Daiwa: This is our top, and only, Singapore bank pick

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

Daiwa tipped DBS as “our top and only pick” in the Singapore bank sector after the first-quarter results season.

DBS is expected to be the sector leader in earnings per share (EPS) and pre-provision operating profit (PPOP) growth over 2018-20, on better net interest margin gains compared with its peers, Daiwa said in a note this week.

Daiwa forecast DBS to reach a three-year EPS compound annual growth rate (CAGR) of 22 percent, compared with 12 percent for UOB and OCBC.

“We believe DBS’s superior EPS-growth outlook is probably still underappreciated,” Daiwa said.

It also pointed to DBS’s “dividend clarity,” with a relatively high core dividend yield and a more reliable outlook for future dividends.

It kept a Outperform call on DBS, with a S$32.00 target price. It rates both UOB and OCBC at Hold, with target prices of S$28.40 and  S$13.40 respectively.

DBS ended Thursday down 0.24 percent at S$28.85, while UOB added 0.17 percent to S$29.54 and OCBC rose 0.08 percent to S$13.20.