Moody's Affirms DBS Bank's Aa1 Rating, Maintains Stable Outlook

Strategic Insights -

DBS Bank Ltd. has maintained its Aa1 long-term bank deposits and senior unsecured debt ratings by Moody's Investors Service, with a stable outlook. The affirmation is due to the bank's strong solvency and liquidity, as well as its very high probability of support from the Government of Singapore. DBS is well-positioned to withstand ongoing volatility in the operating environment and financial markets, thanks to its superior funding franchise, diversified income streams, and good core capital ratio.

Key Takeaways:

  • DBS's ratings are affirmed due to its strong solvency and liquidity, with a very high probability of support from the Government of Singapore.
  • The bank's BCA is maintained at a1, reflecting its strong corporate behavior and conservative risk management culture.
  • DBS's common equity tier 1 (CET1) ratio is expected to decrease moderately to a still-strong 14% range over 2025-2026.
  • The bank's net interest income has lower sensitivity to interest rate cuts compared to other large Singaporean banks.
  • DBS's return on assets is expected to decrease from 1.4% in 2024 to 1.2-1.3% in 2026.
  • The bank's ratings incorporate three notches of uplift from its a1 BCA, reflecting the assumption that DBS will receive government support in times of stress.
  • The ratings are among the highest assigned to any financial institution globally, and upward pressure on the ratings is unlikely.
  • A downgrade of DBS's BCA could lead to a downgrade of its deposit and senior debt ratings, particularly if problem loans/gross loans (NPL ratio) exceed 3% and its capital ratio measured by tangible common equity (TCE)/risk-weighted assets (RWA) decreases below 13%.

Statistics:

  • DBS's CET1 ratio will decrease moderately to 14% range over 2025-2026.
  • The bank's return on assets is expected to decrease from 1.4% in 2024 to 1.2-1.3% in 2026.
  • DBS's CASA ratio stood at 53% as of 31 March 2025 and is expected to increase moderately in 2025.
  • Liquid banking assets/tangible banking assets remained high at 35% as of 31 December 2024.
  • DBS's funding and liquidity will remain credit strengths due to its limited use of market borrowings and a large pool of sticky CASA deposits.

Sources:

  • Moody's Ratings, "DBS Bank Ltd., DBS Group Holdings Ltd." (2024)
  • Moody's Investors Service, "Banks" (November 2024)