Extraordinary climb for DBS with flurry of upgrades after share price hit $50

SINGAPORE – DBS Bank shares continued their bull run on Aug 8 to close at a record high on the back of a flurry of analyst upgrades sparked by the bank’s stellar latest earnings.

The stock, which crossed $50 for the first time ever on Aug 7, hit $50.98 in morning trade before closing at $50.74, up 2 per cent.

That puts the shares 15 per cent ahead since Jan 1, with a striking 50 per cent gain in the past 12 months.

The catalyst for the surge came on Aug 7 when DBS reported a 1 per cent rise in second-quarter net profit to $2.82 billion, beating the $2.77 billion average estimate compiled by LSEG. Total income rose 5 per cent to $5.73 billion.

DBS chief executive Tan Su Shan said the strong results were delivered amid a challenging environment, but she still sees opportunities ahead.

“Our proactive management of the balance sheet puts us in a good position to navigate the interest rate cycle, while strong capital and liquidity ensure we are well placed to support customers,” Ms Tan noted.

The board declared an ordinary dividend of 60 cents a share for the quarter and a capital return dividend of 15 cents a share.

US investment bank Goldman Sachs noted that the results demonstrated “steady performance across operation lines despite lower rates and a highly volatile market environment in the second quarter, which showcases the bank’s strong franchise and effective management”.

Another key focus for analysts was DBS’ capability to sustain the 24 cents annual step-up in core dividend per share (DPS) for 2025 and 2026 despite lower interest rates.

Goldman Sachs is keeping its buy call on DBS, and has revised the 12-month target price from $54.50 to $57.20.

Citi also likes the DBS management’s commitment to returning $8 billion of excess capital.

The plan involves returning capital through a $3 billion share buyback and $5 billion through additional DPS or the equivalent from 2025 to 2027. 

Citi is raising its target price on DBS from $48.85 to $56.50, despite the latter trading at a significantly higher price-to-book multiple compared with rivals OCBC Bank and UOB.

The optimism is underpinned by the bank’s earnings resilience, cost efficiency, high return on equity (ROE) of 17 per cent and dividend growth.

ROE measures how efficient the bank is at generating profit from money investors have put into the business.

HSBC Global Investment Research, which has raised the target price on DBS from $51 to $55, also noted the bank’s resilient earnings, return of excess capital and dividend yield.

However, it is keeping its “hold” rating, adding: “While we recognise DBS’ multiple areas of strength such as in wealth and capital return, we think a lot of the positives are already priced in.”

J.P. Morgan’s equity analysts are holding a “neutral” rating on DBS, and a target price of $48 by June 2026.

It said DBS has been rewarding shareholders with steadily higher dividends, bonus shares and buybacks, which supports its valuation. However, without stronger earnings growth, it will be hard for the stock to re-rate much further.

DBS is also expected to earn about $10.8 billion over the next three years, even as net interest margin (NIM) slips with lower rates. Wealth management will keep driving non-interest income, and asset quality remains solid. 

NIM is likely to fall by 12 basis points in 2025 and six in 2026, with dividends flattening from 2028 to 2030, J.P. Morgan said.

The American investment bank also noted that DBS has achieved one of the strongest ROE improvements in the past decade, helped by higher interest rates, strong digital capabilities and better efficiency. Its digital strengths are boosting loan share, wealth management and underwriting.

Potential risks include a rise in bad loans or problems in trade-related exposures which could weigh on the stock price.

Mr Thilan Wickramasinghe, head of research at Maybank Securities, has upgraded his call on DBS from a hold to a buy and raised the target price from $45.26 to $56.15.

“We believe DBS’ scale, strong execution and safe-haven beneficiary status give it a significant advantage over regional peers. Upgrade to buy,” he said, noting the above-market growth DBS is able to generate across its core divisions.

“We believe this is sustainable in the medium term, given the self-reinforcing effects of scale and strong management execution,” Mr Wickramasinghe added.

Morningstar senior equity analyst Michael Makdad is keeping his $48 fair value estimate for DBS.

“DBS continues to deliver higher returns than peers – ROE has been around 17 per cent versus 13 per cent for OCBC and UOB – and has proved more resilient to the mid-2025 (interest) rate drop. However, we believe this strength is already priced in,” Mr Makdad said.

He estimates that the market values DBS at nearly twice its book value on a forward-looking basis, compared with a multiple closer to one for OCBC and UOB. 

“While DBS’ performance merits a premium, we see relatively greater value in its peers at current levels,” Mr Makdad added.