DBS’ 4Q25 adjusted earnings of S$2.4bn were slightly below our estimates, at 95% of our FY25e forecast. 4Q25 DPS raised 35% YoY to 81 cents (comprising 66 cents ordinary dividend and 15 cents capital return dividend), total FY25 DPS of S$3.06 (+38% YoY).

NII fell 4% YoY despite loan and deposit growth as NIMs declined 22bps YoY to 1.93%. WM fees continued to surge (+24% YoY), driving 14% growth in fee income. Higher SPs of S$451mn (+81% YoY) from a HK real estate NPL hurt earnings. DBS maintained its FY26e guidance for NII to be slightly below 2025 levels, non-interest income growth in the high single digits, credit costs to normalize at 17-20bps, and PATMI below 2025 levels from the lower interest rate environment. Capital return dividend (60cents/share per year) until FY27 and step up of 6cents/share per quarter until 3Q26 policy has been maintained.

Upgrade to ACCUMULATE from Neutral with a higher target price of S$60.00 (prev. S$58.00) as we roll over our valuations to FY26e, raise the terminal growth rate to 3.3% (from 3.2%), and lower the beta to 1.0 (prev. 1.1). We lower our FY26e earnings estimate by 5% from weaker NII estimates. We assume a 2.47x FY26e P/BV and a 16.3% ROE estimate in our GGM valuation. We expect non-interest income to be the main growth driver, as heightened volatility will benefit trading income and continued WM growth will stem from shifts in investor sentiment and AUM inflows. We prefer DBS among the Singapore banks given its continued capital return plans (until FY27), fixed DPS policy, and high dividend payout ratio (dividend yield FY26e: 5.7%, FY27e: 6.1%) despite lower earnings, which offer greater stability compared to its peers, which follow a floating payout ratio tied to earnings performance.