DBS is analyst’s top pick over OCBC and UOB

Well it’s not surprising as DBS’s ROEs leapfrogged its peers in 3Q in a climate of poor capital markets and low interest rates.

CIMB continues to prefer DBS believing that its consecutive quarters of strong results reflect a transformation that is positive and ongoing.

Here’s more from CIMB:

In addition, its excess S$ deposit base is a positive in a tight liquidity environment. DBS’s ROEs leapfrogged its peers in 3Q, in a climate of poor capital markets and low interest rates. This was because its earnings had been supported by treasury-related income, as cross-selling was emphasised.

Even if DBS treasury income slacked off a little in the coming 4Q results, we would not be too anxious. Customer activities usually taper off in winter. We do not like the other two banks at this moment as recent results clearly show revenue headwinds when markets wobble. 4Q will be equally challenging.

Between the two, we prefer UOB because of its more attractive valuations. Also, the aggressive disposal of its EU bank-debt portfolio would have eliminated the negative aura associated with it. Lastly, while we acknowledge that OCBC had proven its superior credit-risk policies in the last credit cycle, its earnings have been rather vulnerable to the whipsaws of markets. Arguably, that does not justify its higher P/BV valuations among the three.

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