Report
UOB
Jonathan Koh

Banking - Is this the best time or the worst to buy banks?

Banks’ share prices are near five-year lows. Based on our sensitivity analysis, current share prices of DBS and OCBC have factored in NPL ratio reaching 4.0-4.5% by end-21, which are higher than their peak of 2.9% and 1.7% respectively during the GFC. The sell-down could persist a little longer but a trough is in sight. Our top pick is OCBC as its 2020F P/B of 0.74x is below trough P/Bs for five out of the past six crises. BUY DBS for 2020 dividend yield of 7.8%. Maintain OVERWEIGHT.
Underlyings
DBS Group Holdings Ltd.

DBS Group Holdings is an investment holding, treasury and funding vehicle for itself and its subsidiaries. Co.'s main subsidiary is DBS Bank Ltd, which is engaged in a range of commercial banking and financial services, principally in Asia. Co.'s various business segments are: Consumer Banking/ Wealth Management, which provides individual customers with a range of banking and related financial services; Institutional Banking, which provides financial services and products to institutional clients; as well as Treasury, which provides treasury services to corporations, institutional and private investors, financial institutions and other market participants.

Oversea-Chinese Banking

Oversea-Chinese Banking is engaged in the in the business of banking, life assurance, general insurance, asset management, investment holding and stockbroking. Co.'s segments include: Global Consumer Financial Services, which provides deposit products, consumer loans, credit cards and wealth management products; Global Corporate Banking, which provides long-term loans, short-term credit, deposit accounts and fee-based services such as cash management and custodian services; Global Treasury, which is engaged in foreign exchange activities, money market operations, fixed income, as well as structured treasury products; and Insurance, which provides both life and general insurance products.

United Overseas Bank Ltd.

United Overseas Bank is bank in Asia with a network of offices in 19 countries and territories in Asia Pacific, Western Europe and North America. Co. provides a range of financial services including personal financial services, private banking, business banking, commercial and corporate banking, transaction banking, investment banking, corporate finance, capital market activities, treasury services, brokerage and clearing services, asset management, venture capital management and insurance. Co. operates within three main operating segments: Group Retail, Group Wholesale, and Global Markets and Investment Management. As of Dec 31 2014, Co. had total assets of S$306.74 billion.

Provider
UOB
UOB

Analysts
Jonathan Koh

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