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DBS Group share price drops to 6-month low as coronavirus toll rises

Singapore’s largest bank was one of many large-cap companies whose share value had suffered, in a week that was marred by grimmer coronavirus updates.

DBS Group, Singapore’s largest bank by market capitalisation, was last week’s most traded Singapore equity, based on IG data.

In terms of share price, the group also experienced one of the largest drops among Singapore blue-chip firms for the week ending 28 February, erasing 3.08% in value to a six-month low of S$24 per share on IG’s platform as of Monday 02 March.

DBS Group’s share price drop a reflection of uncertainty

The start of a new week did not yield much better outcomes, with the stock trading below S$24.40 a share for most of Monday’s market.

The money lender was not the only victim of the rapid decline, which came after some countries reported their first coronavirus cases, and the US reported its first case ‘without a known origin’ on Thursday 27 February.

Singapore stock benchmark Straits Times Index (STI), which tracks and tallies the performance of individual listings on the Singapore Exchange – including DBS, also suffered its steepest drop since July 2019, falling 3.82% to a 14-month low of 2,992.071.

Fellow local banks, namely OCBC and UOB, also saw share price descend 3.64% and 3.62% respectively in the previous week.

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Analysts downgrade DBS share price targets

Analysts were also conservative in their recent estimates of the company’s financial and stock performance.

OCBC’s research team had maintained a ‘hold’ rating and price target of S$27.50 on DBS Group’s stocks – following its Q4 earnings report for the 2019 fiscal year – stating that it expects ‘share price performance ahead to be influenced by the Hong Kong/China outlook’.

Meanwhile, UOB Kay Hian analyst Jonathan Koh maintained a ‘buy’ rating on the stock with a price target of S$28 per share, down from S$28.65 previously, while RHB Invest gave the stock a ‘neutral rating’ and lowered its price target from S$25.80 to S$24.80 per share.

CGS-CIMB researchers were more optimistic, on the rationale that all three major Singapore banks have a guided COVID-19 revenue impact of around 2%, which they believe is ‘relatively manageable’ barring any further credit cost changes.

They have reiterated an ‘overweight’ rating on DBS Group, and is their ‘preferred pick for having the least exposure to consumer segments at risk to the virus’ of approximately S$2 billion. They also envision that the bank’s current Common Equity Tier One ratio will help to ‘support dividends’ in 2020.

Finally, Maybank Kim Eng’s Thilan Wickramasinghe wrote that DBS’ provision expenses (as per its latest guidance) were ‘significantly lower than expected’. He is of the opinion that the risks going forward may increase, especially with the COVID-19 epidemic fallout now a major factor.

As a result, he had lowered his 2020 core-earnings forecast for the company by 2% to 5%. He had also reduced his share price target for the group’s listing to S$28.60 a share from S$29.92 previously, while maintaining a ‘buy’ rating in view of there still being a 13% upside in returns.

DBS Group shares are trading at S$24.42 per share as of Tuesday 03 March.

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The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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