CIMB downgrades DBS to underperform

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: CIMB

Price Call: SELL

Target Price: 11.90

CIMB Research has downgraded Southeast Asia’s largest lender DBS Group (DBSM.SI) to underperform from outperform and cut its target price to $11.90 from $16.56.

DBS’ earnings is the most sensitive out of the three Singapore banks to another recession, as its capital market-related fees are the highest and would shrink in an economic downturn, CIMB said.

The brokerage has cut its 2011-2013 earnings estimates for DBS by about 7% to factor in lower non-interest income and higher credit costs.

DBS’s revenue has the most room to fall, “as capital market activities slow and interest rates stay low, providing de-rating catalysts,” said CIMB in a report.

Shares of DBS have fallen 13.9% since the start of the year to close at $12.33 on Tuesday.