Why are analysts divided?
Analysts have markedly different calls on the three Singapore banks, reflecting differing views on their valuations and how much they stand to benefit from the changing interest-rate environment.
Citi downgraded OCBC from “neutral” to “sell” with a target price of S$27.50. It maintained its “buy” rating on DBS and reiterated its “sell” rating on UOB, although it still preferred UOB over OCBC due to relative valuations and positioning.
Other brokerages were more bullish.
In an Oct 1 report, Macquarie Equity Research’s Vantarakis said that while all three banks would benefit from higher Singapore rates, UOB had the most to gain.
About 43 per cent of UOB’s loans are denominated in Singapore dollars, compared with 37 per cent to 38 per cent for DBS and OCBC. UOB also has a higher proportion of revenue coming from net interest income, at 66 per cent, compared to about 58 per cent for its two peers, he said.
RHB took a more bullish view of the sector. In its Oct 7 report, the brokerage gave a “buy” rating to all three banks, naming OCBC as its top pick and giving the bank a target price of S$33.70.
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