Company Name: OVERSEA-CHINESE BANKING CORP
| Research House: DBS Vickers | Price Call: BUY | Target Price: 10.70 |
Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD
| Research House: DBS Vickers | Price Call: HOLD | Target Price: 19.70 |
DBS Vickers has trimmed its earnings estimates for Singapore banks for the next two years due to a weaker economic outlook, and cut its target prices for United Overseas Bank and Oversea-Chinese Banking Corp.
Shares of UOB were down 0.2% at $18.57, but have surged 21.6% since the start of the year, outperforming the benchmark Straits Times Index’s 15% gain. OCBC fell 0.1% to $9.23, but have risen 17.9% year-to-date.
The brokerage has lowered OCBC’s target price to $10.70 from $11 and UOB’s to $19.70 from $21, but prefers OCBC for its fee income from its private bank unit Bank of Singapore andinsurer Great Eastern. It maintains a ‘buy’ rating on OCBC and has a ’hold’ on UOB.
DBS Vickers expects Singapore banks to see slower loan growth due to weaker economic growth and the recent property cooling measures introduced by the government. It trimmed its 2013-2014 loan growth rate to 8% from 10% and cut its earnings estimates by 4-7% over the same period.
Pressure on net interest margins are likely to continue, with a hike in Singapore interbank offer rates unlikely until 2015, DBS said.
“Earnings momentum is likely to soften as we go into 2013. As such, we expect banks to trade range-bound and remain well supported by decent dividend yields of 3-4%,” DBS said.
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