Comprehensive Analysis of Singapore and Regional Banks

Broker: CGS International

Date: February 10, 2025

Overview of Singapore Banks

The report sheds light on the financial performance and investment potential of Singapore’s leading banks: DBS Group, OCBC, and UOB. It provides an in-depth look at each bank’s financial metrics, growth strategies, and market outlook. Additionally, it compares these banks to regional players in Indonesia, Malaysia, and Thailand.

DBS Group: Yielding to Expectations

Performance Highlights

• DBS recorded a 4Q24 core net profit of S\$2.6 billion, reflecting a 13% decline quarter-on-quarter (qoq) but a 10% increase year-on-year (yoy).
• Net interest margin (NIM) stood at 2.15%, slightly exceeding expectations.
• Total income for 4Q24 was S\$5.5 billion, marking a 10% increase yoy but a seasonal dip of 13% qoq.
• Specific provisions rose to S\$229 million due to lower recoveries, leading to a credit cost of 19 basis points.

Dividend Initiatives

• DBS raised its quarterly ordinary dividend to S\$0.60 per share in 4Q24.
• Introduced a quarterly capital return dividend of S\$0.15 per share, potentially lifting FY25F total dividends to S\$3.06 per share, implying a yield of approximately 6.8%.
• Guided for similar capital returns in FY26-27F, supported by excess capital of approximately S\$4 billion.

Outlook and Recommendations

• DBS upgraded its FY25F net interest income (NII) guidance to “slightly above FY24 levels.”
• Retains a “Hold” recommendation with a target price of S\$43.00, reflecting a downside of 3.8% from the current price of S\$44.68.
• Upside risks include faster recovery in wealth management volumes, while downside risks involve asset quality concerns.

OCBC: Positioned for Growth

Performance Metrics

• OCBC’s stock is currently priced at S\$17.33, with a target price of S\$17.70, offering an upside of 5.0%.
• The bank maintains a strong balance sheet with a price-to-book ratio of 1.39x in CY24F, improving to 1.30x by CY26F.
• Recurring return on equity (ROE) is forecasted to remain steady at 14.3% in CY24F, rising to 14.5% by CY26F.

Dividend Yield

• OCBC offers a competitive dividend yield of 4.9% over the next three years.

Recommendation

• The report assigns OCBC an Add recommendation, citing its stable earnings growth and steady dividend payouts.

United Overseas Bank (UOB): Consistent Performer

Key Metrics

• UOB’s current stock price stands at S\$37.38, with a target price of S\$39.50, implying an upside of 5.5%.
• The price-to-book ratio is expected to improve from 1.27x in CY24F to 1.10x by CY26F.
• Recurring ROE remains robust at 13.4% in CY24F and is forecasted to rise to 13.7% by CY26F.

Dividend Yield

• UOB offers a consistent dividend yield of 4.9% over the forecasted period.

Recommendation

• The report maintains an Add recommendation for UOB, highlighting its strong financial positioning and stable returns.

Indonesia Banks: Regional Leaders

Bank Central Asia (BBCA)

• Current stock price: IDR 9,350; target price: IDR 12,525, with an upside of 8.9%.
• Price-to-book ratio: 4.42x in CY24F, declining to 3.73x by CY26F.
• Recurring ROE remains exceptionally high at 21.9% in CY24F, reflecting strong profitability.
• Dividend yield: 3.1% in CY24F, rising to 3.6% by CY26F.
• Add recommendation, supported by stable earnings growth and strong asset quality.

Bank Mandiri (BMRI)

• Current stock price: IDR 5,150; target price: IDR 7,500, offering a 7.5% upside.
• Price-to-book ratio: 1.69x in CY24F, improving to 1.40x by CY26F.
• Recurring ROE remains robust at 20.7% in CY24F, rising to 20.9% by CY26F.
• Dividend yield: 7.1% in CY24F, increasing to 8.5% by CY26F.
• Add recommendation based on attractive valuation and strong dividend potential.

Bank Rakyat Indonesia (BBRI)

• Current stock price: IDR 4,030; target price: IDR 5,450, with a modest upside of 1.3%.
• Price-to-book ratio: 1.87x in CY24F, declining to 1.74x by CY26F.
• Recurring ROE remains strong, moving from 18.8% in CY24F to 19.4% in CY26F.
• Dividend yield: 8.1% in CY24F, rising to 9.3% by CY26F.
• Add recommendation due to its consistent dividend payout and strong market position.

Malaysia Banks: Steady Performers

Malayan Banking (MAY)

• Current stock price: MYR 10.42; target price: MYR 12.80, offering a 7.6% upside.
• Price-to-book ratio: 1.25x in CY24F, improving to 1.09x by CY26F.
• Recurring ROE is stable, at 10.5% in CY24F, marginally declining to 10.2% by CY26F.
• Dividend yield remains attractive at 5.9% in CY24F, increasing to 6.4% by CY26F.
• Add recommendation, driven by strong dividend yields and steady ROE.

Public Bank (PBK)

• Current stock price: MYR 4.45; target price: MYR 5.57, offering a 6.1% upside.
• Price-to-book ratio: 1.46x in CY24F, declining to 1.28x by CY26F.
• Recurring ROE remains steady at 11.9% over the forecasted period.
• Dividend yield: 4.0% in CY24F, increasing to 4.5% by CY26F.
• Add recommendation due to its strong balance sheet and stable returns.

Thailand Banks: Promising Returns

Bangkok Bank (BBL)

• Current stock price: THB 154.0; target price: THB 193.0, offering a 7.5% upside.
• Price-to-book ratio: 0.53x in CY24F, declining to 0.47x by CY26F.
• Recurring ROE remains stable at 8.1% in CY24F, rising to 8.3% by CY26F.
• Dividend yield: 4.5% over the forecasted period.
• Add recommendation based on undervaluation and strong fundamentals.

Kasikornbank (KBANK)

• Current stock price: THB 160.0; target price: THB 187.0, with a 9.8% upside.
• Price-to-book ratio: 0.67x in CY24F, improving to 0.61x by CY26F.
• Recurring ROE remains strong, moving from 8.6% in CY24F to 8.9% by CY26F.
• Dividend yield: 4.7% in CY24F, rising to 5.6% by CY26F.
• Add recommendation due to attractive valuation and solid dividend yields.

Conclusion

The report provides a comprehensive overview of the financial performance and investment potential of banks across Singapore, Indonesia, Malaysia, and Thailand. While DBS, OCBC, and UOB remain strong players in Singapore, regional banks such as Bank Central Asia and Bangkok Bank present attractive opportunities for investors. Each bank’s strategy, dividend potential, and earnings growth have been carefully analyzed to assist investors in making informed decisions.