Singapore banks stay attractive by lagging behind

With Singapore banks still trading at 1.4xFY11 P/BV, DBS says there is no reason to ignore them, and they are in fact are inexpensive relative to ASEAN peers. 

In a statement, the bank said that Singapore banks are regional laggards trading at undeservedly huge discounts to the ASEAN peers.

“Although near term catalysts appear limited for Singapore banks, we do not seemany road bumps ahead. Singapore banks are trading at just above mean P/BV compared to its ASEAN peers, which trade above +1SD. We advocate accumulating Singapore banks for their strength in asset quality and capital vs. ASEAN peers,” DBS said.

The bank said that the key reason for overlooking Singapore banks is its low NIM vs. ASEAN peers.

“Even Thailand banks have re-rated to 1.5x FY11 P/BV and its market has remained resilient despite the political discord. In fact, Thailand banks’ share prices surged in recent weeks. We think the key reason for Even Thailand banks have re-rated to 1.5x FY11 P/BV and its market has remained resilient despite the political discord. In fact, Thailand banks’ share prices surged in recent weeks,” it said.

DBS believes a SIBOR uptick would be a catalyst for a re-rating.