DBS shares rally to new high of $55.54 as Q3 earnings beat expectations

SINGAPORE - Shares of DBS surged past $55 for the first time on Nov 6 after Singapore’s largest bank posted a smaller-than-expected drop in third-quarter earnings as lower interest rates squeeze margins.

The stock opened at $53.90, crossed the $55 mark at 9.15am and continued to rise throughout the day. At the close of trading, DBS was up 3.8 per cent or $2.04 to $55.54, after 13.1 million shares changed hands.

The bank’s net profit for the three months to Sept 30 dipped 2 per cent to $2.95 billion, from $3.03 billion in the year-ago period, but beat the $2.79 billion forecast by analysts in a Bloomberg poll.

The bank declared an interim one-tier dividend of 60 cents and a one-tier capital return dividend of 15 cents for each ordinary share.

This brings the quarter’s total dividend payout to 75 cents per share, compared with the 54 cents in the year-ago period.

The dividend payable is expected to be $2.13 billion.

DBS said commercial book net interest income in the quarter fell 6 per cent to $3.56 billion as lower rates were mitigated by hedging and deposit growth.

Commercial book net interest margin declined 43 basis points to 2.4 per cent, from 2.83 per cent in the year-ago period.

Banks face squeezed net interest margins – the difference between what banks earn on loans and what they pay on deposits – as rates fall.

Group net interest income was little changed at $3.58 billion, as the impact of lower Singapore and Hong Kong benchmark rates was offset by balance sheet hedging and strong deposit growth. Group net interest margin declined 15 basis points to 1.96 per cent, from 2.11 per cent in the year-ago period.

Speaking at a results briefing on Nov 6, DBS chief executive Tan Su Shan said that surplus deposits were deployed to high-quality liquid assets, such as government securities. Fixed-rate assets account for around one-third of the bank’s commercial book.

DBS continues to see strong momentum in wealth management fees and the momentum has travelled to the retail wealth segment as well, she said.

Ms Tan also sees several opportunities such as a pipeline of deals in Hong Kong, China and Singapore and customers looking to diversify their supply chains and grow in new markets.

“So this shift in trade and investment flows is something that our team is very focused on, and we’re looking at growing the pipeline… regional trade between Asia and Asean countries, China to Asean countries, et cetera.

“There’s been a lot of two-way conversations,” she said.

Ms Tan further pointed to strong growth in loan-related fee income and market trading income.

Loan-related fees in the third quarter rose 25 per cent to $183 million due to increased deal activity. Market trading income rose 33 per cent to $439 million, mainly due to higher equity derivative activity from clients.

Ms Tan added that the bank is disciplined in choosing who it banks with, such as the large blue-chip companies, and is proactive in identifying potentially troubled clients.

Meanwhile, the Hong Kong real estate sector showed signs of recovery and DBS has seen “quite a fair amount of loan repayments” in the third quarter from the sector.

DBS noted that asset quality was resilient, with the non-performing loan ratio unchanged at 1 per cent and specific allowances at 15 basis points of loans for the third quarter.

Ms Tan said: “As we enter the coming year, we will continue to navigate the pressures of declining interest rates with nimble balance sheet management and our ability to capture structural opportunities across wealth management and institutional banking.”

For its 2026 outlook, DBS expects total income to be around 2025 levels despite rate headwinds. Net profit is expected to be slightly below 2025 levels.

It also guided for group net interest income to be slightly below 2025 levels, based on three US Federal Reserve interest rate cuts, a strong Singapore dollar and the current Singapore Overnight Rate Average levels.

Commercial book non-interest income growth is forecast to be in the high-single digits and cost-income ratio in the low 40 per cent range.

Further, specific allowances are assumed to normalise to 17 to 20 basis points, although the bank said it is not seeing signs of stress so far.

UOB reported earnings on the same day as DBS, with the third-quarter profit of Singapore’s third-largest bank tumbling 72 per cent to $443 million as it raised its allowance for credit and other losses by $1 billion year on year.

Shares of UOB fell 2.8 per cent or 97 cents to $33.90.

OCBC’s third-quarter report is set to be released on Nov 7.