully, some good rates when the market falls,” she said.

The bank proposed a final ordinary dividend of 66 cents per share for the fourth quarter, an increase of six cents from the previous payout.

Together with a capital return dividend of 15 cents per share, the total dividend for the quarter is 81 cents.

This brings the total dividend for the year to $3.06 per share, up 38 per cent from the previous year.

DBS plans to continue paying capital return dividends of 15 cents per share per quarter for the financial years of 2026 and 2027, barring unforeseen circumstances.

For the full year, net profit declined 3 per cent to $10.9 billion due to higher tax expenses from the implementation of the 15 per cent global minimum tax.

Pre-tax profit amounted to $13.1 billion, up 1 per cent from a year ago, as total income rose 3 per cent to $22.9 billion despite a challenging rate environment.

Group net interest income of $14.5 billion was modestly higher as the impact of lower Singapore and Hong Kong benchmark interest rates as well as foreign exchange translation from a stronger Singdollar was offset by balance sheet hedging and deposit growth.

Commercial book net interest income shrank 4 per cent to $14.5 billion as net interest margin narrowed 12 basis points to 2.01 per cent.

Commercial book net fee income rose 18 per cent to $4.9 billion, led by wealth management fees, which grew 29 per cent to $2.81 billion from growth in investment products and bancassurance.

Transaction service and loan-related fees also reached record levels, while investment banking fees were higher.

Commercial book other non-interest income was $2.13 billion. Treasury customer sales to wealth and corporate customers grew 14 per cent. The increase was offset by lower other income, which had included non-recurring gains a year ago.

Markets trading income grew 49 per cent to $1.37 billion, thanks to lower funding costs and a more conducive trading environment, said DBS.

DBS is the first Singapore lender to report fourth-quarter earnings. UOB and OCBC are due to announce their results on Feb 24 and 25, respectively.