Maybank Kim Eng upgraded Southeast Asia’s largest lender DBS Group Holdings to ‘buy’ from ‘sell’ and raised its target price to $16.10 from $13.10, citing a more stable outlook.
By 10:11 a.m., DBS shares rose 0.7% to $13.89, and have gained 20.6% since the start of the year, compared to the Straits Times Index’s 15% increase.
DBS posted a 12% rise in third-quarter net profit on Thursday, beating expectations on a sharp drop in bad debt charges and on double-digit growth in income from its core lending business.
“Net interest margins are likely to stabilize moving forward in our view, while loan momentum will likely sustain, albeit at a slower pace,” said Maybank in a report.
Although loan growth shrank 1% in the third quarter compared to the previous three months due to large number of maturities on its China trade financing loans, but Maybank noted the management expects a healthy replenishment of such loans.
The brokerage also said corporate loan demand in Singapore remains buoyant, supporting an annualized loan growth of 12%.
DBS’ net interest margins should also stabilise going forward, said Maybank, as the bank could improve pricing in loans for small mid-sized enterprises and in Hong Kong.
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