DBS’s returns in the next 12 to 18 months would be led largely by its dividend yield at 7% to 8% for the FY2023 to FY2024 and at its book value compound annual growth rate (CAGR) of 5%

According to JP Morgan's analyst Harsh Wardhan Modi, “We do not expect a re-rating in the near term. If the bank is able to navigate the asset quality cycle well (which stays our base case), then the stock should meaningfully re-rate in FY2024-FY2025. Accordingly, we recommend investors to reduce [their] position, but stay invested.”

Despite the downgrade, Modi notes that DBS has been “one of the best turnaround cases” in the region in the last decade.

“Most of the improvements were visible on the pre-provision operating profit (PPoP) line (better asset and liability management, lower fees volatility, treasury, wealth management, digital, branding, etc.) till FY2015-FY2016,” he says.

“The bank’s handling of asset quality in FY2020-FY2021 opens up the path for the stock to become part of core multi-decade portfolios, in our view,” he adds.