Broker's take: CGS-CIMB maintains 'overweight' on banks amid digibank race; DBS top pick

CGS-CIMB is maintaining its "overweight" call on Singapore's banks amid a flurry of developments the past week which saw contenders emerge in the digital bank race.

"While we anticipate stiff digital competition over the medium term, financial impact to deposits and fees should be manageable," said analysts Andrea Choong and Lim Siew Khee in a sector flash note on Tuesday.

DBS is the brokerage's top pick with an "add" call and target price of S$28.29. Its call for OCBC is at "hold" with a target price of S$11.94; UOB meanwhile has an "add" call and target price of S$29.10.

As for contenders in the digibank race, CGS-CIMB believes that the adherence of compliance requirements and fervency of regulatory reporting could be "crucially underestimated" by some digibank applicants.

Therefore, applicants with financial institution partners could stand a slightly better chance of getting the licence due to their better sense of the costs and complications involving banking protocols and policies, the analysts said.

The relaxation of regulatory requirements for the new digital players is a downside risk to the sector, the brokerage added.

Banking shares were on the decline amid a sea of red as at 9.57am on Wednesday on mounting US-Iran tensions. DBS fell 44 Singapore cents or 1.7 per cent to S$25.61, OCBC decreased 17 Singapore cents or 1.6 per cent to S$10.83, and UOB dropped 42 Singaproe cents or 1.6 per cent to S$26.28.