DBS Bank pays a 6.1% dividend yield – Best Singapore stock to buy? Better than OCBC and UOB Bank?



I’ve been getting a lot of comments from readers on how DBS Bank is the best Singapore stock to buy.

With some even going so far as to say that DBS Bank is the only Singapore stock worth buying (and the rest of the money should go into US stocks instead).

So I wanted to relook DBS Bank.

At 7.1% dividend yield today, is DBS Bank indeed the best Singapore stock to buy – and better than OCBC and UOB Bank?


Why DBS Bank is still cheap at this price (1.7x book value)?

In one of my previous articles on DBS Bank, I shared that DBS Bank trading at 1.70x book value was a concern for me.

We are late in the business cycle, where the next move from the Feds is likely to be an interest rate cut.

With uncertainty over global economic growth.

And with DBS trading at 1.70x at the higher end of its trading range, this didn’t exactly strike me as the point where I would want to open a big position in DBS Bank.

Why DBS Bank may still be undervalued if you look at ROE? Comment from a Reader

My comments were more from a macro perspective.

In that article, I received an absolutely fantastic comment (no kidding it’s really good).

The comment basically shared how Book Value may not be the right way to value DBS Bank.

And that if you use Return on Equity (ROE), the valuation premium for DBS Bank is justified.

I don’t want to spoil it for you, so here’s the comment in its entirety (lightly edited for clarity).

I do recommend reading it in full, but if you want to skip I share my summary below.


“Hi FH. Been a regular reader of your posts. First time leaving a comment here. Hope you don’t find me too long winded.

You have missed out an important metric for banks analysis which is Return on Equity (ROE). ROE is a function of Price/Earnings (PE) and Price/Tangible Book (PTB).

Market prices DBS at 1.65x PTB because its ROE is 18% last year. UOB and OCBC PTB is 1.2x because their ROE is around 14%. However, all three have the same PE around 9x.

Hypothetically if DBS can achieve ROE of 25% and has a rich PTB of 2x, it is actually cheaper as PE is only 8x. PTB alone is only half of the story.

DBS has a structurally 4% ROE outperformance vs peers due to:
– higher CASA ratio.
– higher non-interest income which requires less capital.
– superior tech

Question is can DBS defend 18% ROE? With interest rate coming down, probably no. But Piyush Gupta has commented many times that their modelling indicates DBS can achieve 15-17% ROE in next 3-5 years if interest rate does not plummet to zero like in the past.

If we assume middle ground 16% ROE is sustainable, market is now ascribing 1.65x PTB, which equates to PE 10x. It is not expensive for a well-run bank which can stand shoulder to shoulder along global peers.

For perspective, DBS 18% ROE is 7th highest in the world’s top 100 banks. Beating even JP Morgan, Goldman, Citi, HSBC, StanChart, BNP Paribas, Deutsche, NAB and many more.

Moreover historically SG banks have the lowest NIM among the developed countries. Past 20 years average SG banks NIM is 1.7%. UK and AUS is 1.9%. US is 3.4%. To achieve world beating high ROE with low NIM, DBS must be doing something right with Piyush Gupta at the helm.

Going forward, DBS has clearly communicated post bonus issue, it will raise dividend by $0.24 p.a for the next 2-3 years at the minimum. Hence using share price of $34 post bonus issue, 2025 dividend of $2.40, yield is 7%. With 2026 dividend of $2.64, yield is 7.8%. This is the baseline. Risk is on the upside.

Is the high dividend sustainable? Yes, because DBS business mix requires less capital now. It can comfortably give out 70% dividend payout ratio and still grow its business nicely.

More importantly, CET1 is now at 14.6%. During the tech disruption, MAS penalised DBS and increased its RWA Operational Risk Multiplier to 1.8x. When this tech penalty is eventually lifted off (OCBC tech penalty is lifted off this year), CET1 will be bumped up to 15.51%. From 15.51% to optimal CET1 target of 13%, it means DBS has $9.2bn of excess CET1 capital.

During Covid years, DBS has also built up $2.2bn of Management Overlay which is over and above of what is required of GP. This amount is totally untouched yet.

All in, DBS may have excess capital of approx $11bn which can be returned to shareholders and still be able to run its banking operations optimally.

Remember DBS world beating 18% ROE? This ROE is actually dragged down severely by the excess $11bn capital. Hypothetically if DBS has returned all this $11bn excess capital to shareholders last year and with the same net profit, actual ROE would be 22.6% instead of 18%.

Judging DBS by 1.65x PTB alone is missing the forest for the trees. At current price, we are getting a world class bank with:

Actual ROE 22%
PE 10x
Sustainable forward dividend of above 7%

Not pricey at all.”

Breaking down the arguments – Why DBS Bank is cheap at 1.7x book value?

Like I said, absolutely fantastic comment.

This reader basically wrote the whole article for me.

I break down the arguments into 3 key points below:

1. DBS has a structural ROE advantage over peers like UOB and OCBC Bank

DBS’ 18% ROE in 2022 was significantly higher than peers UOB and OCBC (around 14%)

This 4% ROE outperformance is driven by higher CASA ratio, more non-interest income, and superior technology

CEO Piyush Gupta expects DBS to sustain a 15-17% ROE over the next 3-5 years (even with lower interest rates), which would still exceed peers

2. DBS is attractively valued considering its high ROE and dividend yield

At the current 1.65x Price-to-Book and assuming a sustainable 16% ROE, DBS is trading at just 10x Price-to-Earnings

This is inexpensive for a bank that generated the 7th highest ROE among the world’s top 100 banks in 2022

DBS plans to raise dividends by $0.24 per year, implying a 7-7.8% dividend yield by 2025-26 based on the current share price

3. DBS has significant excess capital that could further boost ROE and shareholder returns

DBS has around $11 billion in estimated surplus capital from a high CET1 ratio and conservative provisions

This excess capital is currently depressing DBS’ ROE – adjusting for it, the bank’s 2022 ROE would have been 22.6% instead of 18%

Returning this excess capital to shareholders could drive even higher ROEs and dividend yields going forward


These 3 arguments have been very well presented by the reader, so I won’t belabour the point.

I will try to supplement his arguments below, and provide an alternative angle on DBS Bank.

DBS’s ROE is indeed way higher than OCBC/UOB, and other major global banks

For the record, here’s the ROE of DBS Bank compared vs OCBC / UOB Bank, and other major global banks.

You can see indeed how DBS’s 18.75% ROE is significantly higher than both local banks.

Even against global banks like JP Morgan, DBS Bank fares very well.



DBS Bank

18.75% (Q1 2024)


14.0% (Q1 2024)


14.7% (Q1 2024)

JP Morgan

16.15% (Q1 2024)

Credit Suisse

16.1% (2022)

Goldman Sachs

14.04% (Q1 2024)


12.58% (TTM as of June 2024)

Standard Chartered

11.18% (Q1 2024)


DBS Bank’s net profit growth outperforms UOB and OCBC Bank

You can also see how DBS Bank’s 15% growth in net profits is significantly higher than UOB Bank and OCBC Bank


DBS Bank

UOB Bank


Net Profit




YoY Change




Net Interest Margin




Return on Equity




P/E Ratio




Non-Performing Loans Ratio





And yet if you look at net interest income – it is mostly flat.

So what is driving the outperformance in profit growth vs UOB / OCBC?

Biggest contributor to DBS’s growth is due to Wealth Management

It turns out the reader is absolutely right – it’s the non-interest income.

And if you look at the breakdown in the fee income.

You’ll find that the biggest growth is coming from wealth management.

Wealth management income is up a whopping 47% on a year on year basis.

In fact DBS says that they are targeting to grow their wealth management AUM to $500 billion by 2026 (up from $365 billion currently).

If true, this implies further upside from the wealth management business.


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DBS Bank’s wealth management compared against OCBC and UOB Bank

Here’s how DBS Bank’s wealth management business stacks up against OCBC and UOB Bank.

You can see how DBS Bank’s growth is the highest of the 3 banks.

However as a percentage of its total income, DBS’s is the lowest at only 9.6%.

While OCBC is the highest at 36% because of its Great Eastern arm.


Wealth Management Fee Income Growth

Assets Under Management (AUM) Growth

Wealth Income as % of Total Income

DBS Bank

+47% YoY to S$536M

+36% YoY to $365B


UOB Bank

+5% YoY to S$164M

+11% YoY to S$179B



+19% YoY to S$1.29 billion

+4% QoQ to S$273B, +1% YoY



I suppose like the reader said, this is a good thing.

This implies that if DBS executes well on the wealth management business – there is plenty of room for growth.

You can see by contrast OCBC’s wealth management business is growing much slower than DBS Bank.

Comment was provided in late April – DBS Bank’s share price was about $35 then

Just to provide some context about price.

This comment was provided around late April when DBS Bank traded at about $35.

Share price has been mostly flat since.

But if the reader above is right, there may be further upside for DBS Bank.

How much upside?

What is the upside for DBS Bank, assuming all of the above is true?

Let’s say we use the reader’s assumption of 0.24 increase in dividend each year.

This implies a $2.64 dividend in 2026 (0.24 increase a year).

If you assume the share price trades at a 6% dividend yield in 2026, that implies a share price of $44 (25% upside).

If you assume the share price trades at a 7% dividend yield 2026, that implies a share price of $37.5 (6% upside).

DBS trades at a 6.1% dividend today.

Meaning that if the reader’s assumption plays out, and market continues to value DBS bank at 6% dividend yield – there could be decent upside here.

How likely is this?

What market conditions do we need for these valuation levels to hold for DBS Bank?

For market valuations to hold at current levels, you would probably need market conditions that are good for banks.

Broadly you would want to see:

  1. Inflation staying high
  2. Interest rates staying high (no drastic cuts)
  3. Economic growth holding up

This is assuming interest rates stay high(ish), and no major economic slowdown

How likely is this is frankly anyone’s guess.

I wrote an article for FH Premium subscribers this week, sharing how latest US data is pointing towards a weakening economy.

Inflation numbers are coming in below expectations, while unemployment is coming in above expectations.

It’s fairly clear that economic growth in the US is slowing.

But the million dollar question is whether this will accelerate in the next 6 – 12 months.

Does it accelerate into a full blown recession, or does it just stay as a transitory slowdown followed by a pickup after the US elections?

Don’t forget the outcome will depend a great deal on how policy makers react.

Not to mention that if Trump wins the Nov elections, I could see a roaring US economy that translates into more sticky inflation and interest rates staying high.

Can DBS continue to execute? Is this conditional on Piyush Gupta being around?

The final risk worth discussing is execution risk.

Yes, DBS has been executing very well of late, as shown in their outperformance vs UOB and OCBC Bank.

Will this continue?

How much of their current growth is attributable to Piyush Gupta’s leadership, and how much of it is conditional on him being around?

Again, I don’t know the answer to this one.


DBS Bank

UOB Bank


Net Profit




YoY Change




Net Interest Margin




Return on Equity




P/E Ratio




Non-Performing Loans Ratio





Will I buy DBS Bank at 18.75% ROE, and 6.1% dividend yield?

The more I think about it, the more it comes down to a macro vs micro debate.

The reader’s argument comes from a micro perspective of why DBS Bank is a great company, firing on all cylinders.

My argument comes from a macro perspective of us being very late in the business cycle, and if the cycle turns the market usually sells first and ask questions later.

Both arguments can be right.

I suppose it comes down to this.

If I wanted to buy banks, DBS Bank is probably one of the best buys out there.

The question is whether I want to buy banks, and how much banks do I want to own at this stage of the business cycle?

But for the record, I can buy the reader’s argument.

If the economic slowdown does not play out into a broader recession, and interest rates don’t get slashed.

I could well see DBS Bank executing well the next 2 years, and decent upside for DBS Bank.

So who knows, I may just buy more DBS Bank.


This article was written on 21 June 2024 and will not be updated going forward.

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    • Actually I couldn’t find this info as well. To my knowledge they are the smaller/mid sized banks, not the GSIBs like JPM or BofA etc.

  1. The key assumption that “further upside from the wealth management business” needs to be examined in detail. With the tighter MAS scrutiny/fallout from the money-laundering case, banks are extremely cautious about taking on HNWI and questioning their source of wealth/funds. There was a Bloomberg (or Nikkei) article recently that as a result, family offices and UHNWIs are choosing to set up in HongKong instead of Singapore.
    Will this have an impact of the growth of the wealth management business in Singapore? I would imagine so. So is the ambitious target of growing DBS AUM to $600M even achievable to continue the trajectory of double-digit growth in DBS’ wealth management business?
    Like I said, this needs further due diligence and only future financial results can tell if growth is continuing or stalling.
    I would rather wait on the sidelines and take on your original macro view that we are already late in the cycle and wait for a better price. Past results doesn’t guarantee continued good results.

    • Fair enough. I think there are good arguments both ways. Proof is in the pudding.

      For investors – it goes back to what’s the upside vs downside at this price. And what is the right position size.

  2. Hi FH,

    I am the reader who posted the comments in above article. I thank you for the constructive discussion on DBS.

    On a micro perspective, we can all agree DBS is one of best managed bank in the world. Under macro lens in a rate cut environment, market is unsure how DBS would perform. These are my thoughts.

    When rate cut starts, DBS NIM will go down, hence less profit. Straightforward and no argument on this. However, there’s four upsides to mitigate impact.

    First, loan book growth will start to pick up. No loan growth means no revenue growth. Profit can be cushioned when higher revenue supports lower NIM.

    Second, animal spirits will roar back and non interest income will go up. A lot of AUM is sitting on FD now. Once interest rate of FD is not attractive anymore, clients will shift money to investments. People who buy Tbills will also shift more money to priority/private banking account. What would you do if your Tbills rate start to drop below 3%?w

    Third, higher for longer rates will inevitably pushes up NPL. Credit costs will hit bottomline. Rate cuts has opposite effect.

    Lastly, banks borrow short and lend long. We have an inverted yield curve now which is unhealthy for banks. Short term funding costs is higher than what they can charge for long term loans. When rate cuts and yield curve steepen, banks can operate optimally.

    All in, DBS still can do reasonably well in a rate cut environment. Net profit wouldn’t necessarily fall off cliff.

    For share price movement, if DBS could sustain and increase dividend during rate cuts, the high yield would be too attractive for Mr Market to ignore.

    Assume a probable scenario where Fed normalises and cuts 200bps to around 3% by year 2026 and DBS increases dividend ($0.24 x 2 years) to $2.64. Dividend yield would be 7.5%.

    By then, SGS 10y will probably revert back to 2+% level. SORA, Tbills and FD rates would fall behind 10y as yield curve normalises and steepen. In this scenario, it is unthinkable Mr Market would still let DBS trade at 7.5% dividend yield. Historically SG banks dividend yield trade at 1.5%-2% above SG 10y. Our banks yield were around 3.5%-4.5% in past 30 years before Covid.

    Henceforth, during a rate cut environment, DBS share price may not crater as many would have expected. Using a conservative SG 10y yield of 3% plus 2% premium, it is not unreasonable for market to ascribe a 5% dividend yield valuation for DBS.

    Keep in mind during this time, FD and Tbills rates would be at 2+% level. Long term SGD corporate bonds at 3-4% level. Reits at 5-6% level. So DBS at 5% yield is not a number plucked out of thin air.

    At 5% dividend yield, DBS share price would be $52.80, a 50% upside from current share price. With dividends, total return is 64% in two years.

    At a conservative 6% dividend yield, DBS share price would be $44, a 26% upside. With dividends, total return is 40%.

    I have already shared previously why I think DBS can continue to increase $0.24 dividend yearly in medium term.

    The crux lies in whether DBS can continue to rake in $10bn profit in next few years. With its recent stellar 1Q result and forecast, Piyush Gupta has guided this year $10bn profit target is already in the bag.

    Dbs capital neutral point is 70%-75%. This means it can potentially give out 75% earnings as dividends without impacting CET1. In other words, if dividend payout ratio is below 70%, DBS is likely to accrete more capital to its already burgeoning CET1. The current excess capital that DBS has is around $11bn, 11% of current market cap.

    $10bn profit is $3.60 per share. At $2.40 dividend, payout ratio is 67%. At $2.64 dividend, payout ratio is 73%. It is clear DBS can comfortably fund $2.64 dividend even without touching its excess capital of $11bn. If DBS wants to increase ROE and return excess capital back to shareholders, the payout ratio must surpass 75%.

    An astute observer would have noticed companies under Temasek stable recently have all underwent a transformation of sorts. Temasek is clearly setting a higher ROE as KPI. Notably examples are, Singtel, Starhub, SPH, Capitaland, Keppel, Sembcorp, Semb Marine, ST Engr, SATS.

    Logic suggests DBS as the biggest company under Temasek, would have been tasked to shed excess fats, improve ROE and return surplus capital back to Temasek. It’s high time to invest alongside Temasek via DBS.

    • Hi JFC,

      Thanks – another fantastic comment from you.

      I think my concern is that in markets, you can never predict in too much detail how things will turn out. Which is why I always want to think about the scenario where I am completely wrong in my view.

      If I have no DBS position, I would want to think about the upside risk, and vice versa.

      I agree with your comment on the Temasek linked cos though. I have noticed this a few years back as well, on the renewed focus on ROE and asset light models (and move away from China) for the TLC stable. Question goes back to one of execution. Can Singapore companies truly compete on the world stage? Only time will tell.

      But at least it wont be for lack of trying, and that’s something I can get behind.

  3. Protect the downside and the upside will take care of itself. We have established DBS has $11bn excess capital. It can comfortably pay $2.64 dividends out of earnings. In market crisis, if profit is down in a big way, DBS still has ability to sustain absolute dividend using excess capital. We could get 6-7% yield while waiting for price recovery. The high yield should somewhat support the share price in this scenario.

    We also cannot rule out DBS may continue to execute and clock YoY profit growth. Dividend would increase in tandem.

    Here is some data from year 2011 to 2022. I use 2011 cos banks had already recovered from GFC. So figures will not be artificially inflated from low base of 2008-2010. Again I use 2022 cos 2023 was a bumper year with high rates. Year 2011 to 2022 was a period marked with chronically low rates.

    DBS 2011 NIM was 1.77% vs year 2022 NIM 1.75%. Both very similar NIM, hence the below comparison of ROE and profit growth is a fair one.

    2011 ROE was 11% vs 2022 ROE 15%. Tats a structural improvement of 4% due to better business mix and higher efficiency.

    Net profit from 2011 to 2022 grew from $3b to $8.2b. Tats an impressive CAGR of 9.57% for 11 years of low rates. Again, NIM was the same, so macro interest rate has nothing to do with the stellar profit growth.

    Barring black swans, it’s reasonable to assume even during gradual rate cuts, DBS could sustain $10bn profit and even clock some meaningful earnings growth overtime. DBS investment thesis of growing dividends cum yield compression during normalised interest rate is intact and compelling. Share price should rerate accordingly if things play out.

    There will be more economic growth in our region and Asia wealth will keep rising. Singapore is now seen as the natural choice for global rich to park some of their wealth here. Hongkong is falling out of favour due to English Common Law being chipped off slowly but surely by China. The introduction of Article 23 is just the beginning. It is making foreign investors uncomfortable. Why park your wealth in a country where laws may flip flop overnight? Is there a better choice out there? The answer is clear.

    Asia will get richer and more money will flow in to Singapore. This is an irreversible mega trend. DBS as the biggest bank here, stands to benefit the most.

    For perspective, when Piyush Gupta joined DBS in 2009, DBS private bank AUM is outside of top 20 in Asia pacific ex China onshore. Today it is number 3 behind UBS and HSBC. No easy feat for such a big jump. Apart from the mega trend mentioned, DBS internally must has done something right. I know I may sound biased but next time when you see a DBS branch in your neighbourhood, you are looking at a banking franchise that is probably the best in class and best in world.


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