SG Banks

Banks: Based on an increasingly positive global macro outlook and strong fundamentals, PhillipCapital maintain Overweight on the banking sector. House maintain Accumulate rating on DBS (TP $19.09) and UOB (TP $23.03), and “Neutral” rating on OCBC (TP $10.62). DBS remains its top pick for its stable earnings growth profile, standing to benefit the most from higher interest rates, and strong foothold in HK while house remain neutral on OCBC due to its relatively more volatile earnings profile. House is positive on the potential for improving margins in the medium term. Loans growth should continue to be broad based but lower than FY13’s high base and should be at a moderate pace on the back of positive economic outlook. Fees and commission should continue to drive earnings as trade-related, wealth-related, loans-related and bancassurance fees continue to gain traction. With the decision on Dec 18th to start QE tapering, House view that a revival in the interest rate cycle is in sight and confirms its outlook for potential industry NIM recovery in the medium term.