All three Singapore banks reported solid core bank results, with stable to improving margins, resilient fee growth led by wealth management, credit cost drops, Deutsche Bank said in a note on Tuesday.
“Among the developed market banks, we still prefer Singapore over Hong Kong banks (Singapore banks have outperformed Hong Kong banks by 10 percent year-to-date) as we expect their share price momentum to continue, supported by stable macro and rising property price trends,” it said. “UOB looks the most attractive, with a less demanding valuation and room for more capital management activity.”
It rates UOB at Buy, with a target price of S$32.50, and both DBS and OCBC at Hold, with target prices of S$32.00 and S$14.00 respectively.
Heading into the second quarter, Deutsche Bank expected that higher interest rates would continue to support net interest margins and asset quality should remain stable amid a benign economic outlook. It expected that DBS’ dividend yield would be “respectable” and that UOB’s payout would improve.
“After a very strong quarter, helped by a robust January effect, we expect a slightly more challenging quarter for the wealth management business going forward,” it said.