Bank stocks still overpriced, analysts warn

Shaky loans are still a key concern.

Bank stocks have suffered a painful sell-off in recent weeks, but analysts at Jefferies Singapore are still not tempted enough to snap up these cheap shares.

"While previously frothy valuations have been flushed out, we don't think counters have cheapened enough to factor in an anemic growth outlook and a protracted credit cost normalization," Jefferies said in a report.

Jefferies highlighted that banks remain under threat from loan impairments and higher credit costs, which could dampen investor confidence and erode profits.

Jefferies expects relief rally to materialize in coming days, but this does not change its fundamental outlook for banks.

"Though the recent sell-off has been sharp, providing some valuation support on historical basis, we are not inclined to dip our toes back in the water considering the growth outlook and continued credit cost normalization," said the report.