Update: DBS Bank Ltd.

The stable outlook on DBS reflects our expectation that the bank will maintain its high systemic importance in Singapore and solid financial footing over the next 18-24 months. We believe both positive and negative rating actions are unlikely over the next one to two years. Our assessment of the bank's stand-alone credit profile (SACP) would need to decline by at least two notches for a downgrade. We may revise downward our assessment of the SACP if DBS' financial profile deteriorates significantly. A much higher nonperforming loan (NPL) ratio or credit cost than our base-case assumptions would indicate this. This is, however, an unlikely scenario, given our expectation of manageable macroeconomic and operating conditions. We could lower the ratings on DBS'

...DBS Bank Ltd.'s income growth across multiple business lines is likely to continue into 2025. DBS reported net profit of Singapore dollars (S$) 8.79 billion in the first nine months of 2024 at the group level, up 11% compared with 2023 corresponding period. We believe healthy revenue momentum from the bank's core business lines will continue into 2025, and forecast that the bank's return on assets (ROA) will remain healthy at 1.3%-1.5%. We believe loans growth for DBS will pick up to 3%-5% over 2025 and 2026. The Singapore-based bank's loans growth has been tepid. Loans rose 2% in constant-currency terms over the first nine months of 2024. Loans growth stagnated since 2023 due to high interest rates, which dampened borrowing demand and prompted corporates to repay their loans. In our view, loans growth will pick up to 3%-5% over 2025 and 2026 on further rate cuts. We expect one more rate cut in December and three cuts in 2025 and think the terminal level of 3.00%-3.25% will be reached in...

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