---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 207408
conversation_id: 854220f7-0650-4881-892d-42ab4a143795
citations: 3
created: 2026-05-31 20:00:29Z
---

# How does DBS’s valuation compare to peers, and what justifies its premium/discount?

# DBS Valuation vs Peers — Premium Justified by ROE & Wealth Franchise

## 1. Where the multiples sit today

Per CLSA's latest peer-comp dashboard (23-Apr-2025, prices on or around that date), the three Singapore banks trade with DBS at a structural premium across every multiple:

| Bank | Rec | Last Px (S$) | TP (S$) | Last PB 25CL | Target PB 25CL | Last PE 25CL | Target PE 25CL | Div Yld 25CL |
|---|---|---|---|---|---|---|---|---|
| **DBS** | O-PF | 42.88 | 42.20 | **1.83x** | 1.81x | **11.00x** | 10.83x | **7.0%** |
| OCBC | HLD | 16.59 | 15.90 | 1.30x | 1.24x | 9.92x | 9.50x | 5.8% |
| UOB | HC O-PF | 35.95 | 39.20 | 1.28x | 1.40x | 10.13x | 11.05x | 6.7% |
| Average | – | – | – | 1.55x | 1.54x | 10.48x | 10.49x | 6.6% |

Source: CLSA, Evalu@tor [4]

Key reads:
- **DBS trades at ~1.8x P/B vs OCBC ~1.30x and UOB ~1.28x** — a ~40% PB premium over both Singaporean peers [4].
- **DBS's 25CL PE of ~11x is also ~10–11% above OCBC (9.9x) and UOB (10.1x)** [4].
- **UOB's PB discount to DBS has widened to near long-term support levels**, and OCBC's discount has held in a 0.8–1.3x band over the past decade — i.e., DBS's relative premium has actually **expanded**, not compressed, despite a softer rate backdrop [3].

A more recent valuation rebuild in CLSA's 13-May-2025 ("On the defensive") note holds the same ranking — DBS target PB 1.86–1.95x for 25–27CL vs OCBC 1.36–1.42x and UOB 1.40–1.42x [5][6][7].

## 2. What justifies the premium — five fundamentals

### a) ROE gap is the headline driver
CLSA's Gordon Growth PB framework reverse-engineers the answer: with a near-identical cost of equity (DBS 9.8% vs UOB 9.4–9.7% vs OCBC 9.3–9.5%) and the same 3% terminal growth rate, the spread in target PB collapses to a **pure ROE differential** [5][6][7].

| Driver in GGM-PB | DBS | UOB | OCBC |
|---|---|---|---|
| Sustainable ROE (CLSA) | **15.9%** | 13.0% | 11.8% |
| Cost of equity | 9.8% | 9.4% | 9.3% |
| Long-term growth | 3.0% | 3.0% | 3.0% |
| Justified PB (CLSA) | 1.86–1.95x | 1.49–1.62x | 1.40–1.42x |

Sources: [5][6][7]

DBS delivers a **~3–4ppt ROE premium** to UOB and **~4ppt** to OCBC. In a Gordon-Growth framework, a 4-point ROE gap at a ~10% COE mechanically widens the PB premium into the ~40% range observed in the market. The premium is therefore *consistent with*, not in excess of, the underlying return profile.

The ROE leadership is corroborated by company-reported numbers: DBS delivered **17.3% ROE in Q1 2025** [13], **17.0% ROE and 18.8% ROTE in 1H 2025** [14], and **16.2% ROE / 17.8% ROTE for full-year 2025** [15] — all well above CLSA's normalized 15.9% assumption used for valuation.

### b) Wealth-management franchise is the structural growth story
CLSA's 10-Jun-2025 DBS-specific note (Wealth of returns) frames the thesis directly: "DBS' longer-term positioning as an **Asian wealth leader**. Structural growth in this high ROE business should limit cyclical headwinds and solidify the lender's higher return profile" [8]. AUM has been compounding rapidly and wealth fees + treasury customer sales have repeatedly hit record levels through 2025, even as NIM compressed [14].

OCBC alone has a comparable wealth-bancassurance-asset-management cross-sell stack but execution has lagged, and 1Q25 saw an 11bps NIM contraction in stark contrast to DBS's 3bps — investors have rewarded DBS's wealth-led non-II mix, not OCBC's product breadth [2].

### c) Funding-cost moat (CASA) and explicit capital efficiency
DBS has the **highest CASA ratio of the three** — a structural funding-cost advantage through the rate cycle. It also runs the most explicit capital-efficiency framework and the **highest ROE among peers** [2]. Q3 2025 saw the CASA ratio rise further to 53%, with deposit growth outpacing loans and surplus deposits deployed accretively to NII and ROE.

### d) Capital return amplifies the yield premium
DBS layered a **3-year capital-return programme on top of ordinary dividends**: S$0.60 ordinary + S$0.15 capital-return per quarter, **plus** a S$3bn buyback. CLSA's "Stuck in neutral" total-return schedule shows DBS yielding ~7.7% in 25CL, 8.2% in 26CL, 7.4% in 27CL (ordinary + buyback + special, S$/share) [11] — comfortably the highest absolute yield in the peer set [4]. Effectively, the bank is paying investors to wait through a softer-rate transition.

### e) "Investors prefer DBS then UOB then OCBC"
CLSA's investor survey in May 2025 found near-unanimous preference for DBS, citing **"stronger management team and lower exposure to SMEs"** [10]. UOB's PB discount to DBS exists despite better yield support and lower rate sensitivity precisely because investors stuck with DBS on **"reticence on [UOB] management, higher exposure to SMEs and the unconvincing Citi integration"** [10]. The premium is, in part, a governance/execution premium revealed by buyer behavior.

## 3. Where the premium is vulnerable (the "discount risk")

CLSA does not see further multiple expansion from here, hence the **HOLD-leaning O-PF (Outperform) — not a BUY** — and a target price (S$42.20) modestly *below* spot at the time of the April note [4]. The rationale:

1. **NIM compression risk is highest for DBS.** Its hedging strategy rolls off by end-2026, and 3M SORA/HIBOR have trended materially lower; rate cuts disproportionately hurt the bank with the highest NII share [12].
2. **Limited upside to target** — CLSA's June DBS update explicitly says "we see limited upside to our target price; strong yield support keeps us recommending O-PF" [8]. The premium is fully priced relative to its own DDM/PE/GGM blend.
3. **ROE is decelerating into the trough.** DBS's reported ROE moved from 17.6% (FY24) to 16.2% (FY25) [15] and CLSA models it at 15.6%/15.9%/16.3% for 25/26/27CL — i.e., the **ROE gap that justifies the premium is narrowing into the rate-cut cycle** [9].
4. **UOB now offers higher upside** to TP (+14.4%) on better yield support, lower rate sensitivity and a more attractive entry valuation; CLSA flags it as the higher-conviction pick within the trio [10].

| Year | DBS PE | PB | ROE | Div Yield |
|---|---|---|---|---|
| 2023A | 12.0x | 2.0x | 17.0% | 4.3% |
| 2024A | 11.6x | 1.9x | 17.6% | 4.9% |
| 2025CL | 12.1x | 1.8x | 15.6% | 6.8% |
| 2026CL | 11.5x | 1.8x | 15.9% | 7.3% |
| 2027CL | 11.0x | 1.8x | 16.3% | 6.5% |

Source: CLSA [9]

## 4. Bottom line

**DBS trades at ~1.8x P/B, ~11x PE and ~7% yield — a ~40% PB premium and ~10% PE premium over OCBC and UOB**. The premium is *justified*, not excessive, because:

- A **~4ppt structural ROE gap** (~16% vs ~12–13%) feeds directly into the Gordon-Growth target PB and reproduces the observed multiple spread almost exactly.
- The **wealth-management franchise** is the highest-quality and fastest-growing fee engine in the peer set, providing structural growth atop the ROE base [8].
- Structural funding advantages (highest CASA), the most explicit capital-efficiency framework, and an active capital-return programme (ordinary + buyback) make the **total shareholder yield (~7.7% 25CL) the highest in the trio** [11].
- Investor positioning reinforces the premium — DBS is the consensus preference on management quality and lower SME risk [1][10].

The premium *narrows* — and the discount risk rises — if NIM compression accelerates as DBS's hedges roll off by end-2026 and ROE normalizes toward 15–16%, which is why CLSA rates DBS O-PF (not BUY) and currently prefers UOB on a 12-month risk-adjusted basis [10][12].

---
**Sources**
[1] Singapore banks (Stuck in neutral) — CLSA (20 May 2025) — 607959993LinqAlpha.PDF
[2] Singapore banks (Stuck in neutral) — CLSA (20 May 2025) — DBS Investment Thesis section
[3] Singapore banks (Stuck in neutral) — CLSA (20 May 2025) — PB history table
[4] Singapore banks (Yield wield) — CLSA (23 Apr 2025) — Peer Comp Summary table — 607956678LinqAlpha.PDF
[5] Singapore banks (On the defensive) — CLSA (13 May 2025) — DBS valuation methodology — 607959041LinqAlpha.PDF
[6] Singapore banks (On the defensive) — CLSA (13 May 2025) — OCBC GGM
[7] Singapore banks (Yield wield) — CLSA (23 Apr 2025) — DBS valuation methodology
[8] DBS — O-PF (Wealth of returns) — CLSA (10 Jun 2025) — 607961689LinqAlpha.PDF
[9] DBS — O-PF (Wealth of returns) — CLSA (10 Jun 2025) — Financial summary table
[10] Singapore banks (Stuck in neutral) — CLSA (20 May 2025) — UOB Peer Block / Investor Preferences
[11] Singapore banks (Stuck in neutral) — CLSA (20 May 2025) — DBS capital return schedule (Figure 15)
[12] Singapore banks (Stuck in neutral) — CLSA (20 May 2025) — NIM/Asset-quality concerns
[13] DBS Q1 2025 Earnings Call
[14] DBS Q2 2025 Earnings Call (6 August 2025)
[15] DBS Q4 2025 / FY 2025 Earnings Call (9 February 2026)

## Citations

- [13] **Q1 2025 DBS Group Holdings Ltd** · external
- [14] **DBS Group Holdings Ltd., Q2 2025 Earnings Call, 6-August-2025 10** · external
- [15] **DBS Group Holdings Ltd., Q4 2025 Earnings Call, 9-February-2026** · external

