With its share price climbing 28.2% over the course of 2025, DBS Group Holdings (SGX: D05) has been one of the standout performers of the Straits Times Index (SGX:^STI), bolstered by strong net profits and consistent dividend growth.
DBS’s latest third-quarter financials ended 30 September 2025 (3Q2025) show that earnings remain resilient, even against the headwinds of lower interest rates.
We take a look at the bank’s most recent numbers and see if this rally is sustainable, heading into 2026 and beyond.
Record Income, Even as Rates Ease
DBS reported a record total income of S$5.93 billion, up 3% year on year (YoY) for 3Q2025.
Despite a lower interest rate backdrop, DBS’s growth in total income was supported by resilient net interest income (NII), alongside steady growth from its non-interest segments.
In particular, fee income, treasury sales, and market trading income contributed positively to the bank’s total turnover.
The main takeaway here is that DBS possesses a diversified revenue model, one that is no longer solely reliant on interest rates to deliver topline growth.
Net Interest Margins Are Compressing — But Holding Up
DBS’ core business remains largely unaffected by falling interest rates, with NII showing continued resilience.
For 3Q2025, commercial book NII came in at S$3.56 billion, down 6.3% YoY, but relatively stable quarter-on-quarter (down 1.8%), as the commercial book net interest margin (NIM) compressed 43 basis points to 2.40% amid falling interest rates.
Group NIM came in at 1.96% as of 30 September 2025, down from 2.11% a year ag and 2.05% in the prior quarter.
However, DBS has done a fine job of cushioning the blow through its proactive hedging of its balance sheet, which reduced NII sensitivity to rate cuts.
DBS also saw robust deposit growth of S$50 billion YoY, with surplus funds deployed into high-quality liquid assets that remained accretive to NII despite modestly compressing margins.
The bank continues to enjoy a stable cost of funding (40% of income), supplemented by a diverse mix of deposit growth from retail, corporates, and wealth deposits.
Despite ongoing NIM compression, DBS has successfully managed the impact to date.
Fee Income Is Doing the Heavy Lifting
Fee income continues to support DBS’s turnover, driven primarily by wealth management.
At S$1.58 billion for 3Q2025, fee income rose 20% YoY, making up 26.6% of DBS’s total revenue.
Wealth management continues to be a major growth driver, skyrocketing 30% YoY to S$796 million, on the back of strong demand for DBS’s wealth management products and solutions.
This segment now constitutes 50% of its fee income segment.
The main takeaway is that DBS is increasingly shifting away from its reliance on purely NII, backed by its fee business and a strong wealth management franchise.
Asset Quality and Loan Growth Remain Solid
The bank continues to grow its loan book, with gross loans standing at S$443 billion as of 30 September 2025.
DBS continues to have a portfolio of high-quality assets, with non-performing loan (NPL) remaining stable at 1.0% (the same YoY and QoQ).
More importantly, this suggests that growth has not come at the expense of underwriting riskier loans.
Despite a more challenging macro environment, investors can be encouraged by the resilience of DBS’s balance sheet.
Dividends Remain a Key Pillar of the DBS Story
For 3Q2025, DBS declared a total dividend of S$0.75 per share, comprising an ordinary dividend of S$0.60 per share, and capital return dividend of S$0.15 per share.
At a share price of S$56.40, DBS offers a trailing dividend yield of approximately 5.1%.
Management has guided to raise the ordinary dividend by S$0.06 per quarter in 2026 (from S$0.60 to S$0.66), while maintaining the S$0.15 capital return dividend.
This brings the total quarterly dividend to S$0.81 per share, or S$3.24 annualised, subject to shareholder approval at the March 2026 AGM.
This reinforces DBS’s reputation as one of Singapore’s most reliable income stocks, extending its stellar dividend payout history over the past five years.
What Could Limit Further Share Price Upside
Looking forward, DBS’s main risks include potential lower NIM, which could hamper the bank’s earnings.
Earnings growth could also slow down moving forward, following the exceptional growth of recent years.
Crucially, DBS trades at a rich valuation of roughly 2.2 times book value.
This metric embeds sky-high market expectations regarding its future performance.
With shares at an all-time high, there is no room for error in terms of execution.
What This Means for Investors
DBS’s latest results show successful ongoing diversification from NII reliance.
Looking into 2026 and beyond, the key question is whether fee income growth and loan expansion can support lower earnings due to NIM compression.
To put it simply, can DBS sustain/maintain its earnings moving forward?
Conclusion – Get Smart: Record Results Set a Higher Bar
At an all-time high, DBS has been rewarded by the market for its proven ability to perform across different rate environments.
However, DBS’s current premium valuation means the bank has to continue executing, diversifying its business while maintaining discipline in underwriting loans.
This factor alongside the abovementioned risks and catalysts should be considered by investors looking to buy DBS shares now.
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Disclosure: Wilson.H does not own shares in any of the companies mentioned.
