DBS Earnings: Margins to Remain Firmer Than We Expected; Shares Attractive

Narrow-moat DBS' full-year 2023 results were largely in line with expectations, and with minimal surprises, market reaction should focus on guidance that is more upbeat than we had originally factored in for 2024. The bank's move to give a 1-for-10 bonus issue in lieu of a higher special dividend may disappoint some, but overall, it doesn't change our projection for the dividend payout to rise. We raise our fair value estimate to SGD 44 from SGD 41, which is driven mainly by a higher net interest margin, or NIM, and stronger near-term noninterest income growth assumptions. We're looking at return on equity to be 16.6% and 15.6% in 2024 and 2025, respectively, and averaging 15% thereafter. This factors in our expectations for interest rates to start declining in second-half 2024 and to normalize over the next few years. DBS remains our preferred Singapore bank and one of our favored bank picks in Asia.