UOB KayHian upgraded DBS to Buy from Hold, advising taking advantage of share price weakness after the stock’s more than 8 percent fall since early August.
“We expect bouts of volatilities in the run-up to the U.S. mid-term elections on 6 November 2018, which would present opportunities to accumulate the stock,” it said in a note on Wednesday.
UOB KayHian was also optimistic on the upcoming third-quarter earnings release.
“Double-digit year-on-year growth in net interest income and a sequential recovery in net trading income have helped DBS cope with the pick-up in credit costs,” UOB KayHian said. “We reckon that third-quarter 2018 results would be satisfactory despite the uncertainties relating to trade conflicts.”
The brokerage forecast 16 percent on-year growth in net interest income in the third-quarter results, due to an estimated 13 basis-point net interest margin expansion and a sequential recovery in net trading income amid increased volatility in regional currencies; it forecast NIM rose 1 basis point on-quarter in the third quarter to 1.86 percent.
UOB KayHian forecast net trading income rose 18.9 percent on-quarter to S$270 million in the third quarter as spreads usually widen on regional-currency volatility.
It estimated third-quarter net profit of S$1.386 billion, up 3.9 percent on-quarter and 72.8 percent on-year after “huge” provisions in the year-ago period for its exposure to the oil and gas sector.
It raised its target price to S$29.50 from S$28.20.
The stock ended Wednesday up 1.03 percent at S$24.49.
