Brokers' take

Singapore banks

Morgan Stanley, Sept 9

SINGAPORE banks remain the best positioned in Asean for our base case rate environment: We see 26 to 28 per cent upside. Our preference is based on net interest margin (NIM) benefits and the risks rising US rates present for the more emerging sectors in Asean. We are now also able to place Singapore banks in a global context as regards rate increases. In our view, Asian rate-sensitive banks benefit relative to global banks in the "Goldilocks scenario" of the current Fed funds future curve. However, if rates rise too quickly, this would create credit risk relative to global peers. . . We see upside potential for all the Singapore banks and similar near-term risks for OCBC Bank and UOB, although we also see more upside for OCBC if it is successful in driving its wealth strategy. DBS Group Holdings is less exposed to credit risk than widely assumed, in our view, and benefits more from rising rates.