DBS

DBS: Newswires reported that DBS and South Africa’s banking group FirstRand are in separate discussions to buy RBS’ India unit, with sources indicating that the deal could be worth US$200m.

RBS businesses in India consist of corporate and institutional banking, cash management and trade finance. The proposed sale will however not involve RBS’ back-office outsourcing business.

Market watchers are guiding that the takeover of RBS’ corporate banking business in India would enable the acquirer to better compete with larger domestic rivals in India, most of which are state-owned banks.

Based on its 2014 annual report, DBS currently has 12 branches in 12 major cities in India, and together with China, Taiwan and Indonesia, contributes to 15% of its 2014 total income.

A successful acquisition of RBS’ assets would enable DBS to make further inroads into India, and expand its Pan-Asian network.

Maybank-KE has a Sell rating on DBS with a TP of $15.90, arguing that Singapore banks are facing serious disintermediation pressures. This shrinks their returns from financial intermediation and marks a structural change for the sector, which should be priced into the sector’s long-term valuations.