Secondly, the negatives are likely to be priced in. This includes concerns around DBS’s exposure to US office property (via S-REITs) and Chinese commercial property such as retail and port logistics (also through S-REITs). Then there are concerns over credit quality in general. However, UBS points out that DBS has some $2 billion of management overlays to cushion any black swan event.
DBS Group Holdings (SGX:D05
) has fallen some 13% since its peak of $36.19 on Feb 8. Since the start of the year, DBS’s share price is down a more benign 7.5%. In a 37-page report dated June 20, UBS says it is “turning more positive on the Singapore banks”, and has upgraded DBS from a neutral rating to a buy, and it is UBS’s most preferred buy. (UBS also has a buy on United Overseas Bank (SGX:U11) ).
The report cites four reasons for the upgrade. First, higher for longer Federal Reserve rates could mark a bottom in earnings downgrade. In fact UBS believes there could be a potential revision of net interest margin (NIM) guidance during the banks’ 2Q2023 results during July-August, and this could be a share price catalyst.
