DBS shares have pulled back from record highs. Is it a good time to buy?

SINGAPORE – Shares of DBS, Singapore’s largest bank by assets, have been on a rally the past few weeks, hitting as high as $60 in intraday trading on Jan 29.

The shares pared gains on Feb 9, closing down $1.11, or 1.9 per cent, to $58.19, after the bank’s fourth-quarter and full-year 2025 earnings

missed analysts’ expectations

.

On Feb 10, the stock opened at $58 before sliding 0.67 per cent to end the day at $57.80, down from its record closing high of $59.79 on Jan 29.

Analysts said DBS’ attractive dividend yield and commitment to capital return payouts over the next two years could support its share price, though some of them also noted that the shares are currently overvalued.

Share price could go higher

OCBC head of equity research Carmen Lee said DBS’ committed dividend per share of $3.24 and 5.6 per cent dividend yield represent a higher return than most Singdollar investments, including T-bills and Singdollar bonds.

“As liquidity in the market remains healthy, we expect funds to continue to stay invested in DBS to enjoy this strong yield,” she said.

OCBC on Feb 9 had a “hold” rating on DBS and increased its fair value estimate to $59.43, from the previous $55.

Market conditions remain challenging, but DBS’ strong balance sheet should position it well, said Ms Lee.

RHB maintained its “buy” rating on DBS and lifted its price target to $63.50 from the previous $59.

“Fourth-quarter 2025 results broadly met estimates. Looking ahead, management continues to retain its guidance, with profit after tax and minority interests slightly below 2025 levels.

“Amid muted earnings growth, investor focus will likely remain on dividend and capital returns,” an RHB analyst said.

The analyst added that the expected 2026 dividend per share looks “in the bag” while there could be room for management to boost dividends in 2027.

CGS International analysts Tay Wee Kuang and Lim Siew Khee maintained a price target of $60.50 on DBS with a “hold” rating.

The key driver for the underperformance in the fourth quarter of 2025 was weaker-than-expected markets trading income, they noted, but the dividend yield of 5.6 per cent bolsters attractiveness.

There could be room for more shareholders’ return, they added.

“Since communicating its $3 billion share buyback programme in November 2024, DBS has bought back and cancelled only approximately 8.7 million shares worth about $371 million, and we believe the bank will continue to execute on the buyback to enhance shareholders’ return,” said Mr Tay and Ms Lim.

Shares are pricey

While dividends are still attractive, Morningstar associate equity analyst Kathy Chan said DBS’ shares are slightly overvalued, with a 2026 price/book ratio of 2.4 above its 10-year historical average of 1.4.

The financial services firm on Feb 9 raised its fair value estimate for DBS by 4 per cent to $50.

“That said, our 2026 dividend forecast of $3.24 per share continues to imply an attractive dividend yield of 5.6 per cent, which could continue to support the share price,” said Ms Chan.

Morningstar added that strong assets under management and net new money growth will continue to drive wealth management fee growth.

DBS is also mitigating margin pressure by deploying surplus deposits into high-quality liquid assets, said Ms Chan.

Macquarie Group’s head of Asean equity research, Mr Jayden Vantarakis, said DBS’ shares are currently overpriced.

Macquarie now has a 12-month price target of $48.67 on DBS, after reducing 3 per cent from its previous $50 price target.

The firm maintained an “underperform” rating on the back of the profit miss, as well as flat revenue and slightly lower profit guided for 2026.

“We had viewed fourth-quarter 2025 consensus expectations as leaving little margin of safety, and alongside DBS’ premium valuation, we see limited room for further re-rating,” Mr Vantarakis said in a Feb 9 report.

“A high dividend yield underpins the shares, but we maintain ‘underperform’ due to subdued earnings outlook and limited scope for consensus upgrades.”

DBS proposed a final ordinary dividend of 66 cents per share for the fourth quarter, up six cents from the previous payout.

Including a capital return dividend of 15 cents per share, the total dividend for the quarter amounts to 81 cents.

This lifts the full-year dividend to $3.06 per share, representing a 38 per cent increase year on year.

DBS also said it intends to maintain capital return dividends of 15 cents per share each quarter in the 2026 and 2027 financial years, subject to unforeseen circumstances.

Fourth-quarter net profit was $2.26 billion, down 10 per cent from $2.52 billion a year ago, mainly because of a lower net interest margin (NIM). The figure missed the $2.59 billion forecast by analysts in a Bloomberg poll.

NIM narrowed 22 basis points to 1.93 per cent due to lower interest rates and a stronger Singdollar.

NIM – the difference between what banks earn on interest-earning assets and what they pay on interest-bearing assets – can be squeezed as interest rates fall.

Net profit for 2025, which also missed analysts’ forecast of $11.27 billion, fell 3 per cent to $10.9 billion due to higher tax expenses from the implementation of the 15 per cent global minimum tax rate.