Valuations of banks look attractive: Nomura

Nomura says valuations of Singapore banks look relatively more attractive compared to others in Southeast Asia, while rating the sector ‘overweight’ citing solid fundamentals.

“Our positive Singapore banks call is relative, underpinned by increasingly positive contrast versus global bank peers and, on valuations, versus Asean peers,” the broker said in its Asean banks report.

“Singapore banks, deriving 65-90% of group profit before tax from Asean, have seen valuation discount to Asean peers steadily expand over the last two years,” it said.

DBS Group Holdings, currently trading at 1.1 times forecast 2012 book value, was its top pick. DBS reported second-quarter earnings of $810 million, up 10% year on year, which was 4% ahead of Nomura’s estimate, it said.

The broker said United Overseas Bank was a defensive choice due to its relatively transparent and low-beta operating platform.

Nomura was also overweight on Indonesia and Thailand banks in Southeast Asia.