DBS Group Holdings reported its Q4 2025 results on February 9, 2026, confirming a 10% year-on-year drop in net profit to S$2.36 billion (or S2.26 billion including one-off items). This missed analyst estimates of roughly S2.6 billion.
While the "record high" interest rates of the past few years provided a massive boost to Singaporean banks, the latest data suggests that peak has passed. Here is a breakdown of why the profit dipped and what the bank expects for the rest of 2026:
Why Profit Declined 10%
Margin Compression: Net Interest Margin (NIM) fell by 22 basis points to 1.93%. This was driven by lower benchmark interest rates (SORA) and a stronger Singapore Dollar.
Higher Credit Costs: Specific allowances for bad loans jumped significantly due to a "prudent downgrade" of a previously watch-listed real estate exposure in Hong Kong.
Tax Implementation: Full-year profits were also weighed down by the implementation of a 15% global minimum tax (Pillar Two), which increased tax expenses.
Is More Decline on the Way?
DBS CEO Tan Su Shan has advised investors to "buckle up" for a volatile 2026. The official guidance indicates:
Net Profit: Expected to be "slightly below 2025 levels" as interest rate headwinds persist.
Net Interest Income (NII): Forecast to be slightly lower than last year, assuming at least two more US Federal Reserve rate cuts and a SORA rate around 1.25%.
Silver Lining: Non-interest income (wealth management and fees) remains a strong growth driver, expected to see high single-digit growth in 2026.
The Shareholder "Sweetener"
Despite the profit miss, DBS is leaning heavily into capital returns to keep investors engaged:
Dividends: The bank declared a total Q4 payout of S$0.81 per share, which includes a S0.66 ordinary dividend and a **S0.15 capital return dividend**.
Future Policy: The bank intends to maintain this S$0.15 capital return every quarter through 2026 and 2027, barring unforeseen circumstances.
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