DBS

DBS: Citi gives 5 reasons why DBS would not (and should not) buy Stan Chart:

1) Onerous regulatory hurdles – Given multiple jurisdictions that DBS and Stan Chart overlap, this is nothing short of a regulatory nightmare.

2) Too much to use of scarce management resource – Even assuming no regulatory resistance, the sheer complexity of bringing together these two organizations would tie up excessive amounts of top management time and distract from growing the core business, which itself is increasingly challenging in the present soft macro environment.

3) Digital expansion the way forward. DBS has cited that the key challenge that the banking industry must address over the five years is the threat of digital disruption. But equally, digital channels can be used by DBS as a means to broaden its retail access in countries such as India.

4) M&A remains tactical. DBS’ recent actions suggest that it is only willing to consider M&A of specific tactical portfolios — in the past 18 months this included a cards portfolio in Hong Kong and an Asian private-bank portfolio.

5) Wrong time of the cycle - In Citi’s view, buying any bank (let alone one as large and complex as STAN) into a weakening growth backdrop carries a greater risk of failing to deliver shareholder value.

Citi has a Buy call on DBS with TP of $19.37