DBS

DBS: Below are the various houses thoughts on the acquisition:

- DMG maintain Neutral, TP $13.90 from $13.31, acquiring Danamon a long term positive.
The acquisition will diversify DBS’ earnings base, and DBS expects to add significant value to Danamon in respect of funding franchise, corporate lending and consumer proposition. 2.6x P/B is not high, raised Dec 12 book forecast to S$12.61, from the previous S$12.27, due to the premium paid by DBS. However, DBS’ FY13 ROE will fall to 9.8% from previous forecast of 9.9%, due to the rise in equity.

- JPM maintain O/w, TP $17.00, M&A overhang reduces sharply, stock should move in line with earnings delivery now. Initial stock price action will be negative as the deal does erode value from a 12-nth point of view. The stock will likely be range-bound until financial closure of the deal. Synergy benefits for DBS/Danamon will require upfront cost increase and
will also pose challenges as DBS intends to move Danamon to universal bank over time.

- Daiwa maintain positive stock view despite seeing the transaction as neutral at worst for DBS. There shd not be any negative impact to prospective EPS and DPS, while the deal cld improves its earnings profile with an increased contribution from high-growth Indo mkt.
DBS remains as top pick of the Spore banks, with TP of $15.

- UBS maintain Buy, TP $16.00, Strong execution will be key to making the deal work. See the deal as broadly EPS and RoE neutral on a 3-4 year view. Ratings May Be Cut by Moody as DBS purchase of Bank Danamon Indonesia may give Singapore lender risk tolerance that is inconsistent with its standalone bank financial strength.