Integrated financial service providers CGS-CIMB expects Singaporean banks to end on a high note by year-end. Furthermore, CGS-CIMB expects a surge in credit costs and asset quality holding of the banks.
It is reported that CGS-CIMB estimates a target price of $25.51 for DBS and a target price of $10.13 for OCBC. Furthermore, it has set a target price of $22.52 target price for UOB. The share prices of all three banks surged this week.
According to CGS-CIMB, the improvement in net interest margins (NIM) and loans by these banks may be due to the steady growth of fee income, improvement in ROE and earnings recovery from lower credit costs.
Furthermore, UCB reduced its credit cost guidance after the expiry of moratoriums in Thailand and Malaysia. DBS and OCBC expects lower provisions next year amid a unchanged two-year credit cost estimates.
CIMB analysts Andrea Choong and Lim Siew Khee, told the media, “Their return on equity (ROE) is also inching up, and dividends are coming back in focus. They upgraded the sector to overweight from neutral and likewise upgraded DBS and OCBC to add while keeping UOB at add, following the lenders’ better-than-expected results for the third quarter. All three banks beat expectations with their Q3 results, thanks to NIM for UOB, treasury income for DBS and lower credit costs for OCBC. The apparent trend in Q3 was that the quantum of impairment provisions had peaked in H1 2020.”
Global banks have been walloped by the Covid-19 Pandemic and many banks are still scrambling for profits.