DBS

DBS: Macquarie downgrades to Neutral from Outperform. Despite positive operational trends, house views the overwhelming issue is the overpriced acquisition of Danamon and reckons that while the group has persistently delivered very strong earnings, it does matter much any more for short-term stock performance. Adds that 1Q12 $933m net profit is unlikely to repeat, given NIM pressure and an expected slowdown in trade finance/transaction banking growth. It forecasts 2Q12 earnings of $771m, -17% qoq but +5% yoy. Cuts its target to $14.50 from $16.61 despite raising 2012-14 earnings forecasts by 5-6% as the Danamon deal erodes its previous optimism. House is still impressed by the operational turnaround that management has put into place. However, in a world of uncertainty, the upside for DBS is likely to remain capped for the next few months pending some sort of clarity on the acquisition.