S'pore banks expected to benefit from pickup in credit growth

CGS-CIMB analysts reiterate 'overweight' call on local banking sector, with UOB their top pick

DBS, OCBC Bank and UOB have been maintained at "add" by CGS-CIMB analysts Andrea Choong and Lim Siew Khee. They have a target price of $28.35 for DBS, $12.52 for OCBC and $27.72 for UOB.
DBS, OCBC Bank and UOB have been maintained at "add" by CGS-CIMB analysts Andrea Choong and Lim Siew Khee. They have a target price of $28.35 for DBS, $12.52 for OCBC and $27.72 for UOB.ST PHOTO: CHONG JUN LIANG

A leading financial services firm has reiterated its "overweight" call on the local banking sector in anticipation of a pickup in business activity and credit growth this year on the back of vaccinations and the easing of social distancing measures.

All three banks have been maintained at "add" by CGS-CIMB analysts Andrea Choong and Lim Siew Khee. They have a target price of $28.35 for DBS, $12.52 for OCBC Bank and $27.72 for UOB.

UOB was their top pick, given that its net interest margin could be sustained or trend upwards, which may not occur at its peers.

They forecast that DBS will report lower impairments while OCBC's non-performing loans could trend up to 2.5 per cent to 3.5 per cent in the 2021 financial year.

The bullish stance on the sector comes after Singapore's bank lending ticked up last November on continued growth in consumer loans, reversing an eight-month decline.

The CGS-CIMB analysts note "encouraging" growth in Singapore's industrial production index. The Purchasing Managers' Index - a key measure of activity - inched up 0.1 point last month from November to 50.5, according to data out yesterday.

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A version of this article appeared in the print edition of The Straits Times on January 05, 2021, with the headline 'S'pore banks expected to benefit from pickup in credit growth'. Subscribe