Why analysts think OCBC appears to be 'relatively stretched'

More risks if anything goes awry.

With Credit Suisse's stress testing valuations, OCBC looks relatively stretched. On trailing P/B (1.2x), while Singapore banks are now trading 1 sd below historical average, their premium to the NJA banks sector is close to historical highs.

On a relative basis, DBS appears to have sustainably closed some of the ROE discount to peers—but its P/B discount is still close to historical averages.

Here's more from Credit Suisse:

The market-implied ROEs for OCBC appear to be the most optimistic and higher than our near-term expectations, leaving no room for surprise. On P/PPOP multiples (which exclude loan loss provisioning), OCBC trades at a significant premium to peers and much above the historical average levels.

Based on our estimates, DBS has the most potential for upside—as P/B multiples play catch-up with the sustainable improvement in ROEs and relatively low downside risks under the normalised or stressed scenarios through 2014E. OCBC’s valuations on the other hand are already rich and potentially have more downside if one of our risk scenarios play out. UOB remains a defensive play in this environment with valuation levels close to warranted levels. DBS remains our top pick in the sector.