OCBC kept DBS as its top Singapore banking sector pick.
It pointed to DBS’ share price gain of as much as 15.9 percent year-to-date, compared with the Straits Times Index’s around 3 percent gain over the same period. It also noted that DBS makes up around 10 percent of the Singapore stock market’s total capitalisation.
”DBS recently posted a good set of 2017 results, led by several business units, including wealth management and higher product sales. Management is also upbeat about the outlook for 2018,” OCBC said in a note on Monday. “We believe that the current renewed interest in the Singapore residential property market should also be positive for its mortgage business.”
OCBC added that the expectations for the U.S. Federal Reserve to increase interest rates four times this year, combined with the International Monetary Fund’s (IMF) forecast for 3.9 percent global economic growth this year, should be a positive backdrop for Singapore’s banking sector.
OCBC raised its fair value for DBS to S$32.53 from S$29.50 after raising its valuation to 1.7 times book value, compared with Asian banks, which are currently trading around 1.6 times book value.
It kept a Buy call.