SG Banks

SG Banks: Maybank-KE upgraded Singapore banking sector from Neutral to Overweight based on two catalysts: earlier wariness over China exposures proved unfounded, instead banks should benefit from fund reallocations and (ii) higher interest rates starting mid-2015 should strengthen NIMs. The house raises FY14E-16E EPS by 10%, bumping up TPs for all three banks, to account for better than expected NIMs and non-interest income. Amongst the three banks, DBS remains the top pick Buy with TP raised to $23.50 (from $23.40). It is best-positioned to benefit from the imminent hike in interest rates. UOB was upgraded to Buy, with TP raised significantly to $26.70 (from $25.30). Although the bank is not as well-positioned for higher rates due to its high loan-deposit ratio, its less-favourable funding profile has been priced in and catalysts should come from stronger deposit growth and improving housing-loan quality. Meanwhile, the house maintains Hold on OCBC despite raising TP to $10.70 (from $10.10). Caution on OCBC stems from the uncertainty of the incorporation of Wing Hang Bank.