Deutsche Bank: UOB still the most attractive Singapore bank

POSB, OCBC, UOB and Citibank ATMs in Singapore.POSB, OCBC, UOB and Citibank ATMs in Singapore.

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.